2017: The Year the World Discovered Who Really Controls Bitcoin

What most of the Bitcoin community should have learned in 2017, it it weren’t obvious before, is that miners do not control the Bitcoin network. So who is in control? Everybody, and nobody.

Tribalism over Block Size

On May 23, 2017, the Digital Currency Group announced in their New York Agreement that they’d formed a majority mining cartel that, at the time, controlled over 83 percent of the hashing power on the Bitcoin network. The 58 mining cartel members from 22 countries around the world also announced that within six months they planned to push through a hardfork referred to as Segwit2x (Segwit2Mb).

For many years there has been and continues to be, a long-standing controversy over block size in the Bitcoin community. The debate is mainly about how to best scale the Bitcoin network, i.e., significantly increase the number of transactions it can handle.

Self-proclaimed ‘big blockers’ believe the best way is simply to increase the block size to handle more transactions in each block; while so-called ‘small blockers’ believe this would erode mining decentralization and block size should remain fixed.

On November 8, eight days before the date of the hardfork, Segwit2x was canceled, because as it turns out, the majority of miners would not commit to mining the new chain for longer than 12 hours. The mining revolt was based on the fact that this mining would be less profitable than continuing to mine on the Bitcoin mainchain. Of course, and outside of economic disincentives, there was nothing stopping Segwit2x from actually going through with a hardfork.

In fact on August 1, 2017, Bitcoin Cash did follow through with a big block hardfork aimed at supplanting Bitcoin. However, aside from artificial pump and dumps and mining difficulty adjustments, trading and mining Bitcoin Cash have remained very unprofitable compared with its Bitcoin ancestor. And predictably, the digital currency commands only a fraction of the users, miners, and market share compared to Bitcoin.

Mining Versus Voting

Before these and other real-world experiments in 2017, there seemed to be a common misconception held by much of the non-technical portion of the community that miner signaling stood for miner voting.

This is not so; miner signaling is only meant as an indication of a miner’s technical readiness to execute a particular software update. Miners vote by choosing which chain to mine on, in so far as actions speak louder than words. The majority of miners will mine on the most profitable blockchain…

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