It's a mistake to think that the exciting thing about bitcoin is as a new kind of payment system for consumers.
Instead, it's a rock solid foundation for a new global financial/monetary system in which every nation state, organization, and individual can participate without the permission of any privileged group.
It's a neutral, digital money, like gold was a neutral, physical money.
I fully expect that if it becomes a new money standard, we will in fact see higher layer payment networks (like Visa, Paypal, etc) that provide consumer protection services (for a fat fee) on top of the bitcoin network. Those people who don't want the responsibility of self custodying their money in a way that can't be recovered if they are robbed, can choose to bank with these services.
I wouldn't call it neutral. It still has a development team made up of people who decide the direction of the technology. You don't like a decision and use a fork - now you're isolated from everyone else who is still transacting on the main chain.
The validation of transactions is a red herring in these discussions - the real question of decentralisation is who is responsible for making decisions about the future of the tech and what happens when people disagree. In that respect Bitcoin is neither decentralised nor neutral. Same as Ethereum.
The development team doesn't have the power to decide the future direction. If they release a highly controversial change, no one is obligated to use their code. They could continue using an old version, or switch to an alternative node implementation led by different developers.
Every change to the network is a complex dance between the power of the developers, the miners, the exchanges and services, and the actual coin holders. If any significant segment of these forces don't agree with the direction, then the default is to change nothing and maintain the status quo.
This is what makes it neutral. No major changes to the network can happen without supermajority support among all players, otherwise you risk severely fracturing the network, which is bad for everyone.
Unlike the development teams at a software company, though, the development teams here do not have any special privileges over the software. They only have "control" for as long as their users continue choosing their forks.
If a second "development team" sprung up and had more user support than the existing team, there is literally no advantage the current team has to control the software.
And if a second government sprung up with more support, the old one would be out of luck, too.
I don't think we can simply discount the power these developers wield. They have a lot of explicit and implicit (as in "just install the latest version") trust. Sure, they could loose it, but they can do a lot of damage before doing so.
With software you need to consent to perform each update (I don't think bitcoin core has auto-update yet). This is nowhere comparable to a government in power, which has enormous power and can't be easily deposed. Even recall elections take some time, and can theoretically be interfered by government controlled security forces.
"I wouldn't call it neutral. It still has a development team made up of people who decide the direction of the technology."
The development team has no such power. They can raise a BIP (Bitcoin Improvement Proposal), which goes through rigorous cycles of analysis. A huge amount of paranoid eyes will obsess over any change proposed.
As for the development team itself, there's no THE development team. Rather, it's a highly diverse set of crypto businesses, non-profits, and individual volunteers. This diversity too helps to preserve common interests, rather than specific ones.
Should the BIP survive the first round of extreme scrutiny, next a whopping 95% of miners need to signal that they support the change. But not even that is enough, nodes (validators, of which there are an extreme amount) can still reject the change. Which is what happened in 2017, when miners wanted to increase block size (which reduces decentralization) and the community blocked it, despite a 95% miner approval.
Surely there's no such thing as 100% decentralization or neutrality at a theoretical level, but this is as close as it gets.
Good luck getting any change into Bitcoin that isn't good for every participant of the network. The last time people tried this, users, not even those users with the most Bitcoin at stake, were able to produce enough chaos and generate enough risk that they failed. Ethereum is capable of full consensus mechanism changes that hurt subsets of the network who don't hold the majority of Eth, the latest of which just further entrenched that ability.
I personally prefer the former for that reason, but by your critique, Ethereum is practically conducive to keeping the people who control the protocol small. Bitcoin is probably headed to a version freeze this decade, which is great.
Right now blockchains are essentially being incubated by centralized authorities as they mature.
Eventually, we'll see the ideas behind Decentralized Autonomous Organizations (DAOs) mature and become a viable alternative to centralized authority.
I think that's the plan at least with Ethereum. However, Ethereum 2.0 is still being deployed and what I'm talking about is probably more like 4.0 or beyond.
However, right now there is just no mature alternative. Someone has to own the keys.
Edit: Also, what others have said regarding being able to choose your development team. That's one of the cool things about crypto. Blockchains can be forked with enough support.
I don't see why anyone would want to build an international monetary system on top of something like bitcoin which was designed and developed by people who clearly know nothing about finance or monetary economics, but maybe it's just me...
The boring wisdom is that a bigger economy needs more money.
I will rephrase it. The unit of account should remain stable in respect to what it tracks. If the unit of account is grains and grains spoil then capturing that spoilage in the unit of account does not constitute a breach in stability. E.g. persistent background inflation is often caused by "natural" processes.
If you have a limited quantity of the unit of account then the unit of account will have to change and then people start betting on how the unit of account changes, rather than do productive work.
Here is a makeshift analogy:
A court is in charge of the unit of account and can set it directly and arbitrarily.
A family has borrowed 120 units (representing 10 years of labor) to build a house.
One year later the judge changes the unit of account so that 1 unit = 2 months of labor.
The family has to pay back 20 years of labor to pay off the house.
People now stop borrowing and start speculating on the unit of account because it is other people who have to work and they hope that the unit of account goes up to 1 unit = 10 months of labor so that they can retire.
There is an obvious problem. The family can simply default and the obligation to work 100 years vanishes into thin air.
The lesson here is that work should be more profitable than speculation.
You're explaining why deflation is bad and why growth in money supply is good.
I'd say deflation is okay as long as it is consistent with deflationary expectations. Unexpected deflation is bad, expected inflation is built into borrowing costs.
I don't understand how this is in contradiction with what I'm saying.
_Any_ database can be foundational, digital money if you get the enough people and their governments to agree that it is. The database part is not the hard part.
Bitcoin is trustworthy in the way that gold or beads or shells in a vault are trustworthy - if you have it, you have it, and if you give it to some else, they have it and you don't[1]. That doesn't make it easier to get people and world governments to agree to construct value (and accept payments and taxes) in terms of Bitcoin, or to trust that Bitcoin will continue to be exchangeable for a predictable amount of real goods and services in the future.
It's a sort of stable system if everyone already measures value in terms of bitcoin, since the database itself works well enough, and users are incentivized to make choices that sustain it as a store of value. That's true of _any_ unit of account though, nothing inherent to bitcoin makes it more stable in that regard; the energy usage, transactions costs, and distinction between miners and users probably add risk on that account.
Also (and this is not directed at you personally, but the arbitrary bitcoin maximalist) its hard to take one with millions of glass beads seriously when they argue the world should measure value itself in terms of glass beads, which then by pure happenstance will make them fabulously wealthy.
[1]: and I do appreciate the social and software engineering that allows a purely abstract quantity to have those properties.
> Instead, it's a rock solid foundation for a new global financial/monetary system in which every nation state, organization, and individual can participate without the permission of any privileged group.
Everybody needs "permission" from miners since they have the power to include/exclude transactions from the block chain. They can easily start using a blacklist/whitelist if they already aren't.
> (for a fat fee) on top of the bitcoin network. Those people who don't want the responsibility of self custodying their money in a way that can't be recovered if they are robbed, can choose to bank with these services.
Of course they have to be rich enough to be able to pay the fee.
Lol without permission?
All it needs is a fork and after fork between two govts and we know where we are headed back to. Bitcoin is safe as long as govts dont see significant adoption.
Instead, it's a rock solid foundation for a new global financial/monetary system in which every nation state, organization, and individual can participate without the permission of any privileged group.
It's a neutral, digital money, like gold was a neutral, physical money.
I fully expect that if it becomes a new money standard, we will in fact see higher layer payment networks (like Visa, Paypal, etc) that provide consumer protection services (for a fat fee) on top of the bitcoin network. Those people who don't want the responsibility of self custodying their money in a way that can't be recovered if they are robbed, can choose to bank with these services.