Bitcoin is not Perfect¶
This is one of the most common themes of critique, especially when a critic is engaged in debate with a Bitcoiner. Once you see the pattern you'll see it everywhere. The critic simply claims that a percieved weakness is more important and relevant than it actually is. Here are some of the most common examples of this strategy:
- criminals use Bitcoin
- mining uses a lot of electricity
- it's not fairly distributed
- the price is too volatile
- the fixed supply prevents emergency funding
The problem with the above arguments is that none of them would disprove Bitcoin (even if the claims were valid -- they are not, but that's irrelavant). This form of argument is a kind of trap, similar to Bulverism, where the critic simply distracts with unrelated noise, explaining why something is wrong without actually showing a critical flaw.
For example, Bitcoin can be true AND used by criminals, and still have a volatile fiat price, and be unfairly distributed, and so on -- the question of whether Bitcoin is true is irrelevant to all of those concerns.
Bitcoin fixes -- everything?¶
In the spirit of steelmanning a more useful critique, we can examine the inverse of this argument, that Bitcoin is or should be perfect. What many would call hopium, naive Bitcoiners act as if Bitcoin is the panacea to fix all of society's ills. And even more dangerous is to hold Bitcoin to an impossible standard and refuse or resist adoption till it becomes perfect.
Perfect is the enemy of good *
It is important to remember that Bitcoin is not, and need not be, perfect. Bitcoin only needs to be true, sufficiently true that it cannot be stopped or centralized.
Good enough?¶
To push this criticism into steelman territory, let's consider that there does exist a set of necessary conditions for Bitcoin to survive now and in the future. If not perfect, it must be good enough. But what does that mean for Bitcoin to be good enough?
Bitcoin requires a sufficiently advanced civilization with electricity, computers, and a global network. Bitcoin will also need self-interested developers, and self-interested users, and self-interested miners -- all to preserve the value and decentralization of the network. While this does exist now, there is no reason to believe this will persist into the future. Adopting Bitcoin is very much an act of faith -- Faith that civilization can and should persist, that human progress will and should continue, and that a universal unit-of-account is beneficial towards these ends.
To not believe in the above (with sufficient faith, beyond just rational self-interest) is to bow to a form nihilism that not even Bitcoin could survive. In other words, Bitcoin depends on human civilization to survive and flourish. If humans cannot make it, then neither can Bitcoin.
However, even with faith in human civilization, there are some very difficult compromises that Bitcoin has faced, and will continue to face. Most concerning is privacy and decentralization. Bitcoin is not perfectly decentralized, and it is not perfectly private. Compromises were made.
Imperfect privacy¶
In order to provide full transparency and full auditability of its supply, Bitcoin is not fully private nor anonymous -- it is pseudonymous. In other words, sending and receiving Bitcoin is like writing under a pseudonym. You can create as many wallets (each with as many addresses) as you like. Bitcoin gives you the tools for privacy, but it guarantees nothing; you could disclose your addresses allowing others to surveil your Bitcoin. As a result, it is not and never can be as private as cash.
Privacy is even a problem amongst Bitcoiners. For example, there are many fanatic Bitcoiners that simply do not use lightning payment rails out of concern for privacy; they do not run private lightning channels and learn how to secure their nodes -- instead, they continue to use fiat payment rails (with a kind of blindspot to the privacy problems with fiat) and they will say "more work needs to be done for lightning adoption". And while this is true -- more work is always needed -- we do not wait for others to do the work.
If you're capable of informed criticism, then you're capable of contributing to a BIP
Ultimately, there is no perfect privacy, there is only a cultural attitude to value and fight for privacy (or not). Bitcoin provides us with sufficient tools for privacy, but the rest is up to us. Cryptography provides us an asymmetric advantage to favor privacy, but we cannot expect any cryptographic system to guarantee privacy if we ourselves don't value it.
Imperfect decentralization¶
Bitcoin compromises decentralization in order to maintain a fully auditable fixed supply with no conflicts -- an undisputed ledger. Specifically, the consensus rules solve any disputes in the ledger through proof-of-work consensus. In a conflict (divergent timechains) the chain with the most proof-of-work will win, the other chain will lose (erasing those transactions).
Most of the whitepaper was dedicated to this exact problem, the famed 51% attack: if anyone could achieve 51% or more of the total network hashrate (the work in proof-of-work) then they could control the network. They could use this power for good or evil, but it's centralized either way. This is why the security of the network depends on the enormous cost (in terms of money and ingenuity) of a 51% attack over a given number of blocks.
Mining benefits from economies of scale and as such we did see larger and larger mining companies with early signs of monopolization -- right up until they went bankrupt. Fortunate to the health of the network (but not to the miners), mining is zero sum and it has so far proved impossible to monopolize.
diseconomies of scale within Bitcoin mining must always be greater than its economies of scale
There is no guarantee that there will never be a mining monopoly -- and while this is not necessarily a risk to the fixed supply, this is a severe risk to transaction processing. If you want a transaction in the ledger you go through miners, and if mining was ever monopolized, there would be a centralized point-of-control of who could (and could not) transact on chain. A miner with a majority of the hashrate could simply ignore all other miners, knowing full well it will always win any divergent timechains, meaning its mempool selection would be the only one that matters.
This would effectively prove Bitcoin false. Because it would be centralized, the monopoly miner would be the sole arbiter for all international settlements. They could set any premiums they wanted on transaction fees. They could censor any/all transactions. They could push people to second layer payment rails that they control (as they could censor all competition), giving them full control over currency. And they could do all this without breaking consensus rules. Eventually, even the power of seigniorage could be gained (on a secondary layer) and the system would become yet another bloated fiat monetary system.
Only time will tell whether the game theory behind Bitcoin is sufficient to ensure decentralization. And perhaps it will come down to a small group of zealots that understand this problem and build their own decentralized mining infrastructure. Whatever happens will happen, and it should be clear that Bitcoin is far from a sure thing, but it is ours to lose if we don't pull this off.