Bitcoin: A Tragedy of the Commons?
Mining Risks to The Bitcoin Block Chain
How does Bitcoin thrive without an owner? What happens if a 51% mining group takes control of the Bitcoin Blockchain?
A Lack of a Controlling Entity or Owner Sustains the Bitcoin System
The Tragedy of the Commons
The tragedy of the commons economics theory by Garrett Hardin, illustrates that unless there is private or perhaps government ownership of land, individuals will pursue their own self interest in using unowned land to the detriment of the preservation of that common land.
Mr. Hardin used the example of a common field where individual herdsmen would utilize the field in a no cost, unsupervised manner to graze their cattle. In such a scenario, without an owner to set limits and/or charge grazing fees, the herdsmen will inevitably use the land without regard to its preservation and overgraze, ultimately destroying the utility of the land for future cattle grazing.
Such a result occurring on common land, would be a tragedy; an avoidable one if the land benefited from an owner.
The tragedy of the commons theory thus provides a powerful argument for the societal benefits of private property rights and laws protecting private property. Individuals who own property will, acting in their own self interest, generally take care of the land to preserve or increase its value.
A similar land preservation argument can be made in favor of government ownership of land in the form of city, state or federally owned parks. In both instances, libertarians and statists can find common ground that property is better hands off in the hands of an owner responsible for its stewardship.
The eternal debate between libertarians and statists centers around with whom title to property should reside.
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Bitcoin – A Celebration of the Commons?
Bitcoin was created by an annoymous developer called Satoshi Nakamoto. Bitcoin is a “peer-to-peer network, a set of protocols (standards for interoperability), client interfaces (called wallets) and a currency that operates on top of all of those technologies“.
No one person, corporation or government owns the Bitcoin network or its set of protocols. Under the theory of the tragedy of the commons, a system that no one owns or operates is destined to fail. For this reason all governments and statists and some libertarians tend to hate it.
It is precisely because of the lack of an owner, however, that Bitcoin works as well as it does. The decentralized nature of Bitcoin is a design feature, not a flaw. No dominant owner is what keeps bitcoin trustworthy. The ability of all “in the commons” to see all the transactions in the Bitcoin blockchain provides for transparent security and trustworthiness of Bitcoin transactions.
Thus, Bitcoin works best in that no one owns or controls it – a celebration of the commons.
Why Governments Hate Bitcoin
Governments and their crony capitalist banking partners hate Bitcoin for the simple reason: they don’t own it and it presents competition.
Why Some Libertarians Hate Bitcoin
Libertarian disdain for Bitcoin is less apparent but well grounded and entrenched. Libertarians against Bitcoin reject the notion that merely because Bitcoin is not state created money, it is necessarily good.
For starters, the idea of a system with no owner (what no John Galt?!) runs counter to the traditional free market concept of placing one’s trust and money in an individual or corporation that provides a competition tested product or service and is answerable at all times to its customers for continued business. Rather, Bitcoin requires trust in the Bitcoin blockchain system and the public ledger. To some libertarians this all seems a bit socialist; communal money with no issuer, a very collectivist concept.
Libertarians are also troubled by the lack of any intrinsic value of Bitcoin. Gold, a libertarian favorite, has a long history as a monetary metal and has value in and of itself as it can be forged into art, jewelry and electronics and doesn’t depend on electricity, a protocol or network to exist. Silver, gold’s poorer cousin, also has monetary value and value in its use in electronics, solar panels and jewelry.
Bitcoin, in contrast, is and can only be a digital abstraction – Bitcoin forever.
Bitcoin proponents argue that because the Bitcoin system lacks an owner, it is outside of the state’s confiscatory grasp. There is no owner, no physical specie like gold held in one place, so there is nothing the state can take.
While appreciating the truthfulness of that statement, for some libertarians, it is troubling to accept the economics of an argument that posits: nothing is better than something!
An imaginary house is better than a real one because it can’t be foreclosed on.
Imaginary friends are better because they always like you.
Finally some libertarians reject Bitcoin solely on the basis of their interactions with Bitcoiners who incessantly insist that naysayers just don’t understand Bitcoin and that they need to do more research. For these libertarians their attitude towards Bitcoiners is: “I won’t code, if you don’t pretend you understand money, credit and economics.”
The Future of Bitcoin
The Threat From Governments and the 51%
The Government Threat
The biggest threat to Bitcoin does not come from libertarian naysayers but rather from statists, governments and controlling entities. Governments and their crony capitalists want to stop Bitcoin or want a piece of or, all of it.
Many Bitcoiners are insistent that because Bitcoin is decentralized it can’t be stopped. This is misguided hubris.
If governments can’t control Bitcoin, they can control the people using it via taxation and regulation.
Bitcoiners argue that adverse tax and regulatory actions will serve to solidify Bitcoin use and drive it underground, in a way that the War on Drugs has done, with little effect on the amount of drugs sold and used.
There is a major flaw in that analogy. There is no thrill, addiction or financial incentive in using banned Bitcoins like there is in using illegal drugs (other than among the most fanatical Bitcoiners) that people would risk fines and jail sentences to use Bitcoin. After all, the value of Bitcoin is convenience, not the thrill of use or breaking the law.
Bitcoiners also like to point to the government’s inability to stop pirated music and view it as an instructive example of the government’s inability to stop Bitcoin. This too is a faulty analogy. People steal music and movies online because it’s easy and they get something of lasting value. For someone who has no music or movies, stealing might be an attractive proposition. For someone with no Bitcoin, going online and risking fines or jail, to get some just so they can experience the thrill of using them can’t possibly hold the same allure.
The transparency of the Bitcoin blockchain also makes it more likely that Bitcoin users can be traced.
Governments can also try to control Bitcoin by gaining control of the Bitcoin blockchain and disrupting the trustworthiness of the system.
The 51% Threat
A 51% Mining Control Group Could Cripple Bitcoin
Many Bitcoiners are insistent that because it is decentralized it can’t be stopped. It is possible that hackers, a Bitcoin mining group or government could take control of the block chain and as a result of such control, arbitrarily manipulate the transaction record of the Bitcoin blockchain for its own gain or to destroy the trustworthiness of transactons occurring across the network.
If a 51% control group emerges, Bitcoin is no longer decentralized.
Some Bitcoin proponents argue that even if someone or entity did control the computational power to mine bitcoins and verify transactions, it would not threaten the system because one might expect such a controlling entity to act in its self interest and be good stewards of the control they had gained. Paradoxically, the trustworthiness of the Bitcoin system in the event of a controlling entity emerging would no longer rely on math, but rather on a human owner exercising safe steward principles.
Reliance on a tragedy of the commons safe guard in a celebration of the commons system, like Bitcoin, is unwise. Hackers or government entities may wish to assume control, not necessarily for profit, but in order to take control of the Bitcoin blockchain to destroy the system’s trustworthiness and thereby destroy the Bitcoin system itself.
Bitcoin’s trustworthiness and elegant archtecture is based on math, not human incentives and motives, and can only be sustained and ensured without a controlling “owner”.
In early June 2014, Bitcoin mining group GHash.IO, passed the 51 percent threshold of the Bitcoin networking power without incident and shortly thereafter fell to 35%.
Next time, the Bitcoin system may not be so lucky.
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