Image Credit matrix‏ @maxty

Review of 2017 Bitcoin with the Theme of The Matrix

nozomi hayase


This piece was originally published on Bitcoin Magazine with the title Bitcoin’s Scaling Challenge Brings the Battle for Liberation of Cyberspace”.

This year brought a climax in the prolonged Bitcoin block size debate. Heated disputes over scaling that have become toxic in the ecosystem have overshadowed the technology. Now the cancelation of SegWit2x, the most controversial proposal in this cryptocurrency’s history averted a potential catastrophe.

Innovation moves on and the community is finding some time for reflection. What did this crisis teach us? The political battle that came to the forefront in the last several months challenges all to examine a prevailing notion of Bitcoin as apolitical money and can help us explore the deeper vision behind this technology.

The trilogy of Wachowskis’ science fiction film became a popular meme in the Bitcoin battle on social media. The Matrix is a story of a computer programmer played by an actor Keanu Reeves who is said to become the One that can free people from a machine controlled system. Neo’s struggle to liberate humanity from oppression seems to have resonated with many bitcoinners who found a similar passion in the potential of Bitcoin to bring financial sovereignty to the common man in the world of central banks.

In The Matrix Reloaded, Neo confronted the man who designed the system. The Architect, who represents scientific reason and logic told Neo:

“Your life is the sum of a remainder of an unbalanced equation inherent to the programming of the matrix. You are the eventuality of an anomaly, which despite my sincerest efforts I have been unable to eliminate from what is otherwise a harmony of mathematical precision…”

The Matrix Reloaded — The Architect Scene

To this, Neo responded, saying “Choice. The problem is choice.” Neo’s choice represents an irregularity that disrupts order and eventually threatens the system. This irregularity, in the eyes of the Architect, is a kind of bug that needs to be removed, yet he was unable to do so.

Bitcoin is an architecture that contains this anomaly. If we look back at the past 9 years of its existence, the development of this network relied on the individual’s choice. In the white paper published in the midst of a financial crisis, the mysterious author put forward a blueprint of a decentralized network and set up its basic design.

What created the network was participation of people, who out of their own volition followed the white rabbit. Yet at the same time, as the network grew, this uncontrollable anomaly began to bring hostile forces to the network and create fluctuations in equations.

Clash of Two Visions

From Bitcoin XT, Bitcoin Classic to Bitcoin Unlimited, the proposals to change Bitcoin’s consensus emerged over time, which stirred up disagreements. The crux of the conflict was found in opposing visions of Bitcoin. One camp views it as a payment system, wanting cheaper, faster on-chain transactions, while the other sees censorship resistance and permissionlessness as its defining feature and value proposition.

The friction of these two visions can be metaphorically depicted like a battle between the character Agent Smith, a program meant to maintain control of the Matrix and Neo, involving their different ideas of freedom.

Agent Smith represents the Adam Smith of the world; ‘free market’ economy born in the Industrial Revolution. On the other hand, Neo is a symbol of civil liberty in the Digital Age; free speech and privacy enabled by asymmetric encryption. The growing schism between two visions of Bitcoin seemed to have reached the point of no return in May when the announcement of the “Bitcoin Scaling Agreement” was made.

SegWit2x or the New York Agreement was born in the heat of the scaling dispute. This proposal was put forward by opponents of the Core development team’s proposed protocol upgrade (a way to increase a new capacity without having to change consensus rules, while fixing a long-standing malleability bug).

Most signers of the agreement saw SegWit2x as a compromise between Core’s implementation plan of SegWit (BIP141) and Bitcoin Unlimited (threat of alternative contentious hard fork). They saw it as a way to keep the network together.

SegWit2x, a plan to double block size through a hard fork was developed in the invite only meeting in a hotel in New York by major actors in the industry. Unlike Bitcoin Cash that was launched by supporters of a block size increase in response to the SegWit lock in, SegWit2x lacked replay protection that is needed to prevent potential loss of user’s funds through accidental replay spending and replay attacks.

Concerns were raised about this proposal, specifically its rushed preparation done in a closed development process. Some perceived it as a dangerous and reckless hard fork, which is not a software upgrade as proponents claim, but an attack on Bitcoin.

Beginning of Resistance

In the film, aside from the Architect who presented himself as the father of the system, there was another crucial character; the Oracle, who was the mother of the system. Neo’s mentor Morpheus spoke of how the Oracle, who made a prophecy, had been with the common people since the beginning of the resistance. He told Neo just before he met the Oracle, “Try not to think of it in terms of right and wrong. She is a guide. She can help you find the path.”

In a sense, the creator of Bitcoin was like a prophet, who set up a path for a new future for others to find. What was contained in the white paper was a vision that set everything in motion, which had existed from the very beginning. Before the architecture of 1 and 0’s, whether numbers were used to calculate profit margins or to program software, there was a vision to guide human action.

The rabbit hole that took many of us to the Wonderland of this crypto-world goes much deeper. In a speech in Zurich, titled “Call for a Revolutionary Hacker Movement,” Amir Taaki, who was one of the first developers to start working on Bitcoin, described the battle that has long been engaged since the dawn of the Internet. He reminded the audience how Bitcoin is a political movement that was built on an earlier struggle.

Taaki spoke about another prophet who inspired him to engage in Bitcoin development. His name is Richard Stallman, the Founder of the free software movement, who brought the idea of free software, which this godfather of the GNU/Linux operating system described as “the first battle of liberation of cyberspace.”

Stallman explained free software as one that is “controlled by its users, rather than the reverse.” He defined free as freedom, ‘libre’ in the French word and not a price. This vision of technology to empower individuals and change the world formed hacker ethics, which inspired a group known as the cypherpunks, an electric mailing list of activists who advocate free speech and privacy with the use of strong cryptography.

Amir noted how commercial interests co-opted Stallman’s vision, by renaming free software as open source and rebranding it with an open market idea focused on efficiency, profit and growth. Networks of committed individuals, who out of their own free resolution dedicated themselves to shared ideals greater than themselves, were slowly overtaken by business interests and people who were overly driven by self-interests. He then pointed out how what was happening with the debacle of the block size debate was a hijack of Bitcoin’s original vision, rooted in these ethics.

Resurgence of Free Software

Bitcoin as a breakthrough of computer science is free software, which ensures individual users’ right to control its program. The first essential condition of freedom in the principle of free software that Stallman articulated is “freedom to run the program as we wish.” Stallman explained, if you are not a programmer and don’t know how to program, you can pay someone to do it for you and then through them you can exercise your freedom.

Bitcoin is a global project of free software, in which changes to the protocol are made through a broad consensus of the network. What maintains the integrity of this collective free software are full nodes run by individual users that enforce Bitcoin consensus rules, often referred to as the economic majority. By running codes of their own choice and using the nodes to receive transactions, users create economic activity. This way, they can support the developers who work on their behalf.

The proposed large block size violates this first premise of freedom, for it would increase the cost of individual users to run full nodes, making it impossible for them to use the free market forces to exercise their own freedom.

Thus, this idea for bigger block size increase was rejected on technical grounds, with consideration of a security trade-off that centralization brings. A new solution has been put forward by core developers to preserve this essential condition of freedom on the first layer, with specialization to be built in other layers.

Responding to the SegWit2x initiative, CEO and Co-founder of Prasos, Henry Brade noted;

Some articulated how the real story behind this scaling drama is all about control and noted how these were efforts partially driven by the desire to remove the influence of Bitcoin Core contributors and lock down development within their own vested interests.

Hash Power Supremacy

Like Agent Smith who tried to keep Neo under his control, the world of IOU with laissez-faire economics collides with cypherpunks’ hacker ethics of free and open software. With ICOs and new BIPs filled with empty promises, corporate and Wall Street profiteers disguised as prophets try to infiltrate the crypto-sphere.

Big business players like wild cowboys plunder knowledge in the Bitcoin source code repository that is carefully maintained through rigorous testing and peer-review. With the banner of “open source”, those driven by greed and commercial interests try to copy, modify and create their own version of this currency and put the whole network under their proprietary.

Here, the Industrial infrastructure of power came in full force to resist the ascent of a new Digital Era. Ideology of hash power supremacy was taken up by SegWit2x proponents, who argued that miners can decide or should dictate the future of the Bitcoin protocol.

This is based on the belief (perhaps held by some out of lack of knowledge and by others more intentionally) that a blockchain with more hashing power dedicated to it becomes Bitcoin. Some criticized these miners’ attitudes to put themselves above the protocol rules enforced by users. They saw it as a dangerous slippery slope toward changing all other rules, including the 21 million coin limit.

The community’s concern about this seeming overarching power of miners reached another level last spring, when the controversy of the AsicBoost emerged. The allegation was made that Chinese hardware maker Bitmain was secretly exploiting a previously known weakness in Bitcoin’s algorithm and engaging in unfair mining practices. If this was true, it was like a malicious malware in software that was released into the network. Monopoly through a patent on mining chip technology can be used as a weapon to disable fair market competition and restrict users’ access to participate in the network fully.

Proof of Hat Consensus

While proponents of SegWit2x tried to command economically rational miners and intensify the threat of a hard fork, resistance had emerged. The attempted hashing power takeover was met by Twitter hashtag activism. Around this consensus algorithm, a human network of solidarity was quickly formed and a spontaneous self-directing organism emerged within the ecosystem.

A seed of this movement was planted when pseudonymous Bitcoin and Litecoin developer Shaolinfry proposed UASF, which stands for User Activated Soft Forks. The vision of UASF is said to be inspired by game theory put forward by the author Nassim Nicholas Taleb, namely a concept of the “intolerant minority.”

This idea of an activation mechanism enforced by users began to grow when it kindled the spirit of others. Samson Mow, the CSO of the blockchain technology company Blockstream, set up a bounty to fund the development of a UASF software implementation designed to trigger BIP141.

The UASF cap distributed by Mow became a Proof-of-Hat consensus, a torch of freedom that unites those whose hearts beat to keep the original vision of Bitcoin immutable.

Linux software engineer Warren Togami reminded bitcoiners that users are in charge;

The previously silenced majority now found an avenue to exercise their own power.

The Rise of Hashtag Activism

With his gift of social engineering, Mow created Twitter moments. Titled “Bitcoin vs. corporate Bitcoin (corporate takeover)”, he called on users to rise up in this “battle for Bitcoin’s soul.” Dubbed as Bitcoin Independence Day, activation for Bitcoin Improvement Proposal 148 (BIP148) was set on August 1st.

In an interview with Fortune Magazine, Mow pointed out the contingency of individuals who are pushing for a hard fork and driven by an agenda to bring Bitcoin onto a path of centralization. Their irreconcilable differences were manifested right in the code of BIP148, with its different activation method being incompatible with SegWit2x. Facing the challenge of a potential coin-split between two implementations, another individual rose up to the occasion.

James Hillard, Bitman Warranty engineer (not to be confused with Bitmain), created BIP91, a largely miner enforced softfork that could keep the Bitcoin network together.

Bitcoin Core contributor Matt Corallo helped a smooth rollout, by making updates to FIBRE, the fast block-replaying network and alerted miners to make sure their BIP enforcing nodes have connections. With these collaborations, BIP91 gained rapid signals from the mining community and was locked in ten days before BIP148’s flag day for activation.

The threshold momentum leading up to the SegWit lockin and its activation brought all eyes of the entire global network onto the blockchain. The CEO and founder of Coinkite, a Bitcoin web wallet system, Rodolfo Novak tweeted in countdown for lock-in;

Exuberance created through BIP148 mobilization fueled a #NO2X protest movement. Strong support came from the Bitcoin community. Mir Serena Liponi, an organizer of Milan Meetup and chief expert officer at BlockchainLabit announced the joint NO2x statement from the Italian Bitcoin community.

On the first week of the month that this hard fork was planned to be activated, notable figure and smart contract pioneer Nick Szabo went public to show the opposition, adding [No2X] label on his Twitter profile. Shortly after this, SegWit2x was called off. The announcement of the suspension was made, citing a lack of sufficient consensus.

Michael Goldstein, founder and president of the Satoshi Nakamoto Institute, tweeted;

To which, Bitcoin Core contributor Peter Todd responded;

Human Faces behind Technology

What did this hashtag battle reveal? The disruption in cyberspace shook off the image of Bitcoin as apolitical money, which is often associated with cold algorithms and rational and impartial scientists. It has shown this community the role of human efforts in the development of this incredibly disruptive invention and how there are motives other than economic incentives. We have seen faces of individuals on both sides who are deeply committed to their own vision of Bitcoin.

Miners no longer represent cold power plants and the roles of machines equipped with efficient computing chips. Co-founder and CEO of Bitmain Jihan Wu came to gain wide recognition, with his sensational tweet;

Marek “Slush” Palatinus, founder of the world’s first bitcoin mining pool, came out to announce @slush_pool, responsible for ~4% of the global hashrate, is dedicated to signaling for BIP91.

Behind the scenes, there are real people with their own values and ideas.

Political passion ignited the crypto space. One of the most well known angel investors and Bitcoin evangelists, Roger Ver showed his fierce will to unite his libertarian ideas and market forces in his new brand Bitcoin Cash. The founder of Pirate Party and IT entrepreneur Rick Falkvinge distributed his wisdom of Swarmwise to guide a leaderless network.

Bitcoin Core contributors like Eric Lombrozo and Luke Dashjr played a key role in forming the idea of deploying SegWit as a softfork in 2015. These developers transpired their knowledge into action, by voicing their support for UASF and assisting the process.

Pieter Wuille, one of the authors of SegWit implementation celebrated his SegWit transaction after its activation, thanking all who helped move it forward. We have seen strong dedication and enthusiasm behind this technology.

Choice, A Feature not a Bug

Both efforts behind #UASF and #SegWit2X represented an anomaly — individuals who acted out of their own choice. In the old system of control, this choice represented something that needed to be eliminated. Bitcoin is a departure from that system that sees this as something that creates imperfection.

The events that unfolded around Bitcoin this last year have shown how the capacity for individuals to make choices, which exists prior to any scientific endeavor, is not a bug. It is not something that needs to be fixed, but is a vital feature.

The Matrix Reloaded — The Architect Scene

In the story of Neo’s resistance, the Architect showed Neo two doors, one that leads to the salvation of Zion, the entire human race or another that brings him back to the Matrix, to Trinity who sacrificed herself to save him and the end of the species. Instead of trusting the third party and complying with the instructions given, he chose what he knows to be true that is verified in his heart, networked with the heart of the other.

What guided his decision was a connection to another human that he felt in the heart, rather than an abstract concept of humanity presented by the Architect. Neo’s choice opened up a new possibility that was previously unavailable; to save both Zion and the woman he loved. His love for Trinity that gave him hope was regarded as an imperfection of humanity, which the creator of the Matrix described as a fundamental flaw and an “anomaly revealed as both beginning, and end.”

Yet it is this love that inspires visions, which is the moral code of cryptography and is what fuels the engine of Bitcoin’s decentralized architecture. In the chaos of Bitcoin’s great civil war in 2017, we have seen this love, embodied by each person’s striving to make links, commit patches and make connections wherever the network could become broken.

The creator of this technology saw a different future. Satoshi’s message in the genesis block stands as a warning and a wake up call. We are all Satoshi. We are the prophecy –the coming of a new source code and of an emerging P2P network that could crack this system of control and open all to a free society.

We are the One we have been waiting for, whose subjective value choice exercised adamantly can bring together two divergent paths of freedom and end this battle. Computers are a universal machine and with Bitcoin, programs that we choose to run that express collective values create a universal law of mathematics that cannot be corrupted.

We are all united as users before being divided into merchants, miners, wallet providers, and developers. We are the architects of our own future created through a consensus built on a perfect market in this harmony of mathematical precision.


Thank you for all who have made the history of Bitcoin 2017!

Thank you Aaron van Wirdum for his excellent journalism in providing the technical knowledge that helped me write this piece.