Amir Taaki published a blog on Coindesk today outlining his feelings on the recent Binance flirtation with “reorganizing” the Bitcoin blockchain so as to deprive criminal hackers of their proceeds. The famed crypto-anarchist and creator of libbitcoin (an essential piece of code for later implementations of Bitcoin) believes that the incident underlines a fundamental weakness in Bitcoin: centralization.
Overall, though, he describes himself as quickly losing faith in the potential of Bitcoin to reshape the world’s systems of control. Taaki says the crypto movement “got lucky this time.” The implication is that in the future, we won’t.
“The problem cannot be reduced to technical ideas such as a
decentralized market, p2p exchange or instant transactions. It is much
deeper. We tried to engineer the perfect system. A rube goldberg
machine, where human robots strive for fast financial gain. And in
exchange, the project has been populated with mass men with a slave
mentality that can only think on the level of moon memes. All the good
people are moving on because we no longer offer the future.”
There is a running theory that a mass chain reorganization at the behest of a single organization would crater the Bitcoin price, shake the markets, and drive the money either out of crypto or into other chains. But this theory is unproven.
We must understand that the typical Bitcoin Maximalist is a mental gymnast like no other.
While the market would certainly lose confidence in the underlying technology of Bitcoin if reorganizations were proven relatively feasible, a fringe element would continue to insist that decentralization is at the heart of their belief in crypto, while short traders would bask in the glory of tanking prices. The percentage of long-term “hodlers” who would actually sell in a cataclysmic event of this nature is likely low.
Bitcoin Cash introduced reorganization protection mechanisms, but Bitcoin still relies on the rules of hashpower. The hope is that chain reorganizations are genuinely impossible, and that CZ’s threats were empty.
Centralization is the core of the problem with the network at this point. The fact is, it’s easier to become an upstart miner in the realm of Bitcoin Cash or Bitcoin SV. It’s more profitable an investment over time, as well, at least as the market improves.
The issue isn’t confined to Bitcoin, at least as far as centralization in mining goes. The number of companies who produce SHA256 mining hardware is very limited. I do feel like Bitcoin Cash would be more open to moving to another algorithm if it came down to it, however. They’re generally more flexible in changes, although some believe the frequent hard forking is a problem, because it essentially gives Bitcoin ABC too much power.
In any case, these flaws can be fatal if not addressed moving forward. Should reorganization even be possible? Let me know your feelings in the comments.