Bitcoin Fork and Consensus Explained

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What is a Bitcoin fork?

Unlike the banking system Bitcoin is on 24 hours a day seven days a week 365 days a year. Current up time for the Bitcoin network is 99.99% and higher, in fact, you can check there’s a nice website that can tell you that Bitcoinuptime.com currently functional for a 99.99955568 since a section January 3rd, 2009.

Where is that missing one-thousandth of a point? It’s actually probably a disruptive fork that happened in April of 2013 due to a bug in the system that delayed things for about 25 blocks and again the system didn’t go down, it just slowed down and then all of the transactions eventually went through. But they were just delayed by 25 blocks.

How does the community come to a consensus about changes in the rules? Particularly soft Forks, if people vote with their CPU power does this mean that only miners who really have a say what about developers who don’t mind or a silo mining.

It appears that miners are the only ones who have “the say”, but that quickly falls apart once you realize that miners need to pay their electricity bills and in order to pay their electricity bills they need to be able to transact in the currency that they’re mining. In order to transact in that currency that they’re mining they need exchanges, they need wallets, they need merchants. And in order for those exchanges wallets and merchants to work there have to be some users who are willing to buy the currency that these miners are now selling. In order for those users to be buying that currency, they have to be following the same rules. So if miners implemented a change that the rest of the economy in Bitcoin rejected, miners would continue to mine and they would produce a blockchain with these new rules, but they wouldn’t be able to sell the currency on that blockchain, because none of the exchanges would accept that, none of the wallets would use it and no one would buy it, because everybody’s still operating by a different set of rules.

Now that means of course that those who are operating by a different set of rules exchanges wallets users buyers merchants etc, no longer have miners mining their chain, which would have definitely slowed that chain down. Perhaps even stopped it for a while, but if that economy still has economic purchasing value, some of the miners might decide that they might want to mine that chain. Maybe because there isn’t that much competition for mining, those miners would actually make better profits. So they would defect and start working for the economic majority and as soon as that happens you immediately see how things balance out pretty quickly.

Consensus is a tricky thing to understand, but one of the most important aspects of it is that there are multiple constituencies of consensus developers who write the rules, but can’t force anyone to run them miners who mine blocks, but can’t force anyone to buy the currency or accept those blocks as valid wallets that can produce transactions, but can’t force any miners to mine them or any users to use the wallets merchants who sell products but can’t force anyone to buy those products or give them the currency they want etc etc.

Everybody seems to have power, but they only have power if they play by the majority rules and if they stop playing by the majority rules they are the ones who are losing out economically. So the consensus is something where you can have a lot of power as long as you keep doing what the majority says. The moment you try to go against the majority that power becomes very weak very quickly and comes with significant economic costs that’s how consensus stays together.

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Ethan Hunt

Bitcoin Maximalist and Toxic to our banking and monetary system. Separation of money and state is necessary just like the separation of religion and state in the past. Also, pro-local, pro-global and anti-national.

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