Insight into environmentalists' campaign to change bitcoin code

Insight into environmentalists' campaign to change bitcoin code

The activists explain why they are convinced that it will only take the support of a few powerful companies and individuals to change the fundamentals of Bitcoin.

When environmental groups unveiled a campaign in March to shift bitcoin code away from the energy-intensive proof-of-work (PoW) model, many bitcoiners scoffed at the idea.

Aside from the question of whether proof-of-work mining poses the environmental threat the activists claim, many cryptocurrency veterans doubt the strategy could work.

The strategy depends on convincing a limited number of companies or individuals who, the activists claim, have the power to bring about change or at least convince a critical mass of people to support it.

To old hands, this plan seems to ignore Bitcoin's history - in particular, the block size wars of 2015-2017, including the debate over the Segregated Witness (SegWit) upgrade, in which one of the two proposed changes pushed by the largest companies failed in the face of widespread user opposition.

Leaders of the Change the Code, Not the Climate campaign say they are aware of this history and even see it as a sign that change is indeed possible.

Interpreting the bitcoin story

The block size wars and the SegWit update "serve as examples" to show that "change is possible," Faber, senior vice president, government affairs at the Environmental Working Group (EWG), one of the groups spearheading the campaign, told CoinDesk. Whether those changes come as a hard fork or a soft fork, they can indeed be made "if there is a general consensus within the Bitcoin community," he said.

Rolf Skar is a special projects manager at Greenpeace USA, an environmental advocacy group that is part of the campaign. Skar said there are two key questions about whether the network can change: First, whether it's technically feasible. The 2017 SegWit update "shows that it's clearly technically feasible," Skar told CoinDesk. But, he added, the second question is "whether a proposed change could be supported enough to be adopted."

"Despite the skepticism," activists see no reason why enough support would not materialize, Skar said. "Solutions need to be developed and tested to address legitimate community concerns. If effective solutions are not developed, it is unlikely that the new code will be adopted," Skar said.

Considering how the industry has ridiculed other environmental campaigns, such as electric trucks, which were initially ridiculed but then saw a rapid increase in sales, moving away from PoW doesn't seem so impossible, activists say.

Ken Cook, founder and CEO of EWG, said that based on his conversations with various insiders within the bitcoin industry, he believes bitcoin governance has changed so that there is now an "unstoppable concentration of power and control."

The "notion that this is as democratic as it was originally intended to be has disappeared," he said.

Skar made similar comments in an interview about Bitcoin: "Even though it's a decentralized system, there are key players in it."

EWG's Cook pointed to an October 2021 paper from the U.S. National Bureau of Economic Research, which found that "the top 50% of miners control almost all of the mining capacity. The top 10% control 90% and only 0.1% control nearly 50%" and that "the top 55-60 miners control at least half of all bitcoin mining capacity."

Faber said he doesn't believe the decision will literally be made by 50 people, but if the leaders of the Bitcoin community "speak up, they can help start the conversation that could ultimately lead to the changes we need."

Who controls Bitcoin?

A debate about how to improve the scalability of the Bitcoin network picked up steam in 2015. Some developers and stakeholders called for increasing the size of blocks, while others said it would hurt decentralization.

After two years of controversy, an update to the Bitcoin network called Segregated Witness (SegWit) was adopted through a soft fork, meaning users could continue to use the old version of the software. SegWit increased the number of transactions the network could handle by changing the way data is stored on the chain. Unlike other proposals to increase block size, SegWit found widespread support among users.

Around the same time, another proposal to increase block size met the opposite fate. An agreement was signed by 58 companies representing 83.28% of the network's computing power in New York at the 2017 CoinDesk Consensus conference. The agreement called for doubling Bitcoin's maximum block size to two megabytes. Four of the companies were directly involved in mining, including CoinDesk's parent company, Digital Currency Group (DCG), which also owns U.S. miner Foundry. Another seven signatories were mining pools.

But six months later, the supposedly powerful signatories backed down and canceled the hard fork or backward-compatible code change, citing insufficient consensus. Some big-block supporters formed a splinter network called Bitcoin Cash.

Asked about the controversy over block sizes and the fact that some changes were never implemented, Skar said that "five years is a long time in Bitcoin's relatively short history. Things are different now, as are the issues at stake." It's up to the people and players in the Bitcoin ecosystem to determine how the change will play out, he said.

SegWit was introduced because the Bitcoin community understood it was key to the network's success, Faber said. Now Bitcoin faces a different threat: regulation, the EWG vice president said.

For now, "the decision on how to reduce PoW's power consumption and the resulting climate impact is in the hands of the Bitcoin community. But only for now. Regulators will not stand idly by as the climate crisis gets worse and digital currencies like Bitcoin consume more and more electricity and produce more and more greenhouse gas emissions," Faber said.

The challenge of changing Bitcoin through consensus

Even if it were possible, implementing a change to the protocol is not the whole story. Jonas Nick, a Bitcoin developer at Blockstream who was involved in another major protocol update implemented last year known as Taproot, said reaching a "rough community consensus" was an important step in implementing the update.

But the key to changing Bitcoin is to "convince an overwhelming majority of economic activity on Bitcoin to use the new code," Nick said. "You can always change the rules of chess, but you may have to play alone," the developer said.

One measure of Bitcoin's decentralization is the number of reachable nodes that make up the Bitcoin network. Since the end of 2017, the number of reachable Bitcoin nodes has increased by 27.5%. The block size wars showed that users control the direction of the protocol, which means more coordination is needed to make sweeping changes to the network.

When asked if it was possible to move Bitcoin away from PoW, Nick said the consensus in the Bitcoin community is that PoW is "the only known consensus algorithm that can power a decentralized currency."

Andrew M. Bailey, who teaches about cryptocurrencies at the joint Yale-National University of Singapore College, said that "people have tried to exchange Bitcoin through various forks, but the value of those tokens tends to go down "very, very quickly."

"That suggests that the vast majority of Bitcoiners will simply sell their forked proof-of-stake coins," and that the only way to do that is to "build a social consensus of the entire community," he said.

Bailey believes that consensus is "extraordinarily unlikely because Bitcoin has this conservative development culture" that makes changes slowly and only when the community is absolutely certain about their impact.