If you are in the United States or are watching the 2016 U.S. Presidential election process, you are watching a somewhat sullied but still somewhat legitimate power struggle within the vacuum of the antiquated “twoparty system.” Democrats and Republicans fight it out for eventual leadership and control of the nation. Bitcoin, in 2016, is going through its own electoral process of its own. The timing of it is just a matter of coincidence, but the stakes may be even greater than any Presidential race. This process is global in scope. The Western philosophy of what Bitcoin is and what it can be versus the Eastern viewpoint of what Bitcoin can provide. Two worlds, two cultures who see one revolutionary system from opposite points of view. Who’s right? Is anyone wrong? And like the Presidential election, will anything really change, when all is said and done?
Read the full story below.
Two sides to the same Bitcoin
There was a time, really within the first four years of Bitcoin’s existence, where “The West” controlled Bitcoin’s mining and purchasing might, as Bitcoin’s first major investment market. Values were relatively low, and the digital currency realm was a new technological toy for the libertarians and ultratech savvy early adopters to dream about growing, like a marijuana plant in your home. Was it a coincidence that Bitcoin was born within the largest American recession in three generations? Probably not. This new decentralized currency was a great way to decentralize economic power, similar to the Internet being the new way to diversify the global flows of information.
These unique individuals who acquired Bitcoin early on see a way for economic power to be shared without the interference of a thirdparty. The system is clearly working, as Bitcoin has grown from just a concept to digital commodity worth over $400 USD as of this writing. It is this growth and acceptance that is causing a scalability problem, the first real issue of any import that Bitcoin has faced. The process of deciding where to go from here is opensource, very public, and not controlled by one leader or party, so it looks chaotic, from the outside. This really is the most democratic system extant, with little of the infighting done behind closeddoors. True democracy can be a messy process if freedom reigns. Call it the price of progress.
The 1MB block size on Bitcoin’s blockchain, with 7 transactions per second limitations, is running out of time to still be useful. The question becomes: Does this standard need a hard fork adjustment to scale? Or can the 1 MB blocks become more efficiently used to accomplish the same goals? Is this just a bandaid? Corporation owners like Brian Armstrong of Coinbase and mining companies worldwide have spent the last several months weighing in, and trying to influence the Bitcoin global electorate. This faction views the future of Bitcoin like this, with the help of new options like 2MB Bitcoin Classic, which keeps everything as it were, except for the block size:
“In case, any confusion like last time, running Classic does not take you off the longest valid chain. Your Bitcoin remains interoperable/safe,” said Armstrong on Twitter. “Coinbase is now running Bitcoin Classic! Let's help Bitcoin scale.”
“Increasing the 1MB block size limit is a necessary step towards keeping bitcoin a global system that is both lowcost and directly accessible to all users,” said Jacob Smith, a Bitmain company spokesman, wrote in an email.
Not everyone sees 2MB as the answer, particularly the miners and companies working in China, currently the largest Bitcoin market worldwide for purchasing and mining BTC. Building a global, scalable digital currency that is not really controlled by any one group is not something the Eastern groups have any history with or are comfortable with. A centralized power structure is their language, and whether that was Bitcoin’s intent from the start is not a great consideration, at least at this point. The Chinese culture is much more trusting of a centralized system of governance.
Bobby Lee, who was educated in California and works in China as the founder of BTCC, the world’s largest Bitcoin exchange, sees the stark differences in how Bitcoin is viewed. The Chinese don’t view it as an economic haven of freedom, but more as an economic machine to be worked. The majority seem happy with things as they are, with the Bitcoin Core team running the show.
“Chinese are used to this one power system — one political system, one political power,” Lee tells Forbes magazine.“So, the Core team was the original political party, and now there are people coming up to challenge them, but the Chinese are like, ‘Let’s go with the incumbent. As long as the incumbent delivers something reasonable, we’ll go with it. We’re not going to jump ship and vote and create a new political party for ideological reasons.’”
There is a point to be made when it comes to separating the economy from one’s political views. This model hasn’t really worked in the past, but neither has the centralizing power to one group and hoping they don’t become a tyrant. Eastern culture has been trained that centralization is the best way to go, and not to make large changes. In China, slow and steady wins the race, and that has helped the Chinese government become a global economic superpower.
“People in China are not very interested in this decentralization thing,” Lee says.“In Western culture, people tend not to trust authority, but in China, they tend to trust. They are educated to trust centralized power. Chinese people are very practical, very pragmatic, and the notion of multiple political parties, people who want freedom and anonymity — that’s weird to Chinese people. Some of them want a quick profit. They want to gamble and make a return on their investment — and that goes over the head of Westerners.”
Is Bitcoin supposed to be a way to just print money, digitally? The next way to turn a fast buck? In China, this is a very practical way to view it, especially with the economic issues China is beginning to face. In the West, where the dollar is still strong, a more philosophical and antiestablishment view is prevalent. Neither way is right, or wrong, but they are struggling to coexist as Bitcoin reaches a critical mass for the first time.
How will this East vs West view of Bitcoin get resolved? Through dialogue, but not over a great deal of time. All indications are that something needs to give this year. Mike Hearn bailed thinking this chasm was too much to bridge. It is up to the Bitcoin community to prove him right or wrong. Greed over policy and quick capitalization are still both greed. Like in a presidential election, having one side in charge every four years hasn’t proven effective either. Maybe we can all work together? Just a thought.