Segwit2x proves that blockchain doesn’t make politics obsolete

The somewhat sudden cancellation of Bitcoin’s proposed Segwit2x update should prove beyond any doubt that blockchain technologies cannot make politics or trust obsolete, and that they simply move the politics to another sphere.

Building anything cooperatively implies politics and interpersonal trust. Bitcoin and blockchains are no exception.

Planned to occur on around Nov 16th, the Segwit2x update — or fork — was supposed to help improve the scalability of Bitcoin and reduce the transaction fees, particularly for small transactions. However, ever since the Segwit2x proposal was introduced in May, it has encountered strenuous opposition from many developers and Bitcoin users.

The reason for this resistance was not that the technical updates were considered unnecessary or harmful (although some, of course, did make this claim). Most Bitcoin developers believe that Bitcoin could benefit from better scalability and smaller transaction fees, and such updates are going to be necessary in some form or another. The problem was political: from its introduction in an invite-only meeting, the proponents of Segwit2x misjudged how many Bitcoin developers and users felt about even supposedly beneficial changes in the technology, and how they believed open source projects in general and Bitcoin in particular should be governed. A widespread protest movement called “NO2X” challenged the Segwit2x proposal — successfully, as it now turns out. Failing to bring the dissidents onboard, the Segwit2x developers announced yesterday that the plans to implement the update had been cancelled.

In other words: the development of a supposedly immutable ledger that was believed to be beyond the realm of political meddling was deeply affected by nothing else than… political action. The proponents of Segwit2x wanted to change Bitcoin to a system more suited for their needs and desires; this proposal was defeated through extremely traditional grassroots action by its opponents, in a deeply political debate that extended even to death threats. The Segwit2x proponents could not gain the trust of other stakeholders, partly because they ignored the politics of the situation and exacerbated the mistrust by e.g. announcing the update in an invite-only meeting. The mere fact that there was a serious debate whether or not to adopt an update shows how political power can significantly influence how the “immutable ledger” is interpreted.

Bitcoin and blockchain technologies in general do not make politics or even interpersonal trust obsolete, even though many advocates seem to genuinely believe that a world where everything is recorded in an immutable ledger and “code is the law” would mean the end of political “meddling” and abuses of power. However, as long as humans remain humans, the only thing any new, powerful technology such as blockchain can do is to move the politics to another sphere.

True, with Bitcoin, central banks and governments are not (as of yet) in control; however, the controllers are an oligarchy of core developers, and the mob of less important developers and the users. The difference to existing governance systems is that Bitcoin’s political system is almost completely opaque (no one can say how the issues are really decided, and what actually happens behind the facade), there is no regulation nor oversight, and there is not even a sign of democracy within the proceedings. There are no elections or any other systems that would provide even a semblancy of “one person-one vote” mode of democratic governance, nor anything resembling accountability beyond reputation. Aside from those few lucky souls who happen to have the skills and the inclination to become a core developer or otherwise a trusted (or at least listened) voice in the development community, the only power the vast majority of Bitcoin users have is either to use the system as it is, or not use it at all.

Proposals to by-pass existing governance structures and legislation by technological systems such as blockchain are effectively a transfer of power from states to technologists. For some people, this may of course be an improvement. For the residents of functioning democracies, it may not be. What is clear, however, is that blockchain and open source are not inherently democratic movements. More power to the people may be a result, but is by no means an automatic outcome; and there is no avoiding the fact that governance of open source projects requires politics and trust in one form or another. The naive thinking where Bitcoin and blockchains are seen to be beyond politics and abuses of power needs to end, the sooner the better.

PS. At the wake of the Segwit2x, several people are now suggesting that Bitcoin developers need to figure out “defences” that would make similar power plays more difficult in the future. This is probably an achievable goal (although getting developer support for those updates again requires political action), but the downside is that any structures that make the system more rigid against changes also make the system less able to respond if the environment changes. Bitcoin developers can surely create technological and governance systems that make any changes to Bitcoin blockchain extremely difficult to implement, but this will increase the risk that Bitcoin itself will become outdated in the future.