In a world where software applications get weekly updates and can afford to release as many fixes as they want, the Bitcoin network finds itself embracing a rational form of conservatism. As the base layer converges towards ossification, becoming more rigid in how it operates, the developers also bring optional optimizations that don’t break consensus between nodes.
To newbies, it may seem like nothing new ever happens in the realm of Bitcoin. The fact that altcoins experiment with all sorts of ideas and deploy heavily-marketed features also contributes to this distorted perception. After all, Bitcoin is software, and if it really has the best developers in the industry, then why doesn’t it do VR gaming on the blockchain with tokenized cloud storage video footage? Why does the DeFi yield farming happen on other networks?
Well, first and foremost Bitcoin is hard money and the users agree with the digital gold use case. Secondly, the network is decentralized enough to phase out unwanted and unnecessary proposals. Every node operator is a sovereign voter who chooses their preferred software client and optimizations, while simultaneously agreeing with the fundamental rules of the network.
Refusing to run the developers’ code is part of the game theory. By opting out and not allowing any code wizard to become a tyrant of the network, the decentralization only gets maximized. This way, the developers are disincentivized from working on contentious software. And, when an in-demand fix does get proposed, the users will expect rigorous testing and peer-review.
Bitcoin’s Soft Forks and Game Theory
Soft forks are essentially extra lines of code that get added to a Bitcoin node to achieve various goals. They are non-contentious, in the sense that their inclusion or exclusion does not break consensus and cause a network split (which is the result of poorly coordinated hard forks). To make our case for Bitcoin’s conservatism, we will look at two of the most popular improvement proposals: Taproot and SegWit.
Taproot was first proposed by Bitcoin Core developer Gregory Maxwell in January 2018 and aims to improve the base layer multisig functionality and privacy. Almost three years later, the code is close to completion and contains only 520 lines. This means that, on average, every line has been reviewed for almost two days.
Even if the initial peer review gets passed and the proposal moves into the adoption phase, it will take a while to convince community members to run the code on their nodes. As of September 2020, there is an ongoing negotiation process to convince users, mining pools, exchanges, and wallet developers to support the proposal. But, as always, full nodes will only add the extra code if their sovereign operators find objectively-useful benefits that have been properly tested.
Conversely, SegWit (which received overwhelmingly favorable votes from developers, mining pools, and exchanges in 2017) still finds itself around the 50% mark in terms of adoption. This means that three years after individual nodes started activating the soft fork, half of the network is still not running this malleability fix.
In the absence of benevolent dictators to enforce a roadmap or agenda, Bitcoin relies on distrust and constant verification. Regardless of some users’ decision to run extra code on their nodes, the others can choose not to do it and still be in sync with the rest of the network.
Speed of development and of new feature adoption are clearly not among the priorities of bitcoiners. Most users will point out to base layer ossification and Lindy effects (the longer something survives, the longer it’s likely to survive and remain relevant) as reasons for their conservatism. While extra features can be nice, they should not come at the expense of radical changes or unnecessary complexity — as some of the most competent experts in the field will tell you, complexity is the enemy of good and easily auditable security.
Bitcoin vs Altcoin Development
This slow and steady approach to Bitcoin development is drastically contrasted by the “move fast and break things” philosophy of altcoin contenders. Some networks are much more concerned with offering features that can be marketed than making sure that everything works as efficiently as possible. This is mostly due to these projects’ centralization.
In the case of Ethereum, it’s much easier to enforce a roadmap and make changes to the base layer. Not only that there is an early precedent for breaking immutability via rollbacks, but there are also founders who advocate for “governance” (human intervention on matters concerning the protocol, which replaces “code is law” with politics).
As the co-founder and benevolent dictator of the network, Vitalik Buterin can make decisions to speed up the integration of some features or move away from certain development priorities. Likewise, the Ethereum Foundation can decide where the money goes for different projects. In terms of full nodes, Ethereum is a lot less decentralized and has trouble with full archival nodes (admittedly, not even Vitalik Buterin runs one). Even in the case of the migration to another network, there seems to be very little opposition and a lot of coordination.
The situation only gets worse with other altcoins that can barely claim their right to use the “decentralized” label. To their credit, this means that they are free to experiment more with new features and worry less about consequences. But the ability to activate SegWit earlier than Bitcoin or add Schnorr signatures and Taproot in the middle of Bitcoin’s adoption debates doesn’t really imply innovation. Likewise, replicating Ethereum’s design to capitalize on the DeFi mania is just as short-sighted.
Only the top networks have the most consistently-robust development in their class, while other projects merely copy and change parameters. This is good for code testing, but makes for risky investments in projects that will most likely fail.
Given these circumstances, it’s no wonder that newbies easily buy into the “dinosaur” narrative. According to this perspective, Bitcoin only leads the market because of its brand recognition and first mover advantage.
Consequently, these advocates will tell you that their “faster” and theoretically “more decentralized” networks will inevitably dethrone the king. After all, why is it that so much development goes into DeFi apps, while Bitcoin can’t even add Taproot after years of deliberation? Why is the adoption for SegWit and the Lightning Network so low, and why aren’t there thought leaders who push everyone to follow the same path and use Bitcoin in the way that the official narrative says?
Does Bitcoin Fear Change?
All of this has to do with decentralization and it may seem counterintuitive this world of benevolent dictatorships and their walled gardens. Eventually, Bitcoin’s second layers and sidechains could end up integrating everything good that we see today in altcoins — except that they will get built on a more robust base layer which uses sound money for payments. Correspondingly, the base layer will ossify to such an extent that additions become extremely rare.
Bitcoin, despite its conservatism, remains the most popular and decentralized cryptocurrency. Its transactions are the most secure and guarantee the greatest degree of finality, and its network incentives have worked for the longest time. Yet if the slowness of adoption bothers any users, there are enough alternatives — from second layers to sidechains and privacy altcoins — those users can choose what is best for them.
Competition is healthy and necessary to improve usability, features and protocols, and results in a more secure decentralized system. It’s also useful to test the same code in different implementations that serve disparate use cases. And if the Bitcoin base layer does not provide a certain feature at any given point when it’s absolutely necessary in this turbulent political climate, there is a market for alternatives which exist both on top of Bitcoin and outside it. What matters for now is decentralization and consensus-driven change.
Promised improvements to privacy and scaling, like Schnorr and Taproot are still anticipated, and will make Bitcoin more robust and ready for widespread adoption. Meanwhile, research and experimentation is still alive in Bitcoin and newer proposed protocol improvements like Prism could implement directed acyclic graph (DAG) technology to improve scalability.
Bitcoin is the most secure cryptocurrency and the most effective store of value we currently have, and any criticism of it should take into account the functioning game theory that’s involved in merging new code. After all, we all know the story of the hare and the tortoise: slow and steady wins the race.