Thread by @KyleSamani

0/ The thread in which I argue that Bitcoin is *not* powered by economic incentives, but rather a combination of altruism and ideology

Seriously

1/ There are somewhere on the order of 10,000 full nodes running Bitcoin around the world

bitnodes.earn.com

2/ The *vast* majority of these nodes are non-mining nodes

These non-mining nodes generate $0 of revenue for running non-mining full nodes

3/ There are about 15 mining pools control that control ~98% of Bitcoin's hash power

blockchain.com/pools?timespan…

4/ So, why do all of these people run full nodes, even though they generate no income from doing so?

To keep the miners in check

5/ This is clear by watching the power dynamics of UASF, segwit, and segwit2x over the course of 2017

6/ Another historical quirk (sorry, can't find link): in 2014-2015 bear market, some miners stopped validating blocks to to maximize revenue

Other miners built on these invalid blocks. This went on for a few blocks, before full-nodes caught this, and rejected the blocks.

7/ Or as @pierre_rochard likes to say: Bitcoin has two forms of consensus: consensus on the ordering of transactions, and consensus on transaction validity

The former is driven by miners, the latter by full-nodes

https://twitter.com/pierre_rochard/status/1065579030404112384

8/ So, we have pretty substantial empirical evidence that Bitcoin is not driven by economics

So, what drives Bitcoin?

9/ I haven't done a scientific poll of Bitcoiners, but I suspect if you ask most of them why they run a node, you'll get approximately the following answers:

9a/ I want verify transaction history for myself, and I don't trust anyone else to do so, and it's cheap enough that I can afford to eat the cost of running the node

9b/ Running a node allows me to express my preferences for UASF-type issues, promote segwit adoption, etc.

9c/ Because I believe in Bitcoin, fixed-supply monetary policy, and I want to run a full node

9d/ Because I run a business that sends and receives Bitcoin payments

10/ None of those reasons both directly and economically justify the cost of running a full node. The 4th reason provides indirect justification for running a node

11/ So, what can we take away from this analysis?

12/ So long as it's cheap and easy enough to run a node, and the schelling point of the ideology is powerful enough, enough people will run nodes to enforce the rules of the system

13/ Even if it becomes too expensive for most users to run a full node, businesses can justify the cost. If the cryptocurrency is ever going to achieve meaningful scale, enough businesses will be built on it that they will be able to enforce the rules of the system

{fin}