It’s been quite a year, ending with an intense quarter for Bitcoiners. These last few months have been full of some of the most positive news I could imagine; powerhouse investors and large corporations are engaging positively with Bitcoin. They’ve also shown us some very challenging times — Bitcoiners are seeing real hardship because of the Mt. Gox meltdown.
As Chairman of the Bitcoin Foundation, I owe you an apology. Bitcoin has grown more quickly than we have, and we weren’t prepared to keep up.
What can we do to improve? I have some ideas, and I would like yours as well. First, we need to continue to staff up our communications team, and change our communications culture. Second, we need a more precisely defined and stronger set of guiding principles. Third, we need to make some small modifications to our Governance structure.
I hope to see you at Bitcoin2014 in Amsterdam May 15-17. We will have an open conversation with all our members on May 17, 4pm. (edit: Annual Member’s Mtg will take place Sat, May 17 after closing session, approximately 5:30pm)
The primary operational change we need to make is better, more transparent communication. The entire team at the Foundation is very small; until recently just six full-time employees. We are incredibly lucky to have a huge bevy of volunteers who run our committees and do much of the work, along with the international members pushing forward in individual countries and the amazing advocacy all of our members do naturally.
You, our members, deserve better communication. We have let two things get in the way; the first is that we’ve had complex, sometimes delicate communications concerns around some of our advocacy work in the United States. We have wanted to respect the process people like Patrick Murck and Jim Harper are engaged in, and give them space out of the public eye to work with regulators and law enforcement.
The second is that we’ve been lazy and undisciplined about getting updates written in the face of so much possible content. Jon Matonis is tackling this, getting better communications rolling, and staffing up our communications team as a way to add more resources.
I’ve put forward a challenge to the team: “Say a lot more.” There’s much more we can say than we have about what we’re up to, amazing things our members are doing, and what’s happening in the regulatory world. I would like the Foundation to really stretch on this, both because you deserve to see how your bitcoins are being spent, and because we will all benefit from the sort of vigorous debates that I know will ensue.
They’ve risen to the challenge, and have as a first response opened up read access to our member forums to the public. They are also about to launch a new website on July 1, it is designed to make it easier to get information out about what’s happening around Bitcoin and for our members.
Promote, Protect, Standardize leave a lot of room for discussion, and as a mission statement it is noticeably vague as to some core questions that Bitcoiners care about: what about decentralization? What about privacy?
It’s time to take a stronger stance about what we believe in.
Freedom to transact economically is a human right. Bitcoin provides an opportunity to bring this freedom to people around the world.
The Foundation is committed to the core values that enable this freedom: Decentralization, Fungibility, Standardization and User-controlled privacy.
We will be soliciting feedback on these at Bitcoin 2014 in Amsterdam, both the values and the reasoning behind them – let’s see how much consensus we can get as a community around these.
Centralization adds so many risks to Bitcoin that we think of it as almost self-evident this needs to be protected. Often debates arise not as to whether the technology should become more centralized, but instead as to whether or not an innovation or concept or business model might increase or decrease centralization.
We need to keep at this one, and keep it as our first priority; we will continue to gain facility with these new decentralized computational tools over time, and we should keep vigorously debating the impact on centralization as we do.
Money – cash money – paper money – money from governments – is fungible. You can accept cash as change from a bank or a local butcher shop without worrying about where the cash has been, or if someone else will accept it. In that way, paper currency is largely ‘memory free’. Not all of our money is memory free – for instance, credit card payments remember where they came from, and can be summoned back via a chargeback.
Bitcoins have a lot of memory. Depending on how they’ve been used, researchers are able to trace owners back many years by inspecting the blockchain. And, of course, there are ways to add metadata to bitcoins to increase the amount of information and memory we have about them.
Colored coins, black-listing, red-listing and other proposals all want to add memory to our coins – often for arguably good or innovative reasons. Most of the proposals can be implemented without any changes to the Bitcoin network as a whole, they could be added as a layer on top of Bitcoin. Some require protocol changes.
When we say fungibility is critical for freedom of transaction, we are not saying that any of the above is good or bad, per se. We are instead committing ourselves to the idea that the Bitcoin protocol itself shouldn’t force such systems on users. Bitcoin is best and most valuable if a coin is a coin is a coin. For those who wish to use such systems, they should be allowed to opt in.
One Bitcoin weakness is that the core client is the protocol specification. This has two major downsides; it makes it difficult for theoretical cryptographers and computer scientists to add their knowledge to our protocol, and it makes it very hard to implement alternate clients.
Alternate clients, if working, would add significant decentralization to Bitcoin – if a certain client had a bug or was compromised in some way, the negative impact would be greatly mitigated.
Cryptographers can’t (or don’t often wish to) inspect C++ code to assess how the protocol works, and so they can’t be as helpful as they’d like to be. Problems like transaction malleability would be more easily assessable and solutions could be debated and worked on more easily with a specification that allowed collaboration between theorists and engineers.
As many core developers have pointed out over the years, actually specifying the protocol is extremely hard work, especially while our community continues to innovate.
This is a place that I feel the Foundation could help directly, by providing funds and motivation for what will undoubtedly be a long slog. The benefit to all of us at the end would be immense, though – we would have significant risk reduction with a functioning implementable specification.
Privacy is extremely hard to come by on the Internet. Bitcoin itself is not very private right now.
Publication of the owner of a single Bitcoin address can yield an incredible amount of personal financial information, information that cannot be put ‘back in the box’ – it will be available forever, encoded into the blockchain. This is the sort of information that law enforcement agencies would typically need to subpoena a bank for; instead right now we offer it to the entire Internet.
We haven’t yet seen significant involvement from consumer privacy agencies at the Foundation, but I believe they will be horrified when they understand just how much private financial data is being broadcast and permanently recorded.
This information directly impacts citizens living under repressive governments. It could cause physical harm to a woman whose finances are controlled by her pimp or her kidnapper. The knowledge of transactions can be combined with violence to limit any human’s fundamental right to transact economically.
It seems therefore critical that we do everything we can to support efforts that enhance this privacy from global inspection. Technological efforts like trustless sharing and ZeroCoin/ZeroCash have potential to improve the privacy guarantees available to those using Bitcoin.
Not everyone will want this kind of privacy to be available. In some jurisdictions, concerns over money laundering are brought up as the reason why such privacy should not be available.
I believe that these concerns are real and valid, and pragmatically, that a balance needs to be struck. We don’t yet know exactly how to balance the risks to different parties; on the one hand direct violence, control of individuals and financial risks borne by citizens with hyper-inflationary money supply are real harms being borne by human beings around the world right now. On the other hand there are real and more generalized harms to society that money laundering enables.
Right now, I believe the most reasonable regulatory approach is to encourage anti-money-laundering and know-your-customer rules that can be implemented at the ‘endpoints’, Bitcoin exchanges or money transmittal businesses. These businesses already have clear regulation and operations rules and understand how to identify money laundering, and what to do about it when they see it.
At the same time, we need to do better protecting those who have no other safe way to transact economically, and the Foundation will be providing support for a variety of proposals as a way to let the broader community engage with them and assess what would be useful.
Our board election schedule is in major flux right now; we have two seats that need filling. Our original bylaws had all board members come up for election on the same date, making for the possibility of massive turnover every few years. This issue shouldn’t be a tough one to get right, we just got it wrong when we started by putting all the seats up for election at the same time. It’s the right time to fix it.
I’d like to take the opportunity afforded by these special elections to get the Foundation on a staggered two-year board term (“Even or Odd years”). I have proposed the following to the board, and they have approved it.
We discussed at some length either two year terms or one year terms, and concluded based on feedback from our two newest board members that it’s a challenge to get up to speed on the breadth of the Foundation’s efforts – both Meyer and Elizabeth felt one year wouldn’t be enough time to be effective. If we go too long, however, we run the risk of having a less accountable board, or a board that’s completely out of sync with our industry.
Finally, I’ve asked Jon Matonis to update you on the details of operations and finances of the Foundation. Expect that soon.