When environmentalist groups in March unveiled a campaign to move Bitcoin’s code away from the energy-intensive proof-of-work (PoW) model, many bitcoiners scoffed at the idea.
Setting aside the question of whether proof-of-work mining is the environmental peril the activists claim it is, many cryptocurrency veterans doubt the strategy could work.
That strategy hinges on persuading a limited number of firms or people who, the campaigners claim, have the power to make the change or at least convince a critical mass of people to support it.
To old hands, this plan seems ignorant of Bitcoin’s history – specifically the block size wars of 2015-2017, including the debate over the Segregated Witness (SegWit) upgrade, in which one of two proposed alterations pushed by the biggest companies failed in the face of widespread user opposition.
The leaders of the campaign to “Change the code, not the climate” say they are aware of this history and even take it as a sign that change is indeed possible.
The block size wars and the SegWit update “serve as a case in point” to show that “changes can be made,” Faber, senior vice president, Government Affairs at Environmental Working Group (EWG), one of the groups spearheading the campaign, told CoinDesk. Whether these changes come as “a hard fork or a soft fork,” they can indeed be made “when there’s general consensus within the Bitcoin community,” he said.
Read more: What is SegWit?
Rolf Skar is a special projects manager at Greenpeace USA, an environmental protection organization that is part of the campaign. According to Skar, there are two key questions as to whether the network can change; first, whether it is technically feasible. The 2017 SegWit update “shows that it is, quite obviously, technically feasible to do so,” Skar said to CoinDesk. But, he added, the second question is “whether a proposed change could be supported enough to be adopted.”
“Despite skepticism,” the campaigners don’t see a good reason why enough support will not be eventually garnered, said Skar. “Solutions will need to be developed and tested to address valid concerns of the community. If effective solutions are not developed we understand that uptake of new code would be unlikely,” Skar said.
Considering how industries have scoffed at other environmental campaigns, such as electric trucks, which were initially ridiculed but then sales soared, a change away from PoW may not seem so impossible, according to the campaigners.
Ken Cook, founder and CEO of EWG, said that, based on his conversations with various insiders within the Bitcoin industry, he thinks Bitcoin’s governance has changed, such that there is now an “inexorable concentration of power and control.”
The “notion that this was as democratic as it was originally conceived is gone,” he said.
Skar similarly said of Bitcoin in an interview: “Although it’s a decentralized system, there are key players within it.”
EWG’s Cook pointed to an October 2021 paper from the U.S. National Bureau of Economic Research, which found, “The top 50% of miners control almost all mining capacity. Top 10% control 90% and just 0.1% control close to 50%” and that “the largest 55-60 miners controlled at least half of all bitcoin mining capacity.”
Faber said that he doesn’t think the decision will literally be made by 50 people, but if leaders in the Bitcoin community “raise their voices, they can help start the conversation that could ultimately lead to the changes needed.”
A debate around how to improve the Bitcoin network’s scalability picked up steam in 2015. Some developers and stakeholders called for an increase to the size of blocks, whereas others thought that would harm decentralization.
After two years of controversy, an update to the Bitcoin network called Segregated Witness (SegWit) was adopted through a soft fork, meaning users could still keep running the old version of the software. SegWit increased the number of transactions the network could handle by changing the way data is stored on the chain. Unlike other proposals to increase the block size, SegWit enjoyed widespread user support.
Around the same time, another proposal to increase the block size met the opposite fate. An agreement was signed by 58 companies, representing 83.28% of the network’s computing power, in New York at CoinDesk’s 2017 Consensus conference. The agreement called for a doubling of Bitcoin’s maximum block size to two megabytes. Four of the companies were directly involved in mining, one of them being CoinDesk’s parent company, Digital Currency Group (DCG), which also owns U.S. miner Foundry. Another seven signatories were mining pools.
But, six months later, the supposedly powerful signatories backed down and called off the hard fork, or backward-incompatible code change, citing lack of sufficient consensus. Some big-block supporters started a splinter network called Bitcoin Cash.
Asked about the controversy around block sizes and the fact that some changes were never implemented, Skar said that “five years is a long time in Bitcoin’s relatively short history. Things are different now, as are the issues at hand.” It’s up to the people and players in the Bitcoin social ecosystem to determine how change will occur, he said.
SegWit was implemented because the Bitcoin community understood it was key to the network’s success, Faber said. Now, Bitcoin faces another threat: regulation, according to the EWG vice president.
For now, “the decision about how to reduce the electricity used by PoW and the resulting climate pollution is in the hands of the Bitcoin community. But only for the moment. Regulators are not going to stand by as the climate crisis grows worse and worse and digital currencies like bitcoin use more and more electricity, and produce more and more greenhouse gas emissions,” Faber said.
Even if it were possible, implementing a change to the protocol is not the whole story. Jonas Nick, a Bitcoin developer with Blockstream who was involved in another major protocol update that was implemented last year, known as Taproot, said that achieving a “rough community consensus” was an important step for the upgrade to be implemented.
But the key to changing Bitcoin is to convince “an overwhelming majority of economic activity on Bitcoin to use” the new code, Nick said. “You can always change the rules of chess, but you may have to play alone,” the developer said.
One measure of bitcoin’s decentralization is the number of reachable nodes that comprise the Bitcoin network. Since the end of 2017, the number of reachable Bitcoin nodes has increased by 27.5%. The blocksize wars indicated that users control the direction of the protocol, which means that more coordination is needed to be undertaken to make wholesale changes to the network.
Asked whether shifting Bitcoin away from PoW is possible, Nick said that the consensus in the Bitcoin community is that PoW “is the only known consensus algorithm that can power a decentralized currency.”
Andrew M. Bailey, who teaches about cryptocurrencies at the joint Yale-National University of Singapore College, said that “people have tried to switch Bitcoin through various forks, but the value of these tokens tends to sink “very, very quickly.”
“What that suggests is that the vast majority of Bitcoiners are just going to sell their forked proof-of-stake coin” and that “the only way to make it happen is actually to get social consensus” from the entire community, he said.
Bailey thinks that this consensus is “extraordinarily unlikely because Bitcoin has this conservative development culture,” which makes changes slowly and only when the community is absolutely certain about their effects.
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