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Ask CryptoVantage: Who Controls Bitcoin?
Unlike fiat currency, which is controlled by banks and governments, bitcoin’s nature as a decentralized digital currency means that no one person, group, business, or government can fully control it.
If someone wants to make a change to the way bitcoin works, or govern which transactions should occur, there are mechanisms in place to ensure that a very large number of people must also agree with that change before it can be made. This article describes the potentials of control within bitcoin and how they are mitigated.
Mining Control
In bitcoin, transactions get added to the blockchain by the bitcoin miners. These miners run software that decides which transactions get included in the blocks that they mine. Mining software is generally designed to select the transactions that pay the highest transaction fees, although the software could instead be designed or altered to choose transactions based on different factors. For example, mining software could be designed to only accept transactions from a government-approved whitelist of addresses.
Even though miners get to choose which transactions go into their blocks, they cannot censor transactions. The bitcoin network is made of many, many miners who all hold different opinions and values. Even if 90% of miners were trying to stop a transaction from being included in the bitcoin blockchain, eventually the remaining 10% of miners would include it. This is especially true for transactions that pay a high fee since miners tend to act in their own best interest. This feature prevents even the most powerful miners, or groups of miners, from censoring bitcoin transactions.
A much higher risk with mining control is known as a 51% attack. If a single group controls 51% or more of the mining power, they can undo entire blocks (only the most recent ones). It is worth noting that China currently holds a large portion of the bitcoin mining power, as many bitcoin miners are located there due to inexpensive electricity. Having a large percentage of mining taking place in one country increases the risk of a government using that mining power to do their bidding, including 51% attacks to undo blocks containing certain transactions. Fortunately, with time bitcoin mining is becoming more geographically distributed.
Development Control
Bitcoin Core is the software that the majority of bitcoin users run on their bitcoin nodes. The risk with “development control” is the possibility that developers who maintain the Bitcoin Core code repository may change or alter the code in a malicious way.
The Bitcoin Core code is held on a GitHub repository. Bitcoin Core is open source software, which means that anyone can attempt to fix bugs or improve upon the code. Even though hundreds of people write and review the code, there are only a handful of people who actually have permission to commit changes to the code. This might make it sound like Bitcoin Core maintainers have a lot of control over the direction of bitcoin development, however this is false because:
- If they were to try to push bad changes into bitcoin, or try to block changes from getting in that everyone else approves, the rest of the developers could easily move the project elsewhere and elect a new set of maintainers to maintain the code repository.
- Most changes to Bitcoin Core do not affect the “consensus rules” that dictate the way bitcoin works. Instead, developers focus on other issues such as the Bitcoin Core wallet (which is different than bitcoin protocol itself), or making the network more efficient – for example, if there is a bottleneck on how fast transactions are being relayed through the network, then the Bitcoin Core developers will improve on those issues without altering key components of bitcoin itself.
Attempting to change the rules of the bitcoin protocol takes a very long time because one must convince the majority of bitcoin developers, miners, and users that the changes are worth implementing into the node software. This is not a simple task and usually takes many years. For this reason, code changes that affect bitcoin’s consensus rules are rarely made.
User Control
Ultimately, it is the users of bitcoin who have the most control. Bitcoin users run node software that enforces the bitcoin consensus rules that they agree with. If developers try to make changes that the users disagree with, then the users can simply choose to not run the new software. Even if miners try to force consensus rule changes by mining blocks with new rules, the blocks they mine will become worthless if no bitcoin users are following those consensus rules.
In 2017, bitcoin users showcased the extent of their control during the Segwit2x/UASF movement. At the time, 80% of the combined mining power, along with some major exchanges and developers, were trying to force a change that would increase the blocksize of bitcoin. The miners wanted to do this as it would increase the amount of transactions that could be processed by bitcoin, but the bitcoin users rejected it for two main reasons: 1) it would make it more difficult for regular users to run a bitcoin node to validate transactions; and 2) it would have been a huge security risk if the miners could make rule changes to bitcoin on such a whim. The UASF proved that bitcoin users have the most control over bitcoin.
