Two Lenses

On compromise and the role of experts in Bitcoin

This article is written as an addendum to Two Theories of Bitcoin [1]. It is a continuation of the Two Lenses section, looking at a few more examples of some controversial issues, and how they may be interpreted differently depending of whether one perceives Bitcoin though the Extreme Consensus, or the Market Consensus lens.

Compromise

Recently there have been many calls for compromise between the Bitcoin Unlimited and Core camps. Some recent proposals that have drawn attention are Sergio Demian Lerner’s Segwit2MB proposal, and the recent Extension Blocks proposal [2, 3]. Responses have been mixed, but many well known figures in the community see these proposals as a potential way to bring the community together through much-needed compromise [4, 5, 6].

Seen through the lens of Extreme Consensus, these calls for compromise make sense. Since Bitcoin’s properties are believed to be grounded in strong social consensus, a united community is seen as a precondition for technical progress. Any rift in the community is seen as bringing weakness and disorder to Bitcoin, sapping enthusiasm and opening the door for competing cryptocurrencies with more harmonious communities.

It is natural for people to have different opinions on the best path forward for the development of Bitcoin. Since, through the lens of Extreme Consensus, social consensus is seen as a precondition to technical progress, these different technical paths need to be reconciled. If experts disagree on the best path forward, then it seems that compromise may be the only way forward.

When perceived through the lens of Market Consensus, however, contention and disagreement are not necessarily seen as fatal problems. When there are different potential paths forward, one would expect contentious debate, which has the benefit of allowing market participants to gather information on the strengths and weaknesses of the different proposals.

In the Market Consensus view, the idea that the different groups are in a position to broker compromise makes little sense. The theory suggests that each independent proposal will be judged by the market on its merits. If those willing to commit economic value to their choice favor one change but not another, then there is little that can be done to force them to be bundled together.

The best way to resolve disagreement, in the Market Consensus view, is not to offer compromise, but to offer a way for market participants to back their opinions with economic commitments. For example, investors could be offered a way to trade potential fork futures on an exchange. This would resolve the impasse in a way that rewards choices that bring greater value to Bitcoin, and thus moves it towards a system of greater value for all.

Experts

The difficulty of reconciling diverse opinions into a unified social consensus creates a tendency for adherents of Extreme Consensus to place great importance on the opinions of experts. Since Bitcoin is a very complex system that is difficult to understand, it makes sense to give added weight to people with demonstrated expertise or specialized knowledge. And since there may be a virtually unlimited diversity of opinions in the community, it would be impossible to come to consensus if each of thousands of different opinions were considered equally. Diverging opinions are seen as potentially harmful, as they make social consensus more difficult. If these diverging opinions are ill-founded or uninformed, they would be doubly harmful.

For these reasons, it makes sense that the theory of Extreme Consensus leads to a propensity to place great weight on the opinions of those viewed as experts, and to discount diverging opinions.

Adherent of Market Consensus would also be expected to place value on expert opinion, but with a significant caveat: they must be willing to subject those opinions to a market test. They would perceive the issue of trying to reconcile myriad opinions similarly, but their solution to resolving these opinions will ultimately be rooted in a market mechanism that requires participants to back their opinions with economic commitments.

The Market Consensus view would tend to be more suspicious of self-proclaimed “experts” who attempt to avoid subjecting their proposals to the judgement of the market. There is an incentive for people to increase their personal prestige and influence by positioning themselves into the role of expert. Without recourse to profit and loss, it can be difficult to determine which opinions are self-serving, and which contribute genuine value for Bitcoin as a system.

Reconciling differences

In many ways, the differences in interpretation between the theories of Extreme Consensus and Market Consensus are subtle. The two theories may frequently offer similar assessments of the advantages and disadvantages of different technical options. The main difference is the prescriptive guidance the two approaches give us on how these pros and cons should be weighed.

The theory of Extreme Consensus suggests that the options should be discussed and weighed carefully, with the community coming to a social consensus before any technical changes are implemented.

Discussion and debate also have a place in the theory of Market Consensus. But when agreement seems elusive and a contentious choice is needed, this theory offers a method to make this choice: allow the options to be weighed by market participants with economic skin in the game, who will enjoy profits or suffer losses depending on the wisdom of their decision.

References

[1] https://medium.com/@Mengerian/two-theories-of-bitcoin-f4da84468a7a

[2] https://lists.linuxfoundation.org/pipermail/bitcoin-dev/2017-March/013921.html

[3] https://medium.com/purse-essays/ready-for-liftoff-a5533f4de0b6

[4] http://moneyandstate.com/thoughts-on-segwit2mb/

[5] https://twitter.com/aantonop/status/848680986376249344

[6] https://twitter.com/JihanWu/status/849130135554973696

Image credit: By Ashley Pomeroy (Own work) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

Acknowledgements

Thank you to Zangelbert Bingledack and Roger Murdock who provided review and editorial feedback for this article.