Reflections on the Miners Vote
Bitcoin introduced us to a decentralized network of exchange of value that we have never seen before. A deep understanding of the governing forces and the balance between these is something that we are exploring. Due to its decentralized nature and the limited existence of analogous models, it’s process It will take time to know in all its complexity.
In this document I will consider the Bitcoin Whitepaper as the main source where the mechanisms used and the intention that defines those operating principles of “Nakamoto Consensus” are defined.
The whitepaper is not very detailed and leaves room for contradictory interpretations, so some of the reflections may be invalid for some readers.
The consensus model uses an incentive by which it creates enough strength to keep the nodes on the same chain. Those who do not follow the "strongest" chain have no incentive and therefore have no incentive to continue or stay together.
This analysis applies in the context of Bitcoin Cash, although in general, the observations applied to Bitcoin Core could divert in some cases.
Although the model is simple on the surface, its operation is more complex; issues that seem obvious as the chain is the strongest are not so obvious when we analyze them in dynamic ways; for example the chain that at one time is the strongest may not be at a future time.
Making an oversimplification, we can say that Bitcoin is a monetary system; the incentives are closely linked to the value of its unit (BCH). This is the force that the system exerts on the nodes to remain in the same chain. This creates a virtuous circle in which stability increases the value and the value increases the stability.
Many people knowledgeable in Bitcoin oppose a “voting system” to make necessary decisions. Others who understand the system are reluctant to express thoughts in this area. The opinions adverse to make decisions based on voting is related to the political vision of many of the most prominent members of the community of experts. Some of these are based on politics but the root is purely technical.
The stability needed for the system to work both in its network and in the rules of operation, so if "We can change a rule, they can change it too" Bitcoin is designed to be very difficult or impossible to change.
If a majority can change the rules then however well-intentioned, changes can affect the value of the currency negatively so that a minority is affected by the decision of a majority. That is why in an ideal world it would only be valid to change them by "consensus" (if nobody opposes). This is extremely difficult in a network of multiple members, which in practice leads to the network becoming more difficult to change.
There are two types of actors that have a direct relationship with the functioning of the system: investors and miners. The interests of these actors are generally aligned, however there is an asymmetry that affects their behavior. Investors understand that if there is a negative change in the system, it is easy to sell and exit. The miners know that stability is a fundamental part of the value and unlike holders of BCH they can not leave and enter the business with the necessary speed to avoid the negative impacts of a change, for which they have a strong incentive not to change and to be conservative in making decisions.
In a sense, those who have significant amounts of BCH have a similar dilemma because even when technically they can leave and enter (sell and buy) they depend on the liquidity of the market, so the greater the tenure, the greater the loss when leaving the system and the higher the cost. to enter.
There is another force in play; BCH is not the only provider of a P2P electronic money system. Iif BCH never had competition there would be no incentive to change or improve. This opens an additional window and the main characteristic of Bitcoin becomes its main risk. Excellent resistance to change that creates stability and value makes it difficult to adapt to a change in market needs. In any system the inability to adapt to changes inexorably leads to extinction.
These forces stress the system constantly.
Paradoxically, the center of friction occurs in the community of developers, which is the one that has no direct interests in the system and which has no direct impact on the construction of the chain. Their incentives are different from the two main actors and also differ from each other since a developer has a different motivation than another developer.
This leads me to the first reflection: the developers are not an active part of the decision-making process whether these are a change or not to change. It does not make sense for the miners to complain to the programmers that the miners should vote, because the programmers do not have that power, and because they are asking for something they already have that is control over the chain.
A vote is either binding in nature or is a survey. The use of a survey does not have a real impact beyond giving us an idea of what is being thought, but what is thought and what is done are not necessarily the same thing. The signaling models are surveys and therefore fail as a decision-making mechanism. The "democratic" voting models affect the value of the minority and therefore the total value of the system in some cases can be counterproductive even when it is beneficial to others. However, the miners can implement it without the need for anybody's approval and it can have an impact on the value of the currency since it affects the stability.
The whitepaper introduces the concept of voting. One vote per CPU (hashrate) allows miners to build blocks on the chain they consider valid and only one chain is the one that has the most POW. Miners can leave or main whatever chain they want.
Analyzing the whitepaper in more detail we can draw some conclusions, there is a voting system within the protocol and it is in the spirit of Bitcoin that the miners vote. However, as the system is designed to be difficult to change this process is a democratic vote but of a special nature. All the miners vote and can not abstain;the winner wins everything and the loser loses everything. This creates an important incentive not to vote unless it is a good reason and with an incentive higher than the potential cost. Also, the miners will vote the chain that they believe will win even when it is not the one they want.
This special way of voting has a double function. First, to avoid voting too much because it goes against the concept of stability needed to be "Money", and secondly to protect the miners, because if these were the ones that define the rules, that responsibility becomes the most vulnerable point of the system to be attacked by forces that might want to attack BitcoinCash. Changing the voting model can be very expensive because it concentrates power and carries risks, so it is something to consider for anyone who wants to take that responsibility.
Now to mitigate the risk and cost of ending up mining a chain that ends up dying, the miners can coordinate how they are going to vote and thus actually achieve an approximate consensus. If we already know which chain will win they will all join it and nobody will lose except that some miner wants to work the minority chain and for some reason go against the incentive forces.
When a miner wants to vote all are forced to vote, those who lose the vote lose the fruit of their work and must return to the previous laws to be able to return to work and charge for their work.
To put it in a different way, when someone challenges the emperor if he wins he becomes emperor and if he loses, he and all his allies die. This generates a good stability and a big incentive to not change the rules although changing them is not impossible.
The whitepaper does not make any reference to other cryptocurrencies with the same P2P E-Cash mission, I think Satoshi does not consider a constellation of Altcoins competing for the same mission. When those chains share the same POW, something interesting is produced. The miners that naturally are those that have medium-term interests because they have assets that are not as liquid as the currency, they can leave the system and build blocks in another chain and return when they wish. In this way, they achieve greater freedom than holders and a privilege that the developers do not have. A developer can not leave an ecosystem and suddenly join another one to then do the opposite, the developers require an additional element: the "reputation" a developer needs to have a positive reputation to be able to fulfill his mission, and as we all know, reputation is difficult to build and easy to destroy.
In the original model, the miners have a brutal voting system within the protocol and is a fundamental piece of consensus model. The dynamics of the market makes us see that the miners have a mission to generate profits and this mission is apparently above any other mission since they work in what is profitable in general their behavior follows the logic of the whitepaper and they do what generates more profits .
The BCH holders vote buying and selling their coins, the miners vote choosing which chain they believe will survive and additionally creating blocks in other chains of other currencies if these are more profitable.
As I said before is a type of system that we are exploring its operation and today we know things that we did not know before, today we know that for technical or political reasons a minority chain can survive even when they are not the most powerful in PoW. BCH and ETC are two demonstrations that the power of the POW is the general rule, however in extreme situations other forces impossible to foresee emerge.
We have also learned that although a majority of the miners support a change and even how much they have a signaling mechanism to coordinate the choice of the valid chain, and thus mitigate the risk of mining the wrong chain. The uncertainty of the impact on the price of a change in the rules can make them think one thing, know that they are the majority and still act in another way. Again what you want does not have a relationship with what you do and that is why the signage creates in some cases a false sense of security that can lead to a crisis in which some miners lose money.
If we look at the ecosystem the most stable group that remains more constant in the same chain are the developers, how many developers with real power to generate changes in BTC came to BCH? The answer is none. Bitcoin Cash has had to build its ecosystem from scratch with developers who had no chance that their proposals would be considered in BTC. Developers are those who put their reputation, their most important asset at risk in each line of code and can not leave or join another chain quickly. For the developers the model is even more brutal, the loser loses everything forever Gavin Andresen and Mike Hearn are good examples of this being leaders went into exile.
The miners want to vote?
Are they willing to risk choosing the right chain and also to be the ones that govern development?
Are they willing to take the economic and personal risk that this role entails?
Are you willing to take a risk without direct incentive?
Miners as part of the block size escalation conflict gained something as compensation for resources, time of money invested?
In my opinion, if the protocol is modified to make the voting process more efficient, the security model is changed in a negative way, so voting would have no cost or have a lower cost, it would create an incentive to introduce changes and this may have an impact on the stability of the protocol and a massive loss of currency value.
The Bitcoin Cash community underestimates the aspect of Bitcoin of being uncontrolled. No one controls it and it is very difficult to change, Bitcoin was not the first attempt to make electronic money; the previous ones were subordinated to the banking system or were destroyed by the legal system , Bitcoin has special qualities and reducing its power for a short-term convenience can damage the ability of BitcoinCash to survive in the long term.
If BitcoinCash does not adapt to what market needs, we will never achieve the mission. If we cannot adapt, then BitcoinCash runs the risk of being crushed by the forces of financial entities with much higher power than BitcoinCash.
The balances are delicate, the mission is honorable, the resources scarce and the window of time limited.
It is up to the members of the BitcoinCash community to live up to the circumstances of the day. In our hands was placed an important mission that requires acting with talent, responsibility and honesty.
No one has reviewed this piece of content yet