Block Size Debate and Anarchy


If Bitcoin is a monetary incarnation of cryptoanarchism principles, the question of what a Solomon’s decision on block size would be like is not a private issue meaningful just for coders, bitcoin businesses owners and enthusiasts. It is an isolated situation of a more general question: what is the golden rule for making socially important decisions in an anarchic society?


On the one hand, anarchy implies consensus for all important issues, so there must be no hard-fork. The majority has to persuade the minority, no matter how long it may take. Certainly, no forcing is allowed. On the other hand, in an anarchic society any group disagreeing with the majority’s judgement may leave the community and establish another on their own, as anarchy implies freedom of communities. From this point of view, hard-forking of bitcoin meets the principles of anarchism.

However, it is all romanticism and ideology. In practical and economic sense, there are no anarchic communities behind hard-fork parties, just as there are no limitations for forcing, including cyber attacks and even personal threats mutually agreed by the parties.


Had there been a community behind any hard-fork, that would use the hard-fork similarly to local complementary currencies as used by local communities at local markets, the separation of the network would not have been a disaster. Thus, dissolution of the USSR and switch from Soviet ruble to national currencies did not demolish the economies of newly-established states. It resulted in the emergence of 15 new currencies and increase of currency risks and turnover costs. However, there are no closed economies behind hard-forks.

As opposed to local complementary currencies, there is no community with a mutually-agreed macroeconomic goal behind a hard-fork. There are only different investors having a solely microeconomic goal, that is to get as much profit from Bitcoin project as possible. Growing ambiguity and risks of Bitcoin splitting do not do a favor to optimistic expectations in the investors.

Network splitting would result in emergence of several cryptocurrencies different in quality and demand, which would lead to difference in their exchange rates. Massive selling of rival coins would result in collapse of the exchange rate causing all bitcoin owners who had failed to go bear to lose their money. In addition, exchanging one fork for another entails additional expenses for converting.

Further competition of hard-forks, be it in good faith or not, would result in even greater losses. Hashrate of the split network would be lower than that of Bitcoin, so a weaker hard-fork could be put down by rival miners. There are lots of known was to attack a network with significant computational power. This could be averted by changing mining algorithm, but it won’t change that fact that life and death of Bitcoin are in fact in the hands of miners. Power belongs to those who have production facilities, it’s a rule; in case of Bitcoin, the facilities are mining equipment and mining equipment manufacturing means.


The supreme council of miners, which decides the Bitcoin network’s fate as it may seem economically sensible for them, does not fit the cryptoanarchism ideology. One may object that the power belongs not to miners alone, but also to developers, investors, payment processors and other stakeholders in the industry; however, the clarification does not impact the overall picture. Satoshi Roundtable, being a closed event with a secret venue, reminds a secret meeting of bankers set to develop the Federal Reserve Service.

Notably, the bankers back then avoided names like National Bank or Central Bank on purpose in order to highlight the decentralized structure of the service. They needed to conceal the fact that the banks constituting the FRS were, in fact, private. When someone criticizes national currencies for the fact that governments use printing presses to have their ‘inflation tax’, they usually forget that the world’s money is controlled by a private-owned organization.

Ironically, Bitcoin praised by the Austrian school, in fact, became yet another evidence of inevitability and objectiveness of capitalism evolution. The money, or, to be precise, the industry maintaining its existence, run down the same rails that any other capitalist industry, i.e. concentration and centralization. From the golden age of free competition praised by the Austrian school, it runs to a monopolist capitalism paradigm. The next evolutionary phase for the industry will hardly be any different from that of capitalism in general: monopolist capitalism will turn into state monopoly. Monopolies just amalgamate with nation states.

The search for alternate solutions to avoid concentration and centralization resemble the search for a cure from capitalism centralization. In 1890, Sherman Act was enacted in the US, which was the first antitrust law in history. Since then, almost every country has developed an organization to run antimonopoly regulation with significant powers.

Bitcoin has no antimonopoly committee and no government to grant relevant powers to the committee and maintain their implementation with legal forcing mechanisms. This doesn’t mean that further development of state regulation for cryptocurrency industry won’t have anything to do with regulation of monopolies. However, it remains a question whether Bitcoin is capable of solving its problems on its own, or can a decentralized system free of government regulation be stable at all.


Some altcoins offer solutions for problems faced by Bitcoin. Decentralized management of Dash based on masternode network allowed them to hold a voting on block size increase within a day. As opposed to Bitcoin, Dash grants a reward to full nodes, not just to miners, and redistribution of newly minted coins for the project development fund. The development direction financed by the fund is chosen by masternode voting as well.

The masternode system is a kind of material discrimination, as launching a masternode that grants a vote requires storage of 1,000 Dash. This stable amount, however, is totally incomparable with continuously growing expenses for mining equipment which grants power in Bitcoin. Dash was the first to implement a combination of X11 hash functions to increase its ASIC-resistance and protect it from senseless and ruthless ‘weapons race’ of miners that results in the network’s centralization and concentration.

Most definitely, a minor altcoin may be flexible and engage in daring experiments – mostly because the investment in its ecosystem and its market cap are of minor significance. In most instances, there is no ecosystem for altcoins whatsoever, so no experiment would entail serious losses for cryptocurrency firms. Big money loves calm.

Dash was never intended to remove Bitcoin from its top position. It is positioned as a complementary cryptocurrency rather than a Bitcoin’s rival. The altcoin is mentioned to exemplify an attempt to create a centralization-resistant network, which still provides an efficient decision-making mechanism. Another novelty of Dash is Spork, a mechanism for gradual implementation of updates allowing the network to avoid hard-forking.


The BIP mechanism turned out to have several drawbacks. For that reason, the block size debate is not a mere question of implementing yet another proposal, even if it’s more important than the others. Bitcoin community now faces the issue of self-determination. What kind of community is it? What its underlying principles are? Is it really a community unified by an ideology, or it’s just a union of manufacturers and consumers within yet another branch of capitalist economy? The first implies there is some kind of mutual interest and goals reached by cooperation of the community’s members. The second, however, is also based on a goal sought by the community, but this time the goal is to maximize profits, or, to be precise, personal advantage attained in ‘all against all’ mode. It’s manufacturers vs manufacturers, manufacturers vs consumers, and consumers vs consumers.

If Bitcoin remains a cryptoanarchist project, the technical debate on block size cannot but involve the discussion between different anarchist sects, with no argument ignored. If Bitcoin’s cryptoanarchism became a mere brand that sells as good as Che Guevara t-shirts, the block size debate has nothing to do with decision-making principles in an anarchic society. Nothing anarchical, it’s just business.

by Dmitri Bondar

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