CS120: Bitcoin for Developers I

Consensus software continues to evolve and there is much discussion on the various mechanisms for changing the consensus rules. By its very nature, bitcoin sets a very high bar on coordination and consensus for changes. As a decentralized system, it has no "authority" that can impose its will on the participants of the network. Power is diffused between multiple constituencies such as miners, core developers, wallet developers, exchanges, merchants, and end users. Decisions cannot be made unilaterally by any of these constituencies. For example, while miners can theoretically change the rules by simple majority (51%), they are constrained by the consent of the other constituencies. If they act unilaterally, the rest of the participants may simply refuse to follow them, keeping the economic activity on a minority chain. Without economic activity (transactions, merchants, wallets, exchanges), the miners will be mining a worthless coin with empty blocks. This diffusion of power means that all the participants must coordinate, or no changes can be made. Status quo is the stable state of this system with only a few changes possible if there is strong consensus by a very large majority. The 95% threshold for soft forks is reflective of this reality.

It is important to recognize that there is no perfect solution for consensus development. Both hard forks and soft forks involve tradeoffs. For some types of changes, soft forks may be a better choice; for others, hard forks may be a better choice. There is no perfect choice; both carry risks. The one constant characteristic of consensus software development is that change is difficult and consensus forces compromise.

Some see this as a weakness of consensus systems. In time, you may come to see it as I do, as the system's greatest strength.