Ever since the block size debate went from a technical discussion among developers to a political discussion among the general public, a lot has been said about who controls the rules in Bitcoin. Around the time a plan to implement a hard forking increase to the block size limit via the Bitcoin XT software client was announced, many prominent individuals in the Bitcoin community were referring to hard forks as “votes” among miners on the rules of the system.
While it’s true that miner signaling is often used to activate new, soft-forked features in Bitcoin, no one has the power to make a hard forking change to the protocol on their own. In other words, miners do not control the rules of Bitcoin through the use of hard forks.
Having said that, miners do control whether new rules are implemented in Bitcoin in a way that is different from how it has usually been discussed in the past.
How Some People Think Miners Control Bitcoin
Some people believe miners control Bitcoin because of the perception that they can essentially vote on hard forking rule changes to Bitcoin. Although this line of thinking appears to have less proponents than it did in the past, a few mining pools in China have publicly supported this view over the past few months.
For example, bitcoin exchange and mining pool HaoBTC recently tweeted:
Since when it’s the so-called “users” running the Bitcoin world? And are you the representative of all “users”?
— HaoBTC (@HaoBTC) January 19, 2017
Bitcoin mining pool ViaBTC has also written, “The decision of whether or not to increase the block size beyond 1MB is ultimately made by the miners.”
Jiang Zhuo’er, who is behind the BTC.TOP mining pool, has written, “Only miners, who invested millions-worth of personal wealth, the sunk cost, cannot leave like a bitcoiner, thus can be qualified as the Bitcoin’s safe guards.”
These statements were made in the context of a desire to increase Bitcoin’s block size limit via a hard fork.
In a Medium post that was popular among hard fork supporters, the pseudonymous John Blocke wrote that there would essentially be no ability for those who don’t follow the majority of miners onto a new chain to preserve the original chain because miners would attack the smaller chain and weaken its value proposition.
GBMiners Founder Amit Bhardwaj also told Bitcoin Magazine, “We believe if [a] hard fork is executed as per the Bitcoin Unlimited plan, we would be able to prevent splitting or at least make the new Bitcoin [the] primary one.”
Why miners would be unable to successfully perform such an attack on Bitcoin’s original network is covered in a later section of this article.
What is the Basis for These Claims?
The belief that miners are in control of Bitcoin’s consensus rules comes from an interpretation of statements from Bitcoin creator Satoshi Nakamoto, mostly in regard to hard forks. Throughout the entire Bitcoin whitepaper, Nakamoto describes how miners decide the true version of the Bitcoin blockchain by way of proof-of-work hashpower.
Bitcoin Core contributor Eric Lombrozo has called this aspect of the whitepaper misunderstood because, in his view, Nakamoto was talking about extending valid blocks and deciding on transaction ordering rather than the general rules of the system. According to Lombrozo, this interpretation of the whitepaper would effectively destroy bitcoin’s value proposition as algorithmic money and turn it into another politically-controlled currency.
Those who disagree with Lombrozo often point to the final paragraph of the Bitcoin whitepaper, where Nakamoto wrote:
“Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone. They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism.”
It should be noted that Nakamoto explicitly says miners are voting with their CPU power on the acceptance of valid blocks and the rejection of invalid blocks. He also discusses enforcing rules, not changing them.
This is the closest Nakamoto ever came to claiming miners should vote on rule changes via their hashpower, and it’s still far from conclusive. In every other statement on the matter, Nakamoto is clearly talking about miners deciding on the order of transactions with their hashpower rather than any rule changes. Nakamoto also noted his preference for changes that could be implemented in a backwards compatible manner. These backwards-compatible changes are now implemented via soft forks.
Bitcoin Unlimited’s Use of Satoshi Nakamoto as a Political Tool
While there is strong evidence that Nakamoto was only talking about the order of transactions when he discussed miners voting with their hashpower, it should not be taken as fact. Words on the Internet are easy to misinterpret, and Nakamoto is not around to clarify his online posts from six or more years ago.
Due to Nakamoto’s absence and the fact that it’s unlikely he would be able to predict everything that has happened over the past seven years, it’s best to not hinge every debate on what Nakamoto would think. He is mostly useful as nothing more than a political tool for those who wish to move away from technical arguments.
The only reason Nakamoto must be discussed in this article is many supporters of implementing a hard forking increase to Bitcoin’s block size limit have claimed their side of the debate follows Satoshi’s original vision. As explained above, the evidence does not appear to support this claim, which is worth pointing out.
In addition to the claims discussed above, Bitcoin Unlimited supporters will also say that their vision aligns with Nakamoto’s original road map because he once explained the block size limit could be increased by releasing a patch. “It can start being in versions way ahead, so by the time it reaches that block number and goes into effect, the older versions that don’t have it are already obsolete,” he wrote on the Bitcointalk forum.
Ignoring the fact that the post is from 2010 and Nakamoto’s view on the matter could have obviously changed since then, what Nakamoto is discussing there is very different from Bitcoin Unlimited’s concept of “emergent consensus.” Nakamoto mentions including the block size limit increase “way ahead of [time],” so old versions of the software are obsolete by the time the hard fork happens (this goes back to Nakamoto’s desire for backwards compatibility).
Bitcoin Unlimited supporters will also often point to an email, which former Bitcoin developer Mike Hearn says was sent to him by Nakamoto, as proof that they’re the true guardians of Nakamoto’s vision. In the email from 2009, Nakamoto discusses Bitcoin’s ability to scale to Visa levels over the course of time.
“The existing Visa credit card network processes about 15 million Internet purchases per day worldwide,” Nakamoto wrote. “Bitcoin can already scale much larger than that with existing hardware for a fraction of the cost. It never really hits a scale ceiling. If you’re interested, I can go over the ways it would cope with extreme size.”
Nakamoto goes on to discuss the ability for Moore’s Law to keep up with the transactional demands of Bitcoin; however, he does not go over the “ways [Bitcoin] would cope with extreme size” in this message. Multiple people have pointed out that one of the clearest ways for Bitcoin to deal with extreme size is through the use of payment channels, which were invented by Nakamoto himself.
In other words, this message from Nakamoto could be interpreted as payment channels being Bitcoin’s most useful tool for scaling. But again, it’s best to avoid using Nakamoto as some sort of political tool and try to guess what Nakamoto was talking about here.
It’s also possible that Nakamoto was referring to SPV clients, which were outlined in the whitepaper. The level of security offered by these clients may not be as strong as Nakamoto thought it would be due to the level of centralization seen in bitcoin mining today. The whitepaper also outlines the use of fraud proofs as an extra security mechanism for SPV clients, which have not been implemented in Bitcoin yet.
Bitcoin Unlimited’s emergent consensus design essentially puts the block size limit in the hands of miners, which is something Nakamoto didn’t come anywhere near advocating for in his entire history of online posts.
Examples of the exploitation of Satoshi’s past statements include multiple public statements from some of Bitcoin Unlimited’s most notable supporters such as longtime Bitcoin angel investor Roger Ver and ViaBTC founder Haipo Yang. There was also an entire conference with “Satoshi’s vision” in the name, which was made possible by an anonymous donor to Bitcoin Unlimited.
When people talk about the block size issue being taken from a technical debate to a political debate, this is what they’re talking about: twisting the words of Bitcoin’s creator to fit their own narrative. Again, it is unlikely that Nakamoto could have predicted the current state of Bitcoin, but if people are going to point to him as some sort of oracle of truth, then they need to make sure the quotes aren’t left open for interpretation.
Why Miners Don’t Control Bitcoin via Hard Forks
On top of all of the political talk around hard forks, the fact of the matter is miners don’t have control over the outcomes of these sorts of situations.
A miner can technically mine an invalid block with a higher block size limit anytime they want, but that doesn’t mean every Bitcoin user is going to switch over to this new network with different consensus rules. In other words, the economically-relevant full nodes are the ones who have to adopt the changes for them to go into effect.
The best illustration of this point was when Ethereum Classic was brought back to life after being listed on Poloniex. Miners quickly switched their hashing power back to the original Ethereum chain due to profit incentives. In other words, speculators were dictating the actions of miners.
These sorts of situations can get weird as it’s unclear if an altcoin has been created or Bitcoin has been hard forked.
How Miners Control Bitcoin via Soft Forks
Miners can essentially control Bitcoin’s rules and features via soft forks. This is a reality that has existed in Bitcoin since its inception. A good way to think about this is to realize that miners have always decided what goes into blocks.
For example, a majority of miners could decide tomorrow that no Bitcoin transactions will be processed on the weekends. It only takes a majority of miners to enforce this rule because a majority can orphan blocks mined by those who don’t wish to implement this change.
Miners are unlikely to implement this sort of change because it would weaken the value proposition of the very asset they’re generating with their equipment. On top of that, users would likely react to such a policy by changing the proof-of-work algorithm and essentially firing the miners from their role of creating blocks. This is a tool users have to keep miners acting in the interests of the users.
Technically, users could also decide to change the proof-of-work algorithm if miners decided not to implement a desired soft forking change.
In reality, the only difference between a 51% attack and a soft fork is the level of support the rule change has from bitcoin users.
A more realistic change miners could implement soon is Segregated Witness. Although the change was released in a way that requires 95 percent support from the network hashrate, a majority of miners could technically remove this requirement and activate the change without consent from the minority. Miners who do not implement the change could potentially see their blocks orphaned by upgraded, malicious miners who were willing to throw away their own block reward (the incentives are such that a miner invested in bitcoin wouldn’t do this), but non-mining nodes are not required to make any changes (unless they want to take advantage of the newly activated features).
To summarize, miners (via majority hashrate) are the entity that implements changes in Bitcoin via soft forks. These changes keep everyone on the same network, but users can opt-out of the soft fork by hard forking away from the miners.
An imperfect analogy that may be useful is that a soft fork is the governing process, while a hard fork is a revolution (users overthrowing that government).
With a hard fork, a new network is created, so it’s not completely correct to say the rules of Bitcoin have been changed. It can be unclear if Bitcoin has been changed or a new altcoin has been created in these sorts of situations. Hard forks are still possible, but they’re much more complex and require everyone to move over to the new version of Bitcoin.
The need to avoid a hard fork isn’t a big problem for development. Soft forks are surprisingly powerful
— Bram Cohen (@bramcohen) January 26, 2017
The mechanism for upgrading Bitcoin via soft forks has been there from the beginning. Miners have always been free to make changes to Bitcoin in a backwards compatible manner.
The good news is soft forks enable a large amount of flexibility to Bitcoin’s feature set. As Bloq Economist Paul Sztorc has written, it may even be possible to allow Bitcoin Core and Bitcoin Unlimited to co-exist on the same network without the need to hard fork Bitcoin or create an altcoin.
Update: A previous version of this article claimed that non-upgraded miners would begin mining invalid blocks after the Segregated Witness soft fork has activated. This is not technically true, and the article has been updated to reflect that. Thank you to Adam Back for the correction.
Update 2: A tweet from Bittorrent creator Bram Cohen, which was posted shortly after this article was published, was added to the article.
Update 3: Redditor rightly pointed out that I didn’t cover why miners attacking the smaller chain in a hard fork scenario wouldn’t work. I expanded on this over on Reddit.
Featured image via Jameson Lopp.