- It centralizes the protocol
The Bitcoin protocol and its native token ‘bitcoins‘ are one and the same. The minute we have some small group of developers who can push changes into the protocol, they control the money and its functionality.
A protocol that has a developer group is by definition centralized. When a small group decides on the rules, they get to define what the money is. This is because the Bitcoin protocol follows the longest chain that abides by the rules. When devs can decide on rules, they decide on the “correct” chain, and thus, on the “correctness” of everyone’s money.
I know some may argue that it is not developers that decide but the community as a whole. Such a view is unfortunately extremely naive. It is not how society functions. All human organizations in history form hierarchies. There is no such thing as a community where all members have equal say and power to shape the rules. Hierarchies always form and there is a concentration of power at the top.
This is true even for democracies today. But the situation gets 100X worse when we are talking about internet communities where people are anonymous and multiple accounts can be made and discussions can be moderated and censored. The idea of “community consensus” is a myth sold to the naive. The truth is, the top floor of the social hierarchy decides the rules.
- It breaks the security
Bitcoins security is based on Proof-of-Work. The way this works is that nodes follow the heaviest chain that follows the rules. This provides the system with an objective definition of which chain tracks the ownership. The only way to attack and create confusion in the system is to compute a competing longer chain which is very difficult and expensive.
Once we take a position that the rules are “changeable”, we no longer have an objective definition of the rules. Instead, we end up with politics and personal opinions deciding what the “correct” rules are.
This means that the: “heaviest chain that follows the rules” is now subjective and open for debate because the rules themselves are open for debate. The protocol inevitably splits into multiple chains each with its own political claim for correctness.
With multiple forks tracking the ownership and no objective way of determining the correct chain. We no longer have a protocol that tracks bitcoins. Instead, we get multiple private forks with their own private tokens and their own definitions. The original system and its native tokens are destroyed. Nothing is real. We are left with nothing but mere “opinions” and that is not a good thing for a money system.
- It turns the bitcoins from a ‘commodity’ into a “private currency”
What many fail to understand about bitcoins is that they are a commodity currency. To be more precise, they can be called an ‘explicit’ or a ‘defined’ commodity currency. This is because it is a system of money based on an economic resource that follows a certain definition.
Unlike traditional commodity currencies based on precious metals where each unit embodies the resource in itself. The bitcoins are an ‘explicit’ commodity where the derivative of the resource (i.e. Proof of Work) is embodied in the ledger system that tracks the individual tokens.
Once we change the rules, we are no longer tracking the original commodity. It is the equivalent of having a gold-based money system and then moving to copper while claiming it is the same thing. It’s not.
With changing rules, we lose any objective definition of what we are tracking and we end up with “private currency” or “contractual currency” which simply means that a group of people get together and decide to keep track of an imagined or subjectively agreed on currency.
The problem with such a system is that since all human organizations form hierarchies, the subjective opinions of those at the top will always be worth more than those at the bottom. Inevitably, private money always leads to extreme contractions of power. Eventually, it is either shut down by the government or it becomes the government. “private money” does not work.