Apr 8

Letter #101: Bitcoin - A Blockchain Without A Leader

Read now to learn how the lack of leaders in Bitcoin is one of the most fundamental parts of its decentralization.

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Dear Readers,

For a space that claims to focus on decentralization, there sure seem to be an inordinate number of leaders in crypto. Think about it: Ethereum has Vitalik Buterin. Cardano has Charles Hoskinson. Dogecoin has Elon Musk. Ripple has Chris Larsen. The list goes on.

To be clear, there’s nothing inherently wrong with a community or protocol that has leaders. After all, no one really complains about Elon Musk being the CEO of Tesla and SpaceEx. But we also don’t call those companies “decentralized”.

Bitcoin, on the other hand, exhibits true decentralization, especially in the category of leadership. There are no leaders. No person or group has the ability to unilaterally change or even majorly influence the code and the blockchain. The only individual(s) who ever came close to filling that role was Bitcoin’s pseudonymous creator, Satoshi Nakamoto, who hasn’t been heard from in over a decade.

Bitcoin truly is owned, operated, and controlled by each and every one of its users. All of us have an equal say in what happens on the network, from the smallest user to the largest corporation. But do you actually know why?

Stick To The Code

It’s common to talk about Bitcoin’s decentralization in terms of geographical distribution. After all, there are Bitcoin miners and node operators all over the world. A globally-distributed network is one that is nearly impossible to shut down, whether intentionally or unintentionally. This is one of several pillars of Bitcoin’s decentralization. However, there’s an exceptionally important piece of decentralization that gets brought up much more infrequently: Bitcoin’s open-source code.

The open-source nature of Bitcoin’s code has had several results, both for Bitcoin specifically and for the cryptocurrency space at large. It has contributed exponentially to the growth of Bitcoin’s geographical decentralization, since anyone at all can spin up the software for free. It has also contributed to the improvement of the code itself, because anyone can view the code, develop changes, and then propose them to the rest of the Bitcoin community for potential acceptance. And who can forget that the vast majority of cryptocurrencies and blockchains are based to a large degree on Bitcoin’s codebase?

Most important of all though, Bitcoin’s open-source nature allows any user to verify the code and even select the version of the code that they’d like to run. That’s right; no one will or even could force you to run a specific version of the Bitcoin code. If you don’t like a particular upgrade (or Bitcoin Improvement Proposal, as they’re commonly called), you can simply ignore it. Both your node and your Bitcoin holdings will still be accepted by the blockchain and community.

Most of us aren’t used to that level of freedom when it comes to the software we use. For example, if you hold off on upgrading your iPhone’s software for long enough, then eventually the apps you want to use will no longer be supported by your older iOS. Or if you leave a Google Chrome update sitting for long enough, the browser will eventually force an update through when you close and then re-open it.

In short, it’s rather common for software to be controlled by its developers. So it’s an anomaly that Bitcoin users aren’t controlled by the blockchain’s developers. But it’s an anomaly that makes all the difference.

Bitcoin Usage Cannot Be Controlled

If you’ve been staying up to date on news within the Bitcoin space, then you’ve likely heard of the disinformation campaign that was recently launched by the nonprofit Greenpeace and funded by Chris Larsen, the CEO of Ripple (i.e., the company behind the cryptocurrency XRP). In their campaign, Chris and Greenpeace adopt half-truths and outright lies about Bitcoin’s energy usage in order to influence public opinion against the Proof of Work algorithm on which Bitcoin’s entire value proposition irrefutably relies.

Likely one of the most insidious claims by the campaign is the following:

It’s a common misconception to think that miners, exchanges, and developers have the ability to force changes onto the rest of the network's users, but it’s simply not true. As we already discussed, Bitcoin’s open-source nature ensures that the version of the code desired most by the community is always publicly available. The most that miners, exchanges, developers, and others can do is exclude themselves from the network:

  • If miners choose to mine blocks on an alternate version of Bitcoin (like miners of Bitcoin Cash or Bitcoin Satoshi Vision do), other miners will simply step in for their own chance at earning valuable Bitcoin block rewards and transaction fees.

  • If exchanges choose to delist Bitcoin, users will simply flock to competitors that still list it or will transact peer-to-peer with other community members.

  • If developers propose code changes that the community doesn’t approve of (which happens all the time, by the way), users will simply vote against the proposals by not upgrading their nodes to the new codebase.

The truth is in the details. Bitcoin is resistant to any type of control or manipulation because users are always free to choose the version of the blockchain they care to run. No attacker, no matter how well-funded they may be, can alter or deny that reality.

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This is not financial advice. This newsletter and related content are for informational purposes only. Cryptocurrencies and digital assets can be risky. Always do your own research before making any sort of investment.