Bitcoin Balance Of Power Chart

Soona from Token Daily surfaced this fascinating chart from 2017 about the balance of power in bitcoin. Do you agree that this accurately maps the inherent checks and balances in the system?

See original tweet:

Missing from the chart and missing from most analysis of Bitcoin’s governance is who pays the core developers.

Once this is quantified, we can begin to understand the relationship between soft power and hard power within the protocol.

It’s just not understood or publicly known – and bitcoiners don’t want to talk about it either.

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A contrarian view on the “balance of power” in Bitcoin.

I do not see a “balance” in the “balance of power” illustrated in the above chart. The “power” is with the miners. All things that are mentioned in the chart are possible, but remember that people follow money. So, in the event of a hard fork because 75% of miners decide to change the rules of Bitcoin software (and continue to improve their hashpower so they retain >= their 75% dominance):

1/ Developers – Core developers may refuse to accept the changes suggested by majority miners, but miners wouldn’t care. They develop/test their version of the Bitcoin core software and publish it on Github and other locations for everyone else to use. More on this later. This means, core developers are powerless.

2/ Wallet providers – Major providers now need to support both forks, but guess which version earns the “primary coin” treatment? The hard forked one. Why? That’s where the majority support is. That is where the Bitcoin chain grows with the “most accumulated work” as Nakamoto said in the whitepaper. Some wallet providers may choose not to support the hard fork, but then users will move on to the ones who support. Why? because people don’t want to lose money. Again, wallet providers are powerless.

3/ Full nodes – Just like developers and wallet providers, full nodes may nor may not choose to support the hard fork. So, some full nodes treat the blocks produced in the hard fork as invalid (these nodes don’t want to support hard forked chain) and some full nodes who support hard fork will see the blocks produced by the original chain as invalid. But do full nodes have any power? No! Why? Because full nodes split into 2 parts where they don’t care for each other. This does nothing to hard forked chain, which continues even if 75% of full nodes decide to support the old chain. Unlike BFT consensus algorithms where majority of “Validators” must agree on a block for it to be “valid”, there is no requirement that majority of full nodes must “agree” for blocks to be valid. So, full nodes are powerless too.

4/ Users – Ultimate deciders of which version of the coin lives on. Every user who owns Bitcoins at the time of split will now have the coins on both chains. But this is not hard to analyze as this has happened with ETH-ETC split before. This is painful, lot of people may lose money simply because they don’t know what to do, and the value of coins on both forks may go down because people lose confidence in the “digital gold”. This is the only “balance of power” against miners – they are afraid that any split may affect both the chains, with the end result of lost value on both the chains. This is a lose-lose situation. This is the only reason miners behave in the current setup because doing anything stupid or malicious is suicidal for them.

5/ Exchanges – Just like developers, wallet providers, and full nodes, some exchanges may support only one of the forks and some may support both. Still, they are powerless. They make decisions based on which option allows them to survive and most may end up supporting both.

6/ Merchants – Merchants don’t care. If there are exchanges that support both forks and they can exchange the coins to fiats, they will accept both.

So, I am curious to learn where this balance of power is. We can naively argue that there is balance of power with all these actors, but 4 of them totally powerless, IMO. Miners can do whatever they want IF they think that end users won’t abandon Bitcoin.