As the block size debate has raged over the last several months, the Bitcoin community has started to wonder how it will face division over contentious technical issues going forward. What kinds of decision-making procedures should be adopted? In short, how will Bitcoin governance work?

The formalizers

In May, computer scientists Arvind Narayanan and Andrew Miller called for an “effective decision-making process” for Bitcoin, including a technical advisory board and a public polling and comment process. Narayanan says that centralized decision-making saved Bitcoin during the 2013 blockchain fork. Joi Ito, the director of the MIT Media Lab and former ICANN board member, has raised the possibility that something like ICANN’s Governmental Advisory Committee (GAC) may be necessary to ensure that governments feel heard by the community as future decisions are made.

I’m skeptical that the Bitcoin community would ever be amenable to these formal governance suggestions. As Jeff Garzik, a leading Bitcoin developer, has written in his blocksize proposal,

How can we create a technical advisory board, potentially enshrining its members as a bitcoin priesthood, without the board becoming as corrupt and easy to manipulate as FIFA? Technical decisions have economic consequences in bitcoin. Imagine the economic impact of code changes at 10x, 100x+ scale.

Giving governments a formal seat at the table sounds even less appetizing. For most members of the community, the point of Bitcoin is to enable a censorship-resistant, open platform for financial innovation. If governments are given a say, they will undoubtedly seek to undermine those qualities.

Furthermore, GAC involvement in Internet governance discussions at ICANN has been far from benign. Consider the ridiculous overprotection of new top-level domains embodied in the Trademark Clearinghouse, as well as governmental objections to top-level domains like .amazon and .patagonia. The GAC has exacerbated ICANN’s evolution from a technical agency into a policy organization.

And Bitcoin is more fragile than the Internet. I’m not sure Bitcoin could, even on a technical level, withstand GAC-originated policy compromises.

Impossible, not just unpopular

More to the point, even if it were desirable to create a centralized voting or other decision-making process for Bitcoin, it would not be possible to make any new centralized process the effective governing mechanism. That is the whole point of the Nakamoto consensus that governs Bitcoin at the algorithmic level, and it is the effect of the market mechanisms that govern Bitcoin at the social level. I will call the combination of Nakamoto consensus and market adoption constraints on Bitcoin by the term “Nakamoto/market consensus.”

Let’s suppose that there were another highly contentious issue that needed to be decided. The “technical advisory board” or what-have-you votes to take path A rather than path B. If a majority of miners, users, and exchanges decides to follow the advice of the formal decision-making process, then the community will take path A as decided. But if they instead decide to take path B, there is nothing the formal decision-making structure can do to stop them.

An advisory committee voting mechanism (or any other centralized decision-making process) cannot bind the network. This is by design. That is the whole point of Bitcoin. The network will behave the way the Nakamoto/market consensus wants it to, regardless of how anyone votes. As a result, we should look for governance mechanisms that accept this reality, that explicitly rely on Nakamoto/market consensus as a backstop instead of trying to impose alternative decision-making structures.

Focusing on good communication and empiricism

It’s true that the Bitcoin community is likely to face additional contentious technical issues in the future. But instead of imposing an ultimately powerless formal decision-making apparatus on top of Bitcoin to address these issues,

the goal should be to arrive at Nakamoto/market consensus more easily.

This can be done by 1) improving communication between groups of stakeholders and 2) ensuring that any debate is grounded in realistic assumptions about the world.

To improve communications, members of the community might consider joining with like-minded parties into contestable unions that represent their interests and can communicate with the rest of the community on their behalf. If we all accept that we need the support of Chinese miners to make changes to Bitcoin, it would be nice to have a single person to talk to who could represent Chinese miners. The same is true of major exchanges, or of merchant processors.

This system of contestable unions would be difficult to capture. If a particular stakeholder’s union started to espouse ideas that its membership did not agree with, they could simply switch support to another one. The communiqués issued by union representatives would be public and could be vetted by members. By more quickly making the views of the community known, such a system could accelerate the arrival at consensus.

Another way to arrive at consensus more quickly is to abstract from debates about answerable empirical questions. One way to do this that I have already suggested is to use prediction markets to answer specific questions about the effects of certain technical changes. For example, we can use markets to predict the effect of a given technical change on the price of Bitcoin, or on the hash rate, or on the number of full nodes.

By eliminating these empirical debates from contention, prediction markets should be able to accelerate the arrival at Nakamoto/market consensus. Participants can focus more closely on technical problems when the effects of the various options are known and agreed upon.

Decentralized governance is worth trying

We already have monetary systems that are based on centralized voting mechanisms and government input. They are called “fiat currencies.” Perhaps you have some. What makes Bitcoin so interesting is that it is trying to do something new, not simply reinventing fiat currency on the Internet.

If the formalizers believe that a cryptocurrency with centralized governance will somehow be different than fiat, they are free to create one. But the Bitcoin experiment must continue without such centralization. By focusing on the ease of convergence to consensus, we can make that happen.