January 27, 2023

Introduction to blockchain management from a user perspective

This article proposes the point of view of the editor of Politeia Digest and crypto enthusiast Richard Red about blockchain and cryptocurrency management. According to him, he was not particularly interested in the blockchain space until the summer of 2017, before the fork of Bitcoin Cash and its reasons attracted his attention. Let's find out what conclusions he made after a detailed immersion in aspects of the crypto space.

I began to research and found interest inhow similar decentralized networks / projects / currencies make decisions about their development paths. On the one hand, these are (mostly) open source software projects, but on the other hand, the software is used to manage networks that contain hundreds of millions of dollars of value. Who decides when to change this software and the rules that it enforces, and how does this process work? If the expectation of a significant impact of blockchains on the world is true, then it will be important to understand the answers to these questions.

This publication is an attempt to recapwhat I learned so as to introduce newcomers to the current and recently intensified cryptocurrency management dispute. It tells instructive stories from the history of influential projects and examines the nascent variety of management approaches.

As I see it, there are two aspects of management:

  • How does cryptocurrency ensure that users follow the rules?
  • How are these rules defined?

I am more interested in the second aspect, but a detailed examination of it is impossible without understanding the first.

Cryptocurrencies in its essence is softwaresecurity. Each blockchain user must install software that is compatible with its rules. Often there are prevailing versions of this software used by most participants. It is this software and the computers on which it is running that ensure compliance with the rules, so any change in the rules implies the use of a new version of software by participants. Such rules are called consensus, because for the functioning of the network everyone shouldto agree with them. There must be a consensus on the rules. This is a common property of all cryptocurrencies and blockchains. There are differences in how exactly the software enforces the rules and how users of the blockchain decide to use a new version of the software that changes the rules.

1. Bitcoin

Bitcoin is a good starting point, because it is an original and universally recognized cryptocurrency. Therefore, it is best known, best studied and most often discussed.

Bitcoin is complicated. You can write entire books about “how Bitcoin works” and why it is needed. It’s not so easy to even define “what is Bitcoin” (software, network, currency, social contract). Going further and figuring out “why Bitcoin is just like that” is an even more ambitious venture.

2. Enforcing Bitcoin Consensus Rules

Bitcoin rules are enforced by miners inproof of work (PoW) models. Miners are people (using computers) who compete to find the answer to a complex and arbitrary task. Miners prepare a block that they want to translate, filling it with transactions pending processing (in the memory pool). For this new block to be accepted, it must pass a specific test. Miners pass a combination of inputs through a hash function: previous block title, current labelof time, a Merkle tree representing the transactions they want to include in a new block, and an arbitrary value. For a new block to be accepted by the network, the hash issued by this function must begin with a certain number of zeros (determined by the current level of complexity). It’s impossible to find out if the hash is acceptable,if you don’t try to do this operation, then change an arbitrary value and try again. This is “work” in proof of completion. This process is often called hashing. The frequency with which a computer offers options depends on how quickly it can calculate the hash function, its computing power.

The difficulty of the task is adjusted every two weeks.so that the more miners offer options, the more difficult it is to find a solution. This adjustment is designed so that the average time between blocks remains at about 10 minutes. Nevertheless, we are talking about random guessing, so the actual interval between the blocks varies.

New blocks are tracked by full network nodes. On complete nodes installed software with a complete Bitcoin blockchain (history of all completed transactions). This makes Bitcoin decentralized.the registry. By storing and processing this blockchain, complete nodes know which bitcoins can be spent by which private keys (and what is the origin of these bitcoins).

Full nodes check new blocks for compliance with the rules, in particular:

  • A block hash must satisfy the criteria of complexity, and after decoding using the same hash function, its contents must comply with the specifications of the Bitcoin block. It makes up evidence that the miner completed the required work.
  • Each transaction must be signed with the private key of the wallet from which it was sent (which ensures that only the owner of the private key can spend bitcoins).
  • Transaction wallets must have enough bitcoins to carry out these transactions (which guarantees the impossibility of "double spending" bitcoins).

If the new block is valid, the nodes add itinto their version of the blockchain and broadcast this version. The contents of this block determine the possible solutions for broadcasting the next block. One of the required hash function inputs has changed, so the guessing process starts anew.

Each new block allows you to claim a certain number of new bitcoins - block reward. To receive a reward, miners includeinto a block transaction sending it to a wallet controlled by them. Miners also receive a commission from transactions that they include in the block (and therefore they are motivated to include transactions that offer the highest commissions).

The fact that anyone can find a solution to broadcast the next block is another reason why Bitcoin is called decentralized.

Now Bitcoin is participating in miningexclusively ASIC miners. These are specialized computer microcircuits whose sole purpose is to offer solution options by performing the Bitcoin hash function. They are designed to do this as efficiently as possible. In principle, you can mine bitcoins using any computer, and in the past they did. Faster processors are better because they can produce more options per second or per watt of electricity; graphics cards are even better. Now compete effectively with ASIC. Although I can mine a block using my CPU, it’s very unlikely that I will find a solution faster than one of the many ASICs that I compete with, and I still need to pay for the electricity consumed by the CPU, so there is a chance that I will incur losses .

If you take the next step, now Bitcoinsthere are so many ASICs mined that even if I have one ASIC, I may never find a valid block, or it can take years. Therefore, most miners participate in pools, where all participants send their proof of work, and if one of them finds a valid solution, a new block is formed on behalf of the pool, and the reward is distributed among the participants in proportion to their contribution to finding a solution in the form of work. Pools make Bitcoin mining not so decentralized, because in fact, a limited number of pools produce new blocks. However, a miner can move from one pool to another relatively easily and at low cost. If the miners do not agree with the actions of the pool operator, they can easily transfer their computing power to another pool.

Miners are stakeholders since they invested inequipment and pay for the electricity consumed by this equipment in search of new units. Blocks broadcast by the miner must follow the rules of the software of Bitcoin nodes, otherwise these nodes will not accept blocks in the blockchain. Only when the nodes collectively accept my version of block 1234567, saying that the reward is sent to my wallet X, I receive a reward for my work. Miners must adhere to the same rules as nodes in order to be part of the same network and the same blockchain.

Understanding the work of cryptocurrencies does not come down to knowing the rules. Another key to understanding network behavior is incentives. There is no rule that says howthe miner must choose the transactions to be included in the new block, or that the miner should include any transactions at all. Miners sometimes mine empty blocks. A miner (or, more realistically, a miner pool) may decide not to include certain transactions. If desired, he can blacklist a specific address.

Miners usually include transactions with the mosthigh commission because it motivates them. This maximizes their profits. If Miner A prefers the wallets of his friends and allows them to conduct transactions with a low commission, and Miner B prefers transactions with a higher commission, then over time Miner B will earn more rewards that he can reinvest in order to increase his mining power faster than Miner BUT.

Miners also have a broader motivation,to monitor the health of the network. If all miners start mining empty blocks, then Bitcoin will be paralyzed and lose utility. Without utility, it will not have value, which will harm the miners, because the rewards they earn will not cost anything. The dear ASICs that they use will not be able to generate income, since there is no benefit from them other than mining Bitcoin. Bitcoin's value proposition - the ability to transfer value in a reliable and censorship-resistant way - relies not only on miners to comply with the rules, but also on the fact that their actions are consistent with their incentives.

By the way, that’s why decentralization is suchan important topic among blockchain enthusiasts. The system is based on the assumption that since I can offer a fee for including my transaction in the blockchain, I can be sure that I can conduct this transaction. I can conduct any transaction permitted by the rules if I offer a sufficient commission. If all new blocks mine eight pools, this will introduce a certain degree of centralization. If all these pools decide (or someone convinces them of this) not to include transactions from my address, then my bitcoins will become useless.

3. Establishing Bitcoin Rules

Bitcoin, like most other cryptocurrencies,uses open source software. The whole point of cryptocurrency is the lack of the need to trust individual participants and the ability to rely on cryptographic truth and following rules and incentives. Closed-source software is incompatible with this ideal, since it requires trust in its (closed) code. Open source software means the ability to check it and learn in detail what it will do after launch. In practice, most of us trust in certain sources that provide us with software that behaves the way they describe, because we lack the qualifications or dispositions to test it ourselves. The basis of this trust is the fact that people can and do audit such software and have channels to report any problems found.

Bitcoin Core is the software used by mostcomplete Bitcoin network nodes: it is now installed in 93.6% of the 10,923 complete Bitcoin nodes. Bitcoin Core is the original full Bitcoin node, and almost two years after the launch of Bitcoin, it was the only full node implementation. Now there are alternative implementations of the full Bitcoin node that follow the same consensus rules, which means they are compatible and can work on the same network / blockchain.

: Coin.dance

Open source enables widespread participation insoftware development. Anyone can copy (clone) the software, fix bugs or add new options. If I clone a Bitcoin Core and fix a bug or improve something, I can do inclusion request, proposing to include my changes inThe main version of Bitcoin Core. Anyone can do it. At the moment, the Bitcoin Core repository on GitHub lists 637 contributors who have made some kind of contribution to the software. I can also clone Bitcoin Core (or any full node software) and make changes without the intention of including these changes in the original version. It is called fork.

: Github

Since the software of full nodes ensures compliance with the rules of Bitcoin, changing these rules is possible by changing the software. When deciding to include changes affecting consensus rules in the new release of the full Bitcoin nodes software, the requirements are very high.

The right to approve changes to the Bitcoin repositoryOnly certain people have a Core. I did not find a particularly good source, but this comment on Reddit says that only two people have access to commits, and this post on Bitcointalk two years ago speaks of four people / accounts, and in the history of Bitcoin Core there were twelve access to commits accounts. The fact that only a limited number of people have the technical right to accept changes in the main branch is true in the case of all software projects. The scope of these decision-making powers of these people depends on the social project management method. I did not find any documents on the decision-making process for Bitcoin Core, but this comment (potentially biased) on Reddit describes the voting of Bitcoin Core contributors for or against, after which the maintainers interpret further actions on this basis, which seems to be satisfactory.

Bitcoin Core Release (or any software of a full cryptocurrency site)changing consensus rules differs from most software projects in the importance of obtaining prior approval from stakeholders.

4. Soft forks, hard forks, blockchain splits and free coins!

Both soft forks and hard forks imply changes to Bitcoin's consensus rules.

Soft fork introduces a new rule or makes the rules morerestrictive. In the case of Bitcoin, the key participants in deciding on a soft fork are miners. If most miners agree to the soft fork, then it will be implemented, because it is the miners who decide how the new blocks are built. Soft forks are in a sense backward compatible. Complete nodes that are not updated will recognize the new blocks as valid because the blocks still follow the old rules checked by the nodes. However, a non-updated full node may misinterpret some transactions that use the new rules.

Hard fork eliminates or weakens consensus rules. As soon as the hard fork is activated and the miners start producing blocks according to these relaxed rules, nodes that are not updated to the new rules will reject these new blocks. It may cause blockchain splitif some miners and nodes continue to use the old software, while others switch to the new one.

Examples of forks: Bitcoin initially had no size limitblock. A 1 MB limit was added in September 2010. It was a soft fork because it added a new rule. Non-updated nodes continued to follow the correct blockchain, because the size of the blocks did not matter to them. Minority miners who did not want this limit were forced to upgrade to software that followed the new rules, as blocks mined by them larger than 1 MB were rejected by nodes and miners that adhered to the new rules. This change was made through a soft fork, but it cannot be undone without a hard fork - this is true for all implemented soft forks.

Bitcoin had three blockchain splits. The first occurred in 2010.when a transaction involving 184.5 billion bitcoins was included in the block - there was a bug in the software rules that allowed the adoption of huge transactions. The bug was fixed using a soft fork, which added a clear rule that a transaction cannot spend more than 21 million bitcoins (maximum offer). It took 5 hours to release the patch, and in the “bad blockchain” they managed to mine 51 blocks before a good blockchain (with a fixed bug) bypassed it via PoW. From here follows an interesting point. In the event of a split in the Bitcoin blockchain, the accepted method for determining which blockchain “is the real Bitcoin” comes down to considering the length of the PoW chain - the blockchain with the most accumulated work “There is real Bitcoin”.

Orphaned blocks are found periodically,because it takes time to spread the news about the new block over the network, and the hash of the last block determines the decision of the next block. If Miner A and Miner B broadcast a new block at the same time and half of the nodes first see block A and the other half see block B, then until the next block is found there will be two competing blockchains (branches). If the next block finds a miner using block B, then block B will be a good blockchain, and block A an orphaned one, since the nodes will consider branch B to be “real Bitcoin”, since it has a longer PoW chain.

That is why sellers often expect two or moreconfirmations before accepting payment. The number of confirmations means that after the block containing the transaction, the following X blocks were added. The last block can always be orphaned (i.e. do not become part of the Bitcoin blockchain), but if several blocks were added after it, its transactions become an immutable part of the Bitcoin registry.

Some hard forks are thought of as updates. If there is consensus thatchanging the rules will be favorable; users are coordinated to implement this change at a certain block height. Since it is important that everyone moves to the new rules at the same time, a software version is usually released containing both sets of rules, with logic saying: “Use rules before block X, and use others after block X”. In Monero, hard forks not intended forBlockchain splits occur approximately every six months. They are announced in advance so that node operators can download software that follows the new rules. Bitcoin hard fork Segwit2X was conceived as an update (increase the maximum block size to 2 MB). It did not take place due to the perceived lack of stakeholder support. More on this later.

Some hard forks are thought to split the blockchain. A well-known example is Bitcoin Cash (BCH), andafter him there were several more similar hard forks of Bitcoin. Monero also had a hard fork, conceived to split the blockchain (MoneroV). Hard forks like this happen when some cryptocurrency users decide to change the rules, realizing that not everyone will switch to the new rules. They are also usually announced in advance. People using the new software know that after a certain block they will switch to another blockchain with their own consensus rules.

: https://monero.org/forks/

Some see blockchain split as an offer free coins. Bitcoin Cash mined its first block as a block478559 after Bitcoin block 478558. If you had 1 BTC with block 478558, then with block 478559 you still had it, but your private key also worked in the BCH blockchain and therefore you also had 1 BCH, because before that moment, both blockchains are identical. This can be considered as receiving 1 BCH for free, but it can also be argued that your 1 BTC split like a blockchain, because most of the resources that gave BTC its value (buyers, miners, those who accept payments by them)are now split between BTC and BCH.

5. How is Bitcoin evolving?

There is no simple answer to this question, but since AugustThere is a clear procedure in 2011: suggestions for improving Bitcoin (BIP). BIP has its own repository on GitHub. The BIP handling procedure was outlined in the original BIP-001, but it was replaced by BIP-002. Below I will explain my understanding of the procedure described in BIP-002.

: Github

Each BIP must have an author / advocate who will oversee it.

  1. You should submit an idea through the Bitcoin developers mailing list.
  2. If the mailing list subscribers make it clear that they are ready to consider, you should send the draft BIP in the same way.
  3. If there is no objection, BIP should be uploaded to the appropriate repository on GitHub as a request for inclusion. BIP must follow a specific format.
  4. The BIP editor (someone Luke Dashjr) will review it, and if it meets certain minimum criteria, it will be accepted and will receive a number and category.
  5. BIP editor decides whether to assign status“Proposed” or “final / active”, while the author of the BIP may change the status to “suspended” or “withdrawn”. To switch from draft to proposed status, all details must be disclosed in the BIP and an implementation model provided. This is important: the author / developer must make an effort to implement his idea in usable code before BIP can move on.
  6. BIP-002 also defines the method of obtainingcomments on BIP through a public wiki space where anyone can participate, but where “participants should voluntarily refrain from commenting beyond their area of ​​expertise or qualifications. However, comments should not be censored, and participation should be open to the public. ”

“BIP soft fork strictly requires an explicit majority of miners, expressed by voting on the blockchain (for example, using BIP 9).”

Miners can use the “version” field inblock header to signal support for the proposed soft fork. Voting lasts for a certain period, and you can find out about the support by the miners of the change (measured by their computing power) by looking at the number of blocks signaling support.

Most Bitcoin Miners (i.e. miners controlling most of the processing power) can take soft fork (add new rules). This is because miners create blocks. If most miners decide that the new block size limit is 50 KB, and other nodes will still recognize large blocks as valid, then most of the computing power following the same set of more restrictive rules will produce the longest PoW chain. These miners will not recognize blocks that do not follow the new rules.

In the case of BIP consensus rules changeHard fork is becoming more and more difficult, since the status of “definitively / actively” is assigned only when “the entire economy of Bitcoin” is adopted. BIP-002 states the following:

BIP hard fork requires adoption by the entire economyBitcoins, including those who sell demanded goods and services in exchange for payments in bitcoins, as well as bitcoin holders who, in the case of a hard fork, may want to spend their bitcoins (including selling for other currencies) differently. Acceptance should be expressed through the actual use of hard fork in practice (rather than simply expressing public support, although this is a good step to reaching agreement before accepting BIP) ...
... Miners are not included in the economy, since they are justonly rely on others to sell / spend their otherwise useless mining product. Therefore, they must accept the directions of everyone else when deciding on consensus rules.
Exchanges are not included in the economy, since they are justonly provide services, linking sellers and users who want to trade. Even if all exchanges refuse Bitcoin, these sellers and users can always trade directly and / or create their own exchanges.
Developers are not included in the economy, since they just write code, and others decide to use this code or not ...
This BIP does not seek to determinethat “should” be the basis for decisions. Such a statement, no matter how ideally justified, would be useless without ways to force others to stick to it. The BIP procedure is not intended to serve as a compulsory “management” of Bitcoin, but merely provides a collective repository to offer and provide information on standards that people can voluntarily adopt or not. One can only hope for accuracy with respect to the “status” field, trying to reflect the reality of what it really is, and not what it * should * be.

The BIP procedure says very little about how a BIP requiring a hard fork should get the approval of “the entire Bitcoin economy” (defined as merchants accepting payments by bitcoins and holders), but only defines this criterion for changing the status of BIP in the repository on GitHub.

I understand the logic - participants in the Bitcoin economycan freely choose which software to use and what consensus rules this software should follow. But how to get Bitcoin's entire economy to accept changes to consensus rules requiring hard fork? This seems complicated given that the entire Bitcoin economy must accept a hard fork at the same time to avoid a split in the blockchain. It is perhaps not surprising that not one of the BIP hard forks mentioned has reached the status of “active”.

From my point of view of an external observer, the bestThe chance to achieve adoption of changes to the Bitcoin consensus rules requiring hard fork seems to be the introduction of these changes in the new version of Bitcoin Core, software used by 96.5% of complete nodes. I also believe that most sellers who are in the hands of the final solution according to BIP-002 are not too worried about changes in Bitcoin rules that do not directly affect them, given that they simply immediately convert the received bitcoins into a more stable currency.

BIP-002 lists a number of stakeholders and explains why they are not included in the “economy” and, therefore, do not make decisions about the adoption of BIP: miners, exchanges and developers. It seems to me that everything is exactly the opposite, because, based on my observations, it is these three groups of participants have the power to decide how Bitcoin will evolve.

My observations are mainly based on hard forks.Bitcoin Cash and Segwit2X. I will talk about them here to explain why I believe that these stakeholders have influence. As a small user / holder of bitcoins, I basically end up in a group that must decide whether the hard fork is “real Bitcoin”. But I did not feel it at all; in fact, when all this unfolded, it was difficult for me to understand what was happening.

Developers have an impact because any changesconsensus rules should be displayed in code. In particular, Bitcoin Core developers have a big impact, as this software uses 96.5% of the complete nodes. I also dare to suggest that many of the operators of these nodes trust the new versions of Bitcoin Core without personally checking the code - and this trust may well extend to the new version, which changes the consensus rules. I don’t know how Bitcoin Core developers make decisions, but they meet every week in the IRC and publish logs. This is really wonderful, I fully support transparency, but I don’t have time to follow all these meetings, and to understand something in this, I need special knowledge.

Miners have an impact because any version of Bitcoin,changing consensus rules, it needs miners, otherwise it will literally go nowhere. The rules for determining “which blockchain is real Bitcoin”, since they exist in a form different from social consensus, also indicate the blockchain with the greatest evidence of the work being done (i.e., computing power).

Miners decide what to include in each block, andif most of the processing power agrees with the new rule, then it can be adopted as a soft fork. BIP-0016 was adopted with the approval of 55% of computing power. Miners, not updated with the majority, simply created invalid blocks over the next months.

The only influence that the rest of the Bitcoin economy has to counter most miners comes down to being able to veto miners and changing the PoW algorithm (i.e., all of their ASICs will no longer be able to mine bitcoins). This will require a tremendous degree of coordination among other stakeholders who will need to reach a collective agreement and convince the world that what has always been Bitcoin (blockchain launched by Satoshi with the longest PoA chain based on SHA-256)is no longer it. The Bitcoin Gold fork changed the PoW hash function, but I don’t think it really claimed to be “real Bitcoin”, and the fact that its initiators opened a two-week window to mine 100,000 coins on their own did not play in their favor .

Bitcoin Cash was a hard fork of Bitcoin becausehe relaxed the rules by increasing the block size limit from 1 MB to 8 MB. This was argued by the fact that 1 MB is too small with such an active use, which was observed in Bitcoin, because of which people had to pay too high a commission that did not allow Bitcoin to function as a currency. There is a whole discussion, apparently unfolding for more than one year, about whether Bitcoin should be scaled “on-chain” (through large blocks) or using “second-level” solutions - I do not touch on this.

In addition to increasing the block size limit, the rulesBitcoin Cash added a disclaimer stating that if new blocks arrive insufficiently fast, complexity should decrease sharply. An adjustment of this kind was necessary in order to maintain the functioning of the BCH in case most miners do not switch to mining it instead of BTC. Bitcoin Cash did not change the PoW hash function, so Bitcoin ASIC operators could choose which blockchain to mine in.

This "Emergency Difficulty Adjustment" (EDA)had interesting consequences. When the complexity of BCH fell after EDA, mining it became more profitable, as finding new blocks and getting rewards was easier (although the cost of each BCH unit was lower). Bitcoin miners acted predictably - they followed incentives (profitability). When BCH complexity was low, some miners switched to mining this blockchain. When she corrected up again, they switched back to BTC. So both blockchains developed, but inconsistently. When the complexity of BCH was high, most miners were not interested and it could take 100 minutes to find a new block. When the difficulty sharply corrected down, it attracted a lot more miners and the blocks were kept every few minutes until the complexity was again corrected up and these miners returned to BTC. This also affected the search time for the BTC block, but to a lesser extent, since the cost of BTC was higher and therefore most miners stayed with it, even when the complexity of the BCH became low.

The interval between the blocks of Bitcoin Cash from August 2017 to January 2018.: bitinfocharts

In a sense, it was good, becauseconfirmed that the behavior of miners, key Bitcoin participants, can be predicted (controlled?) using economic incentives - I recall that for Bitcoin this should be true. From the user's point of view, this was bad, as it became more difficult to predict how long it would take to wait for the transaction to complete. This dynamics became quite piquant in early November 2017, when the price of Bitcoin Cash grew rapidly, and the price of Bitcoin fell. This behavior of the price was accompanied by a jump in the number of small transactions in the Bitcoin blockchain, which caused the fees to increase sharply. Some described it as a civil war, and there were rumors of a conspiracy to overthrow Bitcoin. They even speculated that Bitcoin could wait for a deadly peak, as people sell bitcoins because they can’t conduct transactions, which pushes the price down, which, in turn, decreases attractiveness for miners and slows down the creation of new blocks, which provokes a loop feedback that can lower the price so much that the remaining computing power will not be enough to find new blocks.

On November 14, 2017, Bitcoin Cash survived yet another hard fork (with the goal of updating) to make the complexity adjustment smoother, as a result of which the block search time returned to normal.

Exchanges important as public spaces as theyThey are sites where the price of cryptocurrencies is determined, and they also have a direct impact. In the example of Bitcoin Cash, exchanges had an influence in the sense that they decided that Bitcoin Cash is not Bitcoin (BTC). However, many large exchanges decided to support Bitcoin Cash and trade it as BCH. Some decided to admit that those who had BTC at block 478558 also became owners of a similar amount of BCH. Exchanges were not required to do this. When bitcoins are stored on the exchange, the exchange owns private keys that allow them to spend. I doubt that it was stipulated on the exchanges that customers would become owners of new blockchain coins, breaking away from those whose coins were in their accounts.

Many exchanges have also opened markets for trading.BCH, which contributed to its legitimacy. The relative price of BTC and BCH is important, as it dictates what holders of these coins can buy, influencing the behavior of miners - and this price was determined on exchanges.

The exchanges were probably even more influential in relation to the Segwit2x fork, which never happened.

Segwit2x Prerequisites: May 23, 2017After a meeting of certain Bitcoin stakeholders at the conference, a statement was published (New York Agreement). It was argued that conference attendees agreed on how Bitcoin should scale: soft fork to implement Segregated Witness, and then within six months a hard fork to double the block size limit from 1 MB to 2 MB. The agreement allegedly had the support of major players, including miners, who controlled 83.28% of Bitcoin’s computing power, and a number of companies that together accounted for a significant share of the “Bitcoin economy,” such as BitPay, a payment processor that helps merchants get bitcoins in exchange for goods and services.

The agreement turned out to be contradictory (more aboutthis - further). Exchanges played a role here, since when it became "clear" that the Segwit2x fork was causing controversy, they began to declare that they would support coin trading both the Segwit2x blockchain and the original BTC blockchain. This in itself is noteworthy, as the Segwit2x hard fork was conceived for the purpose of updating. If exchanges plan to support the trading of two coins, this clearly indicates that they do not expect the update to go smoothly, but they expect a split in the blockchain. In addition, the tickers they assigned to these blockchains mainly gave priority to the original BTC blockchain (example: BTC and B2X). Perhaps no less remarkable, someexchanges began to offer trading in "Segwit2x futures", allowing speculation on the value of Segwit2x relative to the original BTC. The message from the participants in these markets was that they expect the Segwit2x to cost significantly less than the original BTC.

6. Assessment of the mood of the “Bitcoin economy”

How did it become clear that the Segwit2x update was inconsistent, or how did the Segwit2x inconsistency appear?

I will not go into the details of thiscontradictory, but I can bring my opinion to an outside observer, and since I was not then an interested person, I think my point of view is completely open-minded. In the absence of a generally accepted method of obtaining “Bitcoin's economic endorsement” hard fork, a reasonable starting point seems to memeeting a large number of major players in this economy to reach an agreement. However, transparent and open decision making also seems to be an important part of Bitcoin's management philosophy. A personal meeting, which was not recorded or recorded in any way and to which millions of participants in the Bitcoin economy were not invited, is not consistent with this philosophy. When the outcome of such a meeting is expressed by two points explaining that “Bitcoin will be according to our decision”, it is not surprising that many of those who were not invited for the meeting feel ignored.

This raises a number of interesting questions,for example: how to involve “the entire economy of Bitcoin” in the decision-making process on changing the rules? It seems that this process is expected to be transparent and inclusive, but how to effectively include such a large number of people into the process?

An estimated 2.9 million to 5.8 million people holdone or another cryptocurrency. To be conservative and for the sake of simplicity, let's say that 1 million people hold bitcoins. As already mentioned, many of these people are probably not worried about changing consensus rules, but even if 10% of the holders do not care, there are 100 thousand people who want to participate or at least feel involved.

Thanks to the internet and social networks, all these people canspeak out, and some part can even be heard. Anyone can join Bitcointalk and write messages there, but who has the time to read 50 page topics? Many crypto enthusiasts are registered on Twitter, but there the ability to be heard depends on the popularity and number of subscribers (as well as the whims of social network administrators). Reddit offers a scalable solution, because support for points of view can be expressed by voting - although in fact the “yes” votes should be used for posts and comments that make a constructive contribution to the discussion.

The problem is that all these publicspaces are vulnerable to: 1) censorship; and 2) abuse / distortion / cheating. Moderators can delete posts and comments. / R / Bitcoin even has a rule that states:

"Campaigning for client software trying to change Bitcoin's protocol without overwhelming consensus is prohibited."

BIP cannot be considered offered without a workingimplementations, and the largest subreddit dedicated to Bitcoin does not allow discussing client software trying to change the protocol without overwhelming consensus. Thus, / r / Bitcoin can hardly be considered a public space for the Bitcoin community to reach consensus.

Resource Members (time to create and promote puppet accounts, money to pay people), may create the appearance of dot supportthere is more vision in the community than it really is. All this happens in an opaque and difficult to measure way; we only occasionally see indicators that something is wrong.

If you go back to Segwit2x, users/ r / Bitcoin seemed to be opposed, and many categorically. This protest, apparently, was based not so much on a direct change in the block size limit from 1 to 2 MB, but on the lack of ownership. People objected to what was perceived as a backstage arrangement that tried to dictate Bitcoin's future to them. However, there were accusations of / r / Bitcoin in censorship, which excludes certain points of view.

Reddit is also vulnerable to manipulation (Apparently, all parties acknowledge that the other side is capable of this). So what weight should be given to moods,expressed in reddit? Were the moods against Segwit2x in social networks the reason for its cancellation? Did Segwit2x futures play a role in this? These futures markets had very low volume and were therefore also vulnerable to manipulation. The only ones who know why the Segwit2x fork was actually canceled are the six who signed the cancellation email.

7. Characteristics of Bitcoin management

Bitcoin management is characterized by inertia andconfusion. Inertia is associated with a high barrier to accepting changes to consensus rules. Bitcoin’s entire economy must accept software that implements the new rules — and there is no generally accepted procedure for defining this new consensus until the magical moment when everyone begins to follow the new rules.

The lack of a generally accepted procedure also causesconfusion, since no one knows what to expect. Miners can signal what they want on the blockchain, development groups also have channels that allow them to be heard - but when it comes to users, there remains a cacophony of unreliable signals in various social networks and speculation about the relative price of the new blockchain, if indeed there will be a split. Users do not have a generally accepted and effective way to signal their wishes, which limits their ability to coordinate and reduces their influence.

8. How can a Bitcoin hard fork happen?

I see three scenarios:

  1. Bitcoin will never change consensus rules to trigger a hard fork. Bitcoin in a sense is constrained by breadth andthe variety of its user base and the fact that there is no established method for evaluating whether an attempt at a collective hard fork will succeed or cause a split in the blockchain. Perhaps this is as it should be, and inertia means strength. To some extent, this is because the ease of changing consensus rules would be dangerous for Bitcoin. The complexity of changing the rules is good, but I don’t see how Bitcoin can become a global digital currency in the future if it is impossible to change the rules. For example, even if the Lightning network expects great success, mass use still implies a large number of on-chain transactions for opening and closing channels, which will be costly without at least a moderate increase in block size. If we admit that rule changes will be necessary, then we return to the mechanism of giving these changes importance.
  2. Bitcoin Core developers will release a new version leading to hard fork. It seems to me quite possible, and thisBitcoin's most likely hard fork without chaos. Inertia plays into the hands of Bitcoin Core: 96.5% of complete nodes already use this software and trust it, and some part of these nodes - I think it's big enough - will stick to the Bitcoin Core hard fork. Of course, there are no guarantees; Bitcoin Core developers do not have the power to force a hard fork, but it seems to me that their chances of achieving this are highest.
  3. Another Bitcoin development team will do a hard fork, and its full node implementation will become dominant, possibly after a blockchain split. Bitcoin Cash could potentially and can still achieve this. (although I believe that in the early days, while the blockchains had not yet dispersed too much, this was more likely). Segwit2x did not have developer supportBitcoin Core if the initiative was implemented, then it would be an alternative implementation of a complete node. It is worth noting that Bitcoin Core played an active role in the story with Segwit2x thanks to the publication of a warning stating: “This hard fork is not supported by mostBitcoin users and developers, and therefore is competing. Accepting this hard fork means switching to an alternative currency (altcoin) that is incompatible with Bitcoin. ”. In this warning, Bitcoin Core speaks on behalf of Bitcoin users, advising to beware of those who support the fork.

9. A look at the management of Bitcoin from a frog perspective

“The frog perspective is a bottom view, as ifthe observer would be a frog. The opposite is a bird's-eye view. In such a perspective, the object looks tall, strong and powerful, while the observer feels like a child or powerless. ” - Wikipedia

From the point of view of the Bitcoin user, I can say without hesitation that Bitcoin management is inefficient. Confusion is just the tip of the iceberg, an iceberg of bile and hatred. Let's get back to the examples of Bitcoin Cash and Segwit2x for a short while.

The question is whether to increase the size limitThe Bitcoin block was the subject of controversy long before the big block supporters left the ship and launched the Bitcoin Cash fork. This fork not only divided users, the network effect and the computing power of Bitcoin - it spawned two communities, the most active participants of which spend a lot of time and effort hating another blockchain and its users. Perhaps calling it a civil war is an extreme, but sometimes such associations arise.

The proposed fork Segwit2x met with bitterness on / r / Bitcoin, and its opponents spoke out loud and unpleasant (including personal insults to Segwit2x supporters), and some users ran to / r / btc, saying they were banned for expressing opinions in support of Segwit2x.

Bitcoin users have a nominalpower, but without an established channel for the application of this power, they turn into spectators / fans applauding and hooting from the stands. The assumed sovereignty and significance of these users is further aggravated, because other stakeholders, such as developers and miners, should listen to them. And that means that there is motivation to scream the loudest and be heard. In essence, the perception that a person, group, or community speaks on behalf of Bitcoin users is power.

With the rise in the value of Bitcoin and its economythere is more and more sense in investing resources in the manipulation of the Bitcoin community or its intended opinion. The public spaces where the Bitcoin community gathers (forums, Reddit, Twitter) are vulnerable to manipulation through censorship and Sibyl attacks.

I already mentioned censorship, and in this postanother version of censorship of / r / Bitcoin is provided as part of a broader effort to manipulate the Bitcoin community. I do not stand on either side with regard to the veracity of such allegations, but they are believable, and this is enough to cause harm. I see suspicions of manipulation in all cryptocurrency subreddits (which is also true for other topics such as politics), sometimes with evidence.

Platforms like Reddit, Twitter, and PublicForums vulnerable to Sibyl attacks. If the social platform allows you to register without verification of identity, then it is vulnerable to the Sibyl attack - the only question is whether the potential attacker can earn enough to invest resources (time / money to promote, steal, buy or bribe accounts) was justified. With the growth of value and the adoption of cryptocurrency, more is at stake, you can benefit more from the impact on public perception, which means that the likelihood of serious manipulation in social networks is higher.

Bitcoin is now weighty enough to make itwas a serious problem. I don’t see how you can get a signal from the Bitcoin user community that you can trust. If you cannot trust the opinions of pseudonymous strangers expressed through likes or votes, then who can be trusted? You can trust that the desires of Bitcoin miners are accurately transmitted using onchain signals, since the processing power cannot be faked. You may also prefer to pay attention to certain subjects that you trust and that have communication channels. (pages on social networks, accounts on GitHub, sites). If you are a user with no reputation inspace, your role in this discussion can be fabricated or marginalized in a cost-effective way by anyone with a personal interest and resources to pursue it.

In addition to the problems associated with assessing user moods, I believe that Bitcoin community suffers from lack of dispute resolution process.

If I am a member of a group who wants to change the rulesBitcoin in one way or another, when should we abandon this venture? Should our BIP not have much support among developers? But the developers do not speak on behalf of all Bitcoin. Should miners signal a lack of support? Miners also do not speak on behalf of all Bitcoin. Should most people on the / r / Bitcoin and Bitcointalk forums criticize our plan? But these forums are vulnerable to manipulation. If we implement our own fork of Bitcoin and its token will be traded at 0.1, or 0.01, or 0.001 BTC, should we abandon the idea that our vision is real Bitcoin? The only thing that will immediately kill the fork (or any blockchain) is if the miners stop mining new blocks.

The role that users play in managementBitcoin, I don't like it. And this is normal, since no one forces me to participate. If I do not buy or hold coins and do not use Bitcoin, then this is unlikely to affect me somehow. This is because the scale of Bitcoin is still relatively small, but it will cease to be so if Bitcoin becomes the actual global currency of the Internet. With an eye to the future, it is worth considering the dynamics of management as the adoption and importance of the blockchain grows.

10. Blockchain management when scaling projects

Images: bitnovosti.com

The new blockchain begins with software - for miningnew blocks and the functioning of complete nodes for blockchain validation. A person or organization creates this software with an initial set of consensus rules. It is also standard practice to publish a whitepaper or roadmap explaining how the blockchain should function or what it is intended for. The best practice is to announce the launch of a new cryptocurrency before the start of mining. The announcement before the launch is considered fair, as it gives those who are not involved in the project, the opportunity to participate in mining from the very beginning.

When software developers mine in their ownblockchain before the announcement of its launch, it is known as premine. A similar concept is instamine, when the rewards for blocks are very high and this allows the original miners (most likely, people from the project team) to mine a significant part of the overall offer. Projects with an initial offer of coins (ICO) have a pre-mine in one way or another, since it is from here that coins are sold that are sold to ICO participants. In some projects, the premine is 100%, i.e., all available offers exist already at the time the project is launched (examples: Ripple and EOS). They can also be described as projects without mining, as they have an alternative method of distributing tokens to users. The development of blockchains with full or partial premine is fundamentally different from those where open mining takes place from the very beginning. This has its consequences for management in the early stages of the project, so I will consider these cases separately.

Bitcoin is a good example of cryptocurrency without a premine. On October 31, 2008, Satoshi Nakamoto sent a letter to the cryptography mailing list saying:

“I am working on a new e-cash system, completely peer-to-peer, without trusted third parties. The document is available at: http://www.bitcoin.org/bitcoin.pdf. ”

January 3, 2009 Satoshi was mined the Bitcoin genesis block, Bitcoin software was released on January 8, and full mining began on January 9. Blockchain and Bitcoin software started with a set of consensus rules, but at the start, Satoshi was the only participant. When others began to mine on the blockchain, it can be said that he had a network and these others adopted the consensus rules established by Satoshi.

For a long time after launch, Bitcoin did not haveany expressed value. It was only in October 2009 that the first Bitcoin exchange, New Liberty Standard, opened, offering a rate of 1309 BTC for $ 1, or about $ 0.008 for 1 BTC.

Asset Tracked by Distributed Registryblockchain has no value until someone wants to accept it in exchange for something else. At this stage, there is nothing to distinguish cryptocurrency project management from any other open source software project. Miners and developers are most likely the same people. While the value of the asset that is being mined is low, there is little reason to be particularly interested in the project for someone outside the development team. At this stage, project management can probably easily follow any open source project management model.

When a blockchain-monitored asset receivesgenerally accepted cost, management is complicated, as there are stakeholders who are not involved in the development. Miners can mine on the blockchain, because they perceive the economic benefits in this. Users buy and sell an asset because it is useful to them or they speculate on the growth of its value. The cost of the blockchain is tied to its network, and not to its software. With the growth of the value of the blockchain, the influence associated with managing its development also grows.

So there is a dynamics unfamiliar to projects withopen source and their management models. If there are unsolvable disagreements in the open source project team regarding further development, a fork is usually a good solution. Developers from the original group may have the advantage of recognizing the old name behind them, but the binding effect is very small, since the cost of the software is usually not based on network effects. Nobody lost on the fact that Ubuntu broke away from Debian - we all benefited from a larger selection of Linux distributions.

Cryptocurrencies are different because they are largersimilar to protocols. Their cost depends on what is being developed on top of them, and they rely on all the participants in the network following the same rules. Software is also a means of enforcing these rules. Since the launch of any blockchain, there is a norm determining the adoption of a set of rules by new participants (and, at least in the beginning, software) from the developers who launched this blockchain. By default, trust is required for these developers, which gives them influence.

Projects with ICO differ in that their coins / tokens possesscost even before the launch of the blockchain, sometimes when there is still no software. The balance of power is also different, because the development team gets an advance for the work that they promise to do. They can hold 40% of assets, as well as $ 10 million paid by others for the remaining 60%. Developers in such projects may be less accountable to other stakeholders because they have already received good compensation. Even if the project fails, they can cash out assets received in exchange for the sold tokens. For this reason, some people think that ICO projects are in essence reminiscent of scam.

I see many similarities between cryptocurrencies and companies. Stakeholders such as developers and miners,provide a service to users / customers, and the cost of this service is determined by market forces. The people involved in the provision of this service are united by an interest in increasing its perceived value. Developers often have significant reserves of the asset from the early days when its value was low and it almost did not attract external interest. Miners invested in equipment, and the potential return on their investment is related to the perceived value of the asset they mine.

Some cryptocurrencies are more or less managed.as a company, because there is an organization that openly controls the network. NEO and XRP rely on a small number of trusted validator nodes to manage their networks, and these validators are selected by companies (OnChain and Ripple, respectively). So far, at least, it seems that the management of these blockchains is closely related to the management of specific companies.

Most cryptocurrencies differ from companiesby the fact that they do not have a central authority deciding who can play a certain role in the network. Traditional hierarchical organizations can be important players in such networks, but cannot impose their will on the networks. Although the goals of the network may be similar to those of the company, the network cannot rely on traditional management approaches.

I also see similarities between cryptocurrencies andcompanies for failure. The failure of the cryptocurrency harms the participants - developers, holders, miners and users - but we have not yet reached the stage where the failure of any cryptocurrency could affect anyone other than these stakeholders. At present, it is not so significant if flaws are discovered in the project management and bad decisions are made or no decisions are made - failure means to leave the ship and try something else.

The goal of any cryptocurrency project is massiveAdoption. He seeks to revolutionize various industries and to supplant institutions and organizations. If a cryptocurrency project reaches its goal by providing a new infrastructure for a particular aspect of the economy or society, it will achieve a degree of attachment that we have not yet seen. If the cryptocurrency becomes “too big to collapse” (without significant collateral damage), is it also too big to change the rules or management method?

Altavista and Friendster failed, notcausing a special effect. Google and Facebook have won their battles and now seem too solid and powerful to fail so easily. Perhaps we, as a society, should have taken into account the business models of our search engines and social networks. Most of us have lost sight of the long-term consequences of exchanging data for services, and we have preferred providers that offer the most attractive services. It is difficult to imagine a scenario where Google or Facebook users are massively migrating to another service in sign of rejection of company practices. However, Google and Facebook are traditional, hierarchical, centralized companies. They are accountable to their shareholders and the governments of the states in which they work, and through these institutions, in principle, we can to some extent control their behavior.

Cryptocurrencies, thanks to itsdecentralized nature, resistant to coercion and control, and this is one of the arguments in their favor. The thought that Bitcoin is striving to become a world currency, its management model makes me feel awkward. Is it really a currency that gives miners the freedom to change the rules, while we can only collectively say, “This is no longer Bitcoin,” more desirable than central banks? Looking at how Bitcoin managed to change the block size limit, I am glad that I can just pass by. I do not like the prospect that this could become a model for managing our global currency.

Democracy provides us with the means torepresentation in decision making. Although it can be argued that certain formulations are better than others, great value is the mere presence of a process that most people are willing to adhere to. Elections and referenda may be shared, but this separation is limited and controllable due to the process, and even if this time we didn’t get what we wanted, there are peaceful ways to pursue our goals - or, if no one shares them, understand this and abandon them.

11. Flexibility of institution or management reform

With the growing importance and value of cryptocurrency,most likely, changing her approach to management will be more difficult. The higher the cost of the network, the more powerful will be the stakeholders to whom the network brings influence and income. Bitmain, a major player in Bitcoin (and other PoW coins), received $ 3-4 billion in profit in 2017. Bitcoin miners are interested in maintaining their influence and have the resources to pursue this goal.

Bitcoin users (or full nodes) inin principle, they may decide to establish a new form of management that reduces or balances the influence of miners, but: 1) without the established process, there is a significant obstacle to the implementation of these changes; and 2) if miners do not approve of these changes, they have the resources to resist them.

In the early stages of cryptocurrency, changing the rules is much easier, because there are fewer stakeholders and their interests are more consistent. For making decisions one or another combination is enough following the leader and following the plan. Any project starts with a leader - the person or organization on whose ideas is basedthe project and who implements the first version of the software and the genesis block. People are interested in a project because they believe in its ideals, and usually this also includes a belief in the dedication of the person who created the project or team and in their ability to complete the job.

The leader of Bitcoin, of course, was Satoshi, and judging byeverything, at an early stage of the project, the word Satoshi was practically considered a law. Bitcoin is interesting in this regard because Satoshi left his position and disappeared. We won’t know how long he could have dictated the course of Bitcoin. This can be seen as Bitcoin's strengths, as the only leader that everyone follows is a centralized point of failure. A person can make mistakes or, under duress, take actions that weaken the network.

In the absence of a leader, Bitcoin still has a plan - original whitepaper. Such documents are important because they help to coordinate the expectations of the participants. They set the framework for what the project seeks to achieve. People who do not want to achieve these goals do not need to join the project. Bitcoin is a “peer-to-peer electronic cash system.” At least in this the participants should not have disagreements. However, no plan can foresee all the issues that may arise, or all the decisions that need to be taken along the way. If the leader is absent, there is no one who could unambiguously interpret the correct course of action to implement the plan. Proponents of Bitcoin and Bitcoin Cash allude to Satoshi’s vision, but interpret it differently and the course of action they indicate.

The overall plan is a good basis for making decisions onmanagement until situations arise that were not clearly foreseen, and the further course of action becomes ambiguous. Following a leader is an effective way of managing until that leader disappears or the participants lose confidence in his decisions.

12. Ethereum and The DAO hard fork

The DAO is an interesting management experimenton the blockchain. When the vulnerability was discovered and exploited, it gave interesting observations regarding blockchain management (Ethereum). The DAO was conceived as a decentralized autonomous organization that investors will be able to control through a complex smart contract scheme. It was supposed to function as a kind of venture fund, where anyone could invest capital and these investments gave a share of the income and the right to vote in determining what The DAO should do. There was no traditional (human) management structure, such as a CEO or a board of directors that would interpret and implement stakeholder voices - decisions had to be made and implemented directly on the Ethereum blockchain using smart contracts.

Before The DAO embarked on a full-fledgedAt work, someone found a way to exploit the vulnerability of these smart contracts and take control of all the ether invested by stakeholders in The DAO - worth $ 150 million at the peak. A wait period was built into The DAO before the recipients could spend the money. The attack triggered a 27-day period when the Ethereum community could take action to mitigate before the funds could disperse throughout the Ethereum ecosystem. In a blog post on Ethereum where Vitalik Buterin (its founder) announced this exploit, he also suggested a soft fork, which actually had to block or blacklist the stolen ether, if it was accepted by most miners. The soft fork seemed to have received the approval of the miners and was planned for implementation, but a vulnerability was found that exposed the entire Ethereum network to the danger of a DoS attack - if you read between the lines, this post tells the miners that they should vote against the soft fork.

Thus, in the absence of a solution in the formsoft fork, the Ethereum community had to decide whether to use a hard fork, which would actually rewrite the story recorded on the Ethereum blockchain. The Ethereum Foundation has been offered a hard fork that transfers all of the air held by The DAO smart contracts to a new contract through which those who sent The DAO air can get it back. This proposal was accompanied by a voting tool that allowed Ethereum stakeholders to express their opinion on further actions, and the results of this vote should have determined the default value in the new version of the software for full nodes: whether to use fork or not.

Voting was conducted on the basis of 1 broadcast = 1 vote, not based on one vote per wallet or person. It was the so-called "Vote in rubles". The largest stakeholders had the largestinfluence. There is a tendency to conduct all voting on blockchain management on the same principle, because blockchain is a register of which private keys belong to which assets. Any complete node can find out how much bitcoin or ether is controlled by a private key, but it is in no way possible to find out how many people have Ethereum wallets or how many wallets this or that person controls. Voting on the principle of one vote per person is impossible, because in such a vote (for example, one vote per wallet or node) it would be easy to use puppets - the Sibyl attack.

In this case, 87% of the ether votethe hard fork said yes, and the hard fork was implemented, with 85% of the computing power switched to the new blockchain, where all The DAO investors got their broadcast back. Such an outcome is not surprising, since 15% of all the ETH proposals in circulation at that time were at stake. This should have affected a significant portion of ETH holders who were facing substantial personal losses. This is a strong motivation to vote for the fork, while the motivation to vote against is more based on principles. Hacking The DAO could tarnish the reputation of the young project, and the hacker could throw his ETH into the market, and, besides, the creators of The DAO could wait for a protracted lawsuit. The catastrophic failure of the flagship project of Ethereum could be a significant drawback, so canceling the damage was an attractive option.

Leaders in this case (Ethereum Foundation)They proposed software that contradicted not only the Ethereum plan, but also the fundamental rule common to all blockchains - immutability. Apparently, the role of the Ethereum Foundation in this process was decisive (I did not witness this personally, but I got this impression after reading this article). The first post about this from the fund, written by Vitalik, offered a soft fork if people (miners) wanted it. This post did not say that “it needs to be done”, and therefore the choice should be made by the miners - but it could very well say: “We have no intention in the fund to solve this with the help of a fork, as this will be a gross violation of the principles on which the project is based”, - and then everything could unfold in a different way.

Interesting relationship between the Ethereum Foundation andether holders. In 2014, a crowdsale was held to raise funds for the development of Ethereum, and about 25,000 BTC was collected (or about $ 17 million at the 2014 exchange rate). I could not find information about whether the fund retained part of the original ETH or bought it for BTC, but this article says that in May 2017 it had 800 thousand ETH. At least the Ethereum Foundation was originally funded by ETH customers.

Early investors in exchange for their investmentsthey received not an asset that could be used, but promises about software development, the launch of the Ethereum blockchain and the distribution of coins that investors can use on this blockchain. Trust Ethereum Foundation embedded in the very structure of the Ethereum community. This background creates a dynamic between the Ethereum Foundation and ether holders, different from the dynamics between Bitcoin Core and bitcoin holders.

Ethereum Foundation could not order to holda hard fork of the Ethereum blockchain to abolish The DAO, but he made this possible by sending an appropriate signal to ETH holders. I like that a vote was taken to evaluate the opinions of ETH holders. 87% of ETH voters voted in favor of hard fork, but only 4.5% of all ETHs in circulation participated in the vote, and, as I have already noted, those who invested in The DAO had a strong motivation to vote “for” .

A minority of Ethereum miners who did not accepthard fork, they continued to mine on the blockchain with the compromised The DAO, which became known as Ethereum Classic. It is not surprising that the Ethereum Foundation decided to focus on the blockchain, which forked the cancellation of The DAO, which contributed to the legitimization of this blockchain as “real Ethereum”. Although miners and users who did not accept the hard fork were able to continue working with their own blockchain, what they got was something inferior, as they no longer had the support of the well-resourced Ethereum Foundation, a fund funded by investors / Ethereum holders ( to fork).

Be that as it may, this fork does not seem toled to the level of hostility between the ETH and ETC communities that is observed in the case of BTC and BCH. It is possible that this is somehow connected with the possibility for stakeholders to express their desires through a clearly defined (albeit situational) process and see the results.

Apparently, one of the management issues, bywho now have no consensus in Ethereum as to whether, and if necessary, how, to return ETH from smart contracts that are functioning incorrectly. It seems that a solution to this problem is not yet in sight, and it is impossible to find out what it could be. This, for example, is not very happy for those who "hold" 513 thousand ETH who are stuck in the Parity multi-signature contract.

13. A Brief Overview of Alternative Methods for Securing Distributed Consensus

Not all cryptocurrencies rely on proof of work to achieve consensus. The most famous alternative is proof of ownership (PoS)where the nodes creating the new blocks are selected onthe basis of the currency held by them and sometimes the duration of its retention. This is argued by the fact that you can trust the random selection of nodes based on their share of ownership, because they have strong motivation for honest behavior (they have something at stake). PoS members can be rewarded for honest contributions by receiving rewards for blocks, or punished for dishonest behavior by losing part of their share of ownership.

Now only a few rely on PoScryptocurrencies with high market capitalization. There are theoretical problems that need to be addressed, and it has not yet been proven that this method reliably leads to distributed consensus. The main problem is that for any split in the blockchain, the stakers (who place their stake on the con) are motivated to put on the tokens in both blockchains, which they can easily do. PoW miners cannot do this, because they need to decide in which blockchain to mine, or share their computing power between blockchains.

Coins that I know of that rely on PoS are NXT, Ardor, and Pivx. Ethereum has long had a transition plan from PoW to PoS, but the fund has not yet decided on a specific PoS implementation.

Another method currently used isdelegated proof of ownership (DPoS), where holders can vote (in proportion to their reserves), choosing a limited number of those who have the exclusive right to create new blocks. Lisk holders choose 101 delegates, and Ark holders - 51. Of those delegates, those who create new blocks and get rewards for them are randomly selected.

There are also cryptocurrencies that use a hybrid of PoW and PoS to reach consensus. Their common characteristic are masternodes. These are nodes that occupy a special place in the network andoften providing special services. For masternodes, there is a requirement for a certain amount of currency. This is argued by the fact that masternodes will honestly fulfill their duties, because they have put at stake a substantial amount, which motivates them to take care of the health of the network. The first masternode project was Dash. In the case of Dash, they implement the functions of InstandSend and PrivateSend on the network and receive 45% of the rewards for the blocks. A list of cryptocurrencies with masternodes (adapted for investors / holders) can be found here.

Cryptocurrency using to achieveconsensus PoS, gives power to token holders. That is, in order to understand who has influence in the corresponding network, it is necessary to consider the distribution of coins (both the initial distribution and current fees for blocks and transaction commissions). Currency holders manage - and in a sense, own - a network.

PoW miners carry relatively high costs (purchase of equipment and electricity for his work) and therefore forced to sell somerewards received to cover them. This ensures a stable influx of currency into the market. PoS nodes have very low transaction costs, since they do not use large amounts of energy (this is one of the arguments in favor of PoS), and therefore they can keep more rewards for themselves. Stakers are not under the same pressure to sell part of their rewards. In a system where all rewards for blocks or all inflation go to stakeholders, they can safely keep their share of the currency, while the reserves of non-stakeholders will be constantly diluted. A person who at the very beginning had 50% of the coins can save these 50% and the corresponding influence by simply managing several nodes - currency users who do not put their stake on the line will actually pay him a rent in the form of transaction fees.

14. Ongoing discussions on blockchain management

The rest of this article will be devoted to setting out my view on three popular publications on blockchain management and, in particular, about onchain managementthat appeared in November-December 2017. Each of them sets out convincing arguments of influential people in the blockchain world, so that they deserve attention.

  • Fred Ersham “Blockchain Management: Programming Our Future”
  • Vlad Zamfir “Against Onchain Management” - criticism of an article by Fred Ersham
  • Vitalik Buterin “Notes on blockchain management”

On-chain management means that the protocol includes a formal process for accepting changes to consensus rules. The norm for blockchains is off-chain management. There is one process or another. (we already examined the process of Bitcoin and Ethereum)through which various participantsagree on the changes and download the new software version introducing new rules after a certain block, or some participants do not accept the changes and a split occurs in the blockchain.

Decred is the only project I know withfunctional on-chain management of protocol changes, so I will describe it in more detail. The Decred project is most interesting to me because it relies on a protocol management vote (and in the near future - to finance the development of the project). In fact, one of the reasons I startedwrite this article, in that the three above-mentioned publications on the on-chain management of protocol changes do not mention the only project that really uses this.

15. Decred

Decred uses to powerconsensus rules for both PoW and PoS. PoW miners receive the largest share of block rewards (60%) and perform the same role as in Bitcoin. PoS miners / validators / voters receive 30% of the block rewards, and their role is to vote for changes to the consensus rules and to ensure that the miners properly enforce these rules. The remaining 10% goes to the budget fund of the project.

Decred holders can buy tickets by blockinga certain amount of DCR until their ticket votes. When mining each new block in a pseudo-random manner, five are selected from the pool of active tickets. At least three of these five tickets must vote for block approval, otherwise the miner will not receive his reward. After the ticket has successfully voted, its owner returns its price plus a fee. Tickets on average vote after 28 days. If the ticket has not voted in 142 days, its term expires and the owner can withdraw it and return the blocked DCRs - approximately 0.5% of the tickets do not have time to vote before their expiration date. The target pool size of active tickets is 40,960 tickets. The price of tickets increases or decreases depending on whether more or less in the pool of tickets in comparison with this purpose.

Blocking funds for an unknown period of up to 4months to buy tickets is a Decred mechanism that motivates voters to take care of the health of the network. To have a significant impact, you need to block a significant amount of DCR. If, due to your vote, DCR loses value, you will not be able to quickly exit your position to avoid consequences.

The on-chain process for adopting changes to consensus rules is as follows. Changes to the Decred protocol are included in the new software in standby mode. Upon reaching a certain threshold (the new version should use 95% of the computing power of PoW miners and 75% of PoS voters) the voting period starts. Voters decide whether to vote with their tickets for changes or against them, and within one month (8064 blocks) the votes of selected tickets are counted. For the proposal to be accepted, at least 10% of the vote must be “for” or “against” (that is, I do not “abstain”). If the participation threshold of 10% is not reached or there is no clear majority of 75% “for” or “against”, another one month voting period opens. If there is 75% of the vote against, the proposal is rejected. If in the second round of voting 10% of the participation is not reached, the proposal expires. Accepted offers are automatically activated a month later (block 8064) after acceptance.

Decred Voting Cycle.

Such a system should give voters more freedom in deciding what constitutes a valid bloc. (i.e. what are the consensus rules). PoW miner whose block is not approved by voterswill not receive a reward, while a PoS voter for a vote against the block still receives a reward. PoS voters, in principle, can implement their own “soft forks” punishing miners who behaved improperly, for example, refusing to update and allow the vote to take place or mine empty blocks.

The system must also resist splits.blockchain caused by competitive hard forks. It will be difficult for a breakaway blockchain supported by a minority of voters to find new blocks, because it will select tickets from the pool that votes to invalidate the blocks. The only way for a minority of voters to survive and add new blocks is to remove this requirement. Of course, this is possible: as in any other blockchain, Decred software can be changed. However, since the principle of stakeholder voting is part of Decred’s foundation and identity, it’s difficult to imagine a scenario where any doubts might arise about which blockchain is “real Decred”.

Decred stakeholders have voted in favoradoption of two changes to consensus rules. In the first case, the ticket pricing algorithm has changed (so that the result is a reduction in fees for PoW miners, playing against their interests). In the second case, the change necessary for integration with the Lightning Network was adopted.

Displaying active voting on poll.decred.org website for April 2017. The screenshot was taken from the waybackmachine archive, since no voting is currently taking place.

16. Returning to ongoing discussions

Fred Ersham’s article has a whole section onon-chain management, where Tezos and DFINITY are mentioned at the present time - while at the time of writing none of these projects had launched its main network. Decred - a project that has already approved two changes to consensus rules in the form of a hard fork through online voting by stakeholders - is not mentioned at all.

Fred’s article contains some good arguments aboutwhy blockchain management is important, and interesting speculation about the future. It provides a brief and simplified overview of management and motivation in Bitcoin and Ethereum. This is understandable, I can confirm what happens when you try to describe it in more detail; The article you are reading is a good example, and it only touches the surface.

Fred's article also makes good points.about financing development. In Bitcoin, there is no way to directly pay developers. In the early days, this was not a big problem, because developers who were so interested in Bitcoin to spend time working on it, most likely considered it underestimated and bought coins. If they took profits during one of the big overclocks of the price, then they probably did not need to worry too much about paying bills, and they had strong motivation to improve Bitcoin and increase its value. But I don’t see why an experienced developer who is not a major stakeholder can decide to work on Bitcoin. Smaller projects (or a new one) offer better prospects for its work leading to a large increase in the value of the asset it holds.

Companies often pay developers to work onOpen source software, as the business of these companies relies on this software. It is likely that such companies are interested in the software developing in a certain direction, and they will accordingly direct the hired developers. Developers can also be funded through donations, which imposes a milder version of the restrictions associated with wage labor. The only ones motivated to make donations (i.e., expects these investments to pay off), - these are large stakeholders, and they willto finance only the work that is consistent with their vision for the development of the project. Monero is interesting in this regard, as it has a forum-based funding system that provides an infrastructure through which community members can finance projects in a more gradual and distributed way.

Some Monero projects are underway with community funding.

Ethereum has a fund that I believepays developers, and, as mentioned above, this gives the fund the opportunity to dictate the course of development. When the network split, the support of the fund did not go to fork, and those who wanted to stick to the old consensus rules with Ethereum Classic were left to their own devices.

17. Autonomously funded cryptocurrency projects

There are also cryptocurrencies having a built-ina mechanism by which a certain percentage of remuneration for blocks is sent to a fund whose funds are used to develop the project. Here are the projects of this kind known to me:

  • Dash sends 10% of the block reward tobudget fund. Anyone can offer to do some work in exchange for a certain amount in DASH, and masternodes vote on which proposals will receive funding. This vote and the subsequent distribution of DASH are on-chain, making Dash an early example of a decentralized autonomous organization (which is actually functioning). Every month (after a certain number of blocks), all votes for the proposals of this month are calculated, and proposals that have passed the threshold are ranked by the votes “for” or “against” and are financed until the monthly budget is spent - proposals that have not received funding are rejected and the process starts again. The history of offers can be viewed here.
  • Pivx started as a fork (software, not network) Dash andreplaced PoW with PoS, but retained masternodes and a development budget, as well as the process by which masternodes vote to select proposals for financing. Pivx masternodes voted to include stakeholders in the project management, but this has not yet been put into practice. Current offers and votes can be viewed here, but, unfortunately, there is still no easy way to access the budget history of Pivx (although it is recorded on the blockchain).
  • Blocknet sends 10% of the remuneration for the block to the development fund, and the “service nodes” (conceptually similar to masternodes) vote for spending these funds in superblock cycles.
  • Zcash is going to transfer 10% of everythingOffers of the same company - within 4 years, 20%, and then nothing. This is touted as a “remuneration of the founders”, and in this case it is not expected that everything will be spent on improving Zcash. Part will go to the investors of the company as income.
  • Zcoin started with the same remuneration of the founders and its distribution model (company) as Zcash, but the figure was reduced to 7% of the entire offer (14% over 4 years).
  • Zclassic is a fork of Zcash that has abolishedremuneration of the founders, and Zencash is a fork of Zclassic, which added a development fund to which 8.5% of the remuneration for the blocks is transferred. Zencash planned to implement a decentralized autonomous organization through which stakeholders can directly control this fund.
  • Decred transfers 10% of block rewards tothe project’s budget fund and plans to give stakeholders direct control over this fund through a decentralized autonomous structure. So far, the budget fund of the project has been managed by Decred Holdings Group LLC. The funds were spent quite economically. Now the fund has almost 627 thousand DCRs — this is approximately 82% of all DCRs that have been received by the fund since the launch of Decred.
  • Smartcash transfers as much as 70% of the rewards forSmartHive blocks, and the rest is distributed between miners, masternodes and SMART holders. SMART holders can vote (based on their SMART balance) for what SmartHive funds should be spent on, and the allocation of funds is carried out by trusted curators as they reach agreed targets.
  • Ubiq has a development fund, and were announcedplans to issue Ubiq holders of a management token (Escher). Escher will be used to vote on Ubiq management. The Ubiq Development Fund has approximately 20 BTC and 14 thousand UBQ. I was not able to find information about where these funds come from, but it does not seem like with block rewards, so maybe Ubiq should not be considered as an autonomously funded cryptocurrency.

18. Once again, we return to the current discussions.

The publication of Vlad Zamfir is a direct answer to Fred, in fact a critic. Vlad’s article has a lot of things that I don’t agree with.

Vlad’s main argument is thatmanagement is not a design task and that projects such as Bitcoin and Ethereum have management processes that Fred simply did not try to understand. Their replacement is fraught with risk - this will be a revolution that existing stakeholders may not accept. I agree that it will be difficult and risky to establish a formal management process in mature projects such as Bitcoin and Ethereum (and many others). This will deprive the influence of the participants who now carry out this management and dominate it (and who are able to withstand such a revolution) and replace something familiar with something untested that might not work or have unforeseen consequences.

But this part of Vlad’s criticism is not applicable to newor young projects, especially those based on a formal management approach. This approach can be developed at the very beginning, or its development and implementation at the early stages can be laid down in the plan or roadmap available at the very beginning.

Is it worth considering blockchain managementas a “design task", depends on the point of view on the management of proven projects. For someone who does not like the management of Bitcoin and Ethereum or who thinks that it may cause problems in the future, blockchain management is definitely a design task, since projects that avoid formal management in favor of situational decision-making are likely to develop similar undesirable processes.

According to Vlad’s own description, Ethereum management processes:

“... they are not well documented and difficult to understand without active participation in them ... No one has complete information about the structure of the processes involved.”

It seems to me completely undesirable fora system seeking to play a significant role in the global economy. I don’t see why we should want such a system to be controlled by a small elite and understood only by those who can spend a lot of time participating in it. How can I, belonging to the vast majority of those who do not understand how it works, know that it is not subject to manipulation by influential persons or that it is not being manipulated now?

Argument of Vlad against onchain managementconsists in the fact that the participation of operators of full nodes becomes optional, as their decision to upgrade to a new version becomes insignificant. I am skeptical of the sovereignty of complete node operators as an integral part of the management process for the reasons stated above. Vlad also puts an equal sign between users and operators of full nodes, but I believe that the vast majority of Ethereum users do not have a full node (the number of full nodes now is 8143).

I don’t see why I should trust thatEthereum's control and complete nodes act with my interests in mind as a user. Since I have no influence on the management of Ethereum, there is no reason to include me in the decision-making process or try to explain to me the decision made. It can be argued that, since I am not closely acquainted with the technology of Ethereum, I do not need to participate in the management, but if I do not play any role, then I have no reason to get acquainted with it. This problem, in my opinion, will become much more significant when global adoption takes place and the proportion of users who understand what is happening or who have time to follow the management process, as in the case of Efirum, becomes much less.

Vlad also puts forward an argument against votingstakeholders, arguing that the interests of holders are not necessarily consistent with the interests of users - in particular, holders want the price to rise, while users would prefer a low price. It seems to me not quite true. Most users are also holders for some time, and therefore are interested in a price up trend. Users who purchase ether in order to immediately use it in its entirety in a transaction should be more concerned with commissions rather than the price of ether. The interests of holders differ from the interests of users only when holders benefit from commissions. This may well be the case when Ethereum moves to PoS. Decred is an example showing that this is not always the case. Decred voters do not benefit from commissions, as they go to PoW miners.

However, I partially sympathize with disgustVlad to plutocracy. Wealth can influence any form of government, but I don’t like to consolidate this as a principle of decision making. However, as Vlad admits, we currently do not have an alternative to blockchain on-chain management that is resistant to Sibyl attacks.

When I imagine blockchain managementas a company, I don’t have much trouble with coin voting, as it resembles the company's stock management. If large blockchain stakeholders begin to impose rules that are beneficial to them at the expense of users, then I will very quickly leave such a blockchain as, as I think, many other users. On-chain voting also does not exclude the possibility of adopting a hard fork, which has the support of most users / nodes (but not votes); it only means that they will have to remove or adapt that part of the software that provides for a rule they do not like. But on-chain voting offers an orderly and transparent way of accepting consensus changes that have the support of stakeholders.

The last thing I want to say about Vlad’s publication,concerns the statement that "miners today * do not * have a significant impact on management." I admit that, due to the non-transparent processes of Ethereum management, I cannot say with certainty that this is not true, but this is not consistent with the approach to hacking The DAO, when Vitalik first proposed a soft fork that could be implemented with approval by miners.

I can say little about Vitalik’s article. In general, I find her well thought out and balanced. It made the same omission as in Fred's publication: when referring to projects using on-chain voting for protocol changes, Tezos is mentioned, but not Decred (where this has been done since April 2017).

Vitalik criticizes coin vote by pointinglow participation, citing an example of 4.5% participation in the Ethereum fork due to The DAO. Decred has an answer to this: motivate to vote, giving voters 30% of the block rewards.

Vitalik’s arguments about bribery of votersreasonable and relevant. I reviewed Lisk and Ark, and Lisk definitely has a problem with delegate choices. Lisk holders can vote for 101 delegates, and this allows elected delegates to set conditions for receiving a bribe. In the case of Lisk Elite: “To get rewards from me, you also need to vote for these 53 delegates from my group.” (32 in the case of Lisk GDT). This condition, coupled with the fact that members of these groups vote for each other and spend only 25% of block rewards on bribes (in the case of Lisk Elite), means that these groups are actually86 out of 101 delegate seats were reserved for themselves and with each block they are becoming richer and more influential. It is difficult to see how these groups can be squeezed out unless their behavior threatens the network - and then the holders will have to choose between the absence of rewards / bribes and an asset that has no value.

Ark, it seems to me, is not so badcondition. Ark wallet can only vote for one delegate, which greatly complicates the formation of groups that rely on traditional bribery in order to maintain and expand their influence. Most elected Ark delegates offer their voters 80-100% of block rewards (compared to 25% in Lisk)so there is at least a more competitive vote buying market here!

Vitalik also published another article onmanagement criticizing DPoS and coin voting on the basis that they are vulnerable to bribery. This is fair criticism, but I don’t see why off-chain management is inherently more resistant to bribery, unless we are talking about an approach where only proven and trusted members have any significant influence. In the DPoS examples, the good thing is that since the vote is distributed among all coin holders, bribery is open, you can point to it and know that it takes place. The management process, a deep understanding of which is accessible to only a few, can also be vulnerable to bribery, possibly to large bribes to fewer participants. It is more difficult for external observers to learn about vulnerabilities or whether there are reasons for suspicion of bribery.

I agree with the final argument of Vitalik aboutthe multifactorial consensus and importance of various signals, such as a roadmap, consensus of developers, voices of coin holders, voices of users resistant to Sybil attacks, and established standards. But I disagree with him in that I do not consider a formal on-chain management approach that replaces all these signals as the only coordination institution. If you go back to Decred, then it is obvious that the roadmap and project guidelines and the opinions of long-term developers are of great importance to community members. Voting at Politeia will also provide Decred with a user polling method that is at least partially resistant to Sibyl attacks, since registering and participating in discussions on the Politeia-like Reddit web platform will not be free. The cost will not be so high as to push away genuinely interested users from participation, but it will set a limit on mass manipulation in the spirit of Sibyl's attacks.

On-chain management has the potential to simplifymanagement, conducting signals more efficiently and transparently through a process in which stakeholders play a clearly defined role. When cryptocurrency holders get a role and responsibility in its management and the process becomes easier to understand and track, most likely the number of those who understand what decisions are made and what is at stake will increase. I think this is definitely good.

Even in a scenario where on the blockchain withsomething will “go wrong” with the on-chain management, the community will be able to fork to eliminate or replace the compromised management in a similar way as the consensus rules are changing now. On-chain management simply changes the default value with “We cannot change consensus rules without the consent of all stakeholders, otherwise we risk getting a blockchain split” on “If X% of the holders agree to the changes, they will be put into effect and we will all accept them, unless we fork to change our management process”.

19. Skepticism about Decred

I hope you do not need to say that my words should not be considered as investment recommendations. I approach this not from the point of view of the investor, but as an interested observer.

I really sympathize with Decred. “Autonomy means self-government. Stakeholders Set Rules ". Such a mission statement is simply more interesting to me than a detailed plan explaining what the group of founders decided to do with blockchain technology.

It aroused my interest enough toOctober 2017, start visiting Decred's Slack channel to see how it works in practice. It turned out that for most of my questions about how Politeia will be used to distribute the project budget, there are still no answers and many details are discussed in public Slack channels. I joined a few discussions and soon realized that there was no good consolidated description of how Politeia would work, so I wrote this myself. I hope to get some DCR from the project fund for this work.

Here's how work has been done so farby the Decred project: people come, do some work and get paid for it, if those who have already proved themselves see value in it. The initial version of voting at Politeia will determine what constitutes valuable work for stakeholders.

In the interest of balance, I will also voice skepticism about Decred.

Decred began as a reaction of some developers to their experience with Bitcoin, in order to solve what they perceived as problems in managing Bitcoin. Decred has not reached scale yet (by participation or by importance)in which such problems reallyarise. Perhaps he will never reach such proportions, and then there will be little benefit from his approach to management. We may never know if Decred's approach to managing solves the problems he intended to solve.

To accept consensus rule changesa fairly high level of support is required - 75%. This seems very conservative to me, and there is a possibility that an attacker who has enough DCR to constantly buy 25% of the ticket pool could block any protocol changes. On the other hand, such a high threshold can make this approach more resistant to bribery in an attempt to convince stakeholders to vote against their best interests, since nothing can be achieved without convincing 75% of Decred tickets.

The ticket price, in my opinion, is too high - for some time now it has been around 85 DCR ($ 4250 at today's prices), and there is no reason to expect its significant decline. Decred holders who cannot afford to buy a ticket are excluded from project management. For some time, there has been talk about fragmenting tickets, which will allow you to buy part of the ticket. There is a demand in the community for such an option, but implementing it in a way that would not weaken the Decred management model is still fraught with some difficulties.

Share pools are a weak point inDecred’s on-chain management, since those who use them trust that the pool operator will vote in accordance with their preferences. The voter can check whether the pool voted correctly using his ticket, but it is unclear how many participants in the pools really check this. Probably, the pool operator will not have time to conduct a lot of manipulations with the votes until they notice it, and since the only criteria for choosing a pool is a timely and correct vote, the operator who violates the trust will quickly lose all participants.

Manage your project budget by votingPoliteia will not initially directly control these funds, but the long-term goal is to make the distribution of funds autonomously controlled by stakeholders. The first version will rely on the enforcement of decisions made through Politeia by proxies controlling the project budget wallet, which offers a security guarantee in exchange for trusting those individuals. The search for a way to design and implement autonomous control over the fund is recognized as a significant challenge (and the greatest concern is resistance to bribery and usurpation). The design of this approach and its endorsement by voting on Politeia is community dependent.

The Decred community does not seem to be verygreat. It is difficult to accurately measure it, but if we consider such a rough indicator as the number of subscribers of the subreddit, then Decred has less of them than almost all other projects mentioned in this article. This does not bode well for a project whose whole essence is in general management. I expect more interest after the launch of Politeia's voting platform, but it's impossible to know for sure. Decred missed the opportunity to use the project budget for promotion in December 2017 - January 2018, when it cost about $ 45 million and many first showed interest in cryptocurrencies. As a result of the subsequent general decline in cryptocurrency prices, the same amount of DCR began to cost more than half. It seems that the founders of the project are not interested in the hype or promotion. They are more concerned about fundamental indicators and a high-quality code, and they decided to implement protocol chain management before the mechanism by which stakeholders can decide how to spend the project’s budget fund. Many community members have ideas on how to spend the project budget on its promotion, but until they can vote for them with Politeia, they will not be able to achieve as much as they could in January 2018.

20. Conclusion

Now is a good time to experiment withblockchain management, since rates are rising, but technology has not yet become an integral part of global society, so the consequences of failures or wrong decisions are unlikely to significantly affect anyone other than the direct participants.

I am glad to see how many new projects are seriousthink about management and begin by planning their approach to it. It will be interesting to see whether these newcomers will be able to take various management approaches to catch up with established players, and whether the informal management of these established players will continue to work as their acceptance and relevance grow.