The two biggest digital currencies, bitcoin and ethereum, have both experienced a chain-split hardfork in the past two years.
In each case, it was much feared at the time, but with hindsight, we can say it was probably the best thing to have happened to either of them since their invention.
Ethereum rose to great new heights after their chain-split hardfork. Bitcoin did too, nearly doubling. While the combined value of Bitcoin Core and Bitcoin Cash has now risen to almost $5,000.
Yet, in both cases, such chain-split hardfork was resisted ferociously. During a one month period after the Slockit DAO hack, ethereum’s public spaces became a metaphorical war-zone of sorts with some strongly arguing the fork should not happen, while others arguing in favor.
They went through a process which should, in our view, decide the default option to be merged in the main client/s. Token holders vote, miners too, depending on the results, the code is or isn’t merged in the main node software.
But, after all that process and ferocious arguing, everyone can still get what they want by chain-split hardforking. In this way, a minority does not dictate the rules of the majority, and the majority does not coerce a minority.
This is a very different and, in some ways, a very new method of governance which we haven’t seen before and doesn’t quite exist in the physical world, but does exist in this space.
Yet, many have argued, and some continue to argue, against it with the most prominent example being Adam Back, Blockstream’s CEO, who told Chinese miners back in 2016 that bitcoin is, in effect, a dictatorship.
That, of course, is factually incorrect. Bitcoin is neither a dictatorship nor a democracy, but a creature of the free market with its governance being the free market itself.
They may argue that even though bitcoin can fork it should not fork. But should is a very subjective term, a mere opinion, and you know what they say about those. Everyone has one.
So it needs some objective intellectual foundations which haven’t really been provided except in a hand-wavy manner. But bitcoin does have very strong intellectual foundations of which the coders that randomly happened to contribute towards the open source project in a first come first served basis might not be aware.
“The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process… only competition in a free market can take account of all the circumstances which ought to be taken account of.”
That’s the insight expressed by Hayek in the Denationalization of Money after studying for much of his life the nature of money. Earning a Nobel prize in recognition for his work as well as achievements.
Nations have tried to implement some of his insight by allowing the free-floating and exchanging of currencies in the foreign exchange markets. But, even if the Bank of England really honestly wanted to decentralize money, the temptation would probably be far too great, the interests too numerous, for them to be able to do so. So Hayek says.
So he argues it would need to be a new generation of “bankers” that would be laughed at by the old generation, but the people would see the benefits.
Nakamoto forced the implementation of this insight without requiring any permission due to advances in technology which now allow us to operate a complete monetary network through just some code.
Even with just bitcoin alone and no other digital currency, its success shows the power of objectivity and what we can call that which is self-evident.
It’s clear that money, which values all things, itself must have some mechanism of being valued, but when there is only one money you can’t quite do so due to no choice.
If it was hard money, like gold, it would have some objective qualities, but gold can easily be devalued as it was until it was taken off the monetary aspect completely.
The only real objective mechanism is, therefore, the free market. A new generation might grow to consider money not as something that is, but as something they choose like their preferred loaf of bread they buy daily at the supermarket. Picking one “kind” among many sorts.
The ingredients of that preferred bread might change, so their choice might change too. Likewise, their preferred money might be mismanaged. Fees might become too high, for example, or transaction speed might become too slow, or it somehow becomes inconvenient, or prices become too dear because it suddenly inflates too much or deflates too much, etc.
This isn’t a world we can easily envision and even if we do we would be wrong on many counts since we cant possibly take into account the many aspects. But it’s not a world that will suddenly be here tomorrow either. Like most things, it will probably happen gradually, with aspects refined or addressed as they come, until it’s ready for everyone and they all wonder how it suddenly happened.
The bitcoin hardfork, in that regard, was a step in that direction. Primarily because it does not in any way affect bitcoin holders, with all of them being given an equal amount, thus making it a true choice between one or the other.
In this regard, some companies stand out for criticism. BitPay especially. Because they are placing themselves in the way of the free market for no good reason instead of allowing their merchants to freely choose.
The reason they don’t is the reason why old bankers would laugh at the new generation. They can’t conceive of things working so differently after having spent all their life doing things in one way. Customers would be confused, they might say. No one is going to sit there decide what money they like for breakfast, they might snicker.
And yet they do, especially among the new generation. There are plenty of them who used btc for buying things, but now prefer eth to do so. That’s just eight years after bitcoin’s invention. How will they behave in two decades?
Are we really to assume that their customers have sufficient intelligence to understand bitcoin and even accept it for payments, but would be driven away if the added option of bitcoin cash or eth was provided?
Is BitPay or any other company really saying that something like money is similar to the many donation options in some page? When donations is something you can easily persuade yourself out of, while money is something you can very easily persuade yourself into.
The past optimization studies can’t really be applied to something like money because we are very incentivized to increase our money or ensure it retains value. Therefore would certainly not be put off by the added choice, but would instead take time to consider it.
That’s what Hayek says and he is probably right. If their money is being inflated, people won’t leave it to fall in value due to laziness if they have the choice.
Likewise, if businesses are paying thousands in daily fees, their very last concern would be if they have five minutes to research their options. Here is what one BitPay merchant says:
“I am a long term bitpay merchant and think you guys are great, you made it easy for companies to accept bitcoin…
Maybe its time you guys added support for other coins (ETH,BCH,LTC?) on payment checkout pages, right now any clients of mine who want to pay are being sent to shapeshift who seem dodgy to be honest.
Bitpay your core business is not bitcoin (whatever that means nowadays with what 3 forks?) its making it easy for companies/people to get paid in Cryptocurrencies. Maybe its time to diversify…”
Where there is market demand there will be supply, whether that’s by BitPay or someone else. Because most people are not tied to any one coin, like they are tied to dollars or pounds. With just one click, they can have whichever they want.
Since certain things are objectively true and indisputable, it is probable the majority would use just one as long as it remains well managed. If it doesn’t, they can freely move.
While plenty would probably not use the majority coin, either because they are first to see a new one is better or because it serves some niche of theirs such as supporting local merchants.
All this might not be as simple as one centrally controlled money, but that simplicity has given us constant boom and crashes, from which only a tiny number benefits, as well as outright tragedies as we are currently seeing in Venezuela.
Any minor inconvenience by having such free choice would probably be dwarfed by the considerable added benefits of free market objective money.
Which is why there can not be one chain to rule them all or one bitcoin or one currency. Which is why chain-split hardforks can and do happen and when they do the market roars.
Which is why bitcoin does not need any committee standards or central layer governance, but the knowledge and realization that any mismanagement will be punished by the market while any good management will be greatly rewarded.