Michael J Casey works on blockchain-based solutions for the Digital Currency Initiative at the MIT Media Lab. He is also a former Wall Street Journal reporter, and the author of several books including “The Age of Cryptocurrency”, which he authored with Paul Vigna.
In this piece, Casey examines recent events in the bitcoin world that culminated in the departure of developer Mike Hearn, providing his perspective on the resulting debate.
Like many in the digital currency community, I’m tired of the “bitcoin is dead” line that has permeated mainstream coverage of high-profile software developer Mike Hearn’s decision to quit the “failed” bitcoin experiment.
Yet if we contemplate this misguided storyline, there’s much to learn from it. It’s up to those of us who believe this technology truly matters and that, in some shape or form, it will change the world, to shift the narrative.
Let’s use this opportunity to restart the public conversation.
The first thing to acknowledge is that the doomsayers might be partly right. In one, narrow sense, bitcoin as a mass-adopted currency is dead. Not technically, of course – it would take the deletion of all versions of the blockchain ledger to kill it – but socially.
Bitcoin simply won’t be, not any time soon, a replacement for the dollar.
The big idea
But what drew me and many others into this project was not the prospect that Mom and Pop would buy their groceries with bitcoin. It was the expansive core concept behind it.
This new, decentralized system for achieving consensus contained a very big idea.
For me, the first phase of discovery meant opening my eyes to the flaws in our current system for exchanging value and for keeping track of those exchanges. It helped me realize how, in letting powerful intermediaries resolve our persistent problem of mutual mistrust, we’ve made an unjust and inefficient society even more so. The second part was discovering that it’s possible to do things differently.
That very big idea is definitely not dead. In fact, the core technological concept behind bitcoin – which it to say its software-driven governance system, not the currency per se – is very much alive.
It is making people and organizations, from Fortune 500 companies to G8 governments, rethink the means through which we share valuable information. Independently, both the UK government and the IMF brought that point home this week.
Yet an outsider reading of Hearn’s noisy exit might well conclude that Satoshi Nakamoto, the mysterious inventor of bitcoin, achieved nothing.
That’s because news reports tend to reduce this nuanced issue down to simple, binary terms: either bitcoin fails completely and has zero impact on the world or it succeeds and we all start exchanging it for goods and services.
Solving a thorny problem
That perspective says nothing about the astounding wave of innovation that’s fervently seeking the most effective way to implement bitcoin’s core idea.
It ignores the many new models for disintermediating payments, remittances, securities settlement, asset registries, escrow, notary services, supply chain logistics, copyright, contracts, voting, data storage, communal infrastructure management, and so much more.
Treating bitcoin as a static product that customers either like or dislike – as if akin to Coca-Cola – doesn’t take into consideration the constant protocol updates, the ongoing proposals and counterproposals for improvement, or the countless new applications that open up new use cases.
Joe Public has no idea, either, that there are myriad copies and partial copies of bitcoin’s open-source code in operation, alternative decentralized models for exchanging assets, keeping records and managing shared resources.
Still, in one sense, Hearn’s depressing analysis is accurate. The particular version of the “bitcoin” idea to which he is referring – the original one – has not been well managed.
This isn’t a technical issue. It’s political.
Scaling bitcoin’s protocol – in particular, resolving the heated debate over increasing the data capacity of the blockchain’s component blocks – is a much knottier problem than can be solved with a software fix.
A solution requires competing bitcoin stakeholders to negotiate a deal in an environment in which a) there is significant money at stake, b) there’s no ultimate arbitrating authority, and c) arguments play out on public forums such as Twitter, Reddit and IRC where it’s difficult to trade away one’s principles.
Still, when the only other option is self-destruction, people tend to reach compromises – whether in governments, boardrooms, or marriage. The bitcoin community is no different. As venture capitalist Fred Wilson said on this topic: “Sometimes it takes a crisis to get everyone in a room.”
The bigger problem is the damage this fight has done to the image of the broader cryptocurrency project among a woefully ill-informed public. That matters because the stakes are higher than ever.
Finding a balance
The growing interest in blockchain and distributed ledger applications in London, Washington, DC and New York suggests this core technology could become the back-office foundation of our global financial system. Knowing the harm that system’s vulnerabilities can cause, everyone should care about how this new architecture is designed.
Will its consensus system for proving transactions and affirming the ledger match the optimally decentralized, “trustless” aspirations of bitcoin and Ethereum?
Will it mix both trust and trustlessness as Ripple’s protocol does? Will it be run by an association of “permissioned” stakeholders – perhaps a federation of financial institutions, not-for-profit and regulatory agencies? Or will it be controlled by a consortium of banks?
It seems clear that bitcoin’s governance and scalability problems have for now ended the pure decentralized model’s chances of being adopted by Big Finance. But somewhere along that spectrum of decentralization lies a workable balance.
I, for one, believe a network of validators coordinated by a transparently run federation of differently aligned entities could provide a robust, near-incorruptible system.
But there are many smart cryptocurrency minds who argue that such a permissioned structure will be, at best, impractical and, at worst, attackable. What I am sure of is that we need a rigorous public debate on such issues.
Few specifics have been reported about what Hearn’s new employer, R3CEV, is up to. It has some of the finest minds working for it and I don’t doubt they are striving to make our financial system more efficient.
But let’s also not forget that its 42 members comprise what regulators call “systemically important financial institutions” — too-big-to-fail banks, to the rest of us. They are the very same powerful intermediaries that are in the crosshairs of every fintech developer building on bitcoin, Ethereum and other disruptive platforms. Why wouldn’t those banks design a system that entrenches their interests? Would that be in the broad public interest?
We need to be asking such questions. Now.
And when we do, our benchmark starting point should be that, thanks to bitcoin, we now know that the core objective of decentralization is not only important but possible.
Bitcoin is not dead.
Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.