Bitcoin has a governance problem, no matter who created it

Fri May 6, 2016 2:04pm EDT
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By Jemima Kelly

LONDON (Reuters) - As one would-be father of bitcoin falls by the wayside, squabbling among the web-based currency's lead developers is exposing a fundamental flaw: it must evolve to meet growing demand, but may lack a governance structure to achieve this.

The latest bickering erupted after Australian entrepreneur Craig Wright promised to prove he was the mysterious creator of bitcoin - which allows users to move money across the world quickly and anonymously - but then said on Thursday he could not provide further evidence to back this up.

Wright stopped short of reneging on his claim to be Satoshi Nakamoto, assumed to be a pseudonym for the person or people who launched the digital cryptocurrency in 2009. However, he apologized for damaging the reputations of bitcoin experts who had believed him.

Many members of the bitcoin community reckon this is all a distraction and agree with Wright when he said that the identity of Nakamoto "doesn't, and shouldn't, matter".

"Satoshi's biggest achievement was to create a system that doesn't require his participation to run," said Peter Todd, one of bitcoin's core software developers. "That's what makes all this stuff kind of funny. It's like searching for the creator of a system that's designed not to require a creator."

While gray-suited central bankers print conventional currencies and commercial banks control transactions in them, no one person or entity is in charge of bitcoin. Instead it runs on a decentralized system of shared trust without any third-party verification of transactions - one reason why many people are attracted to it.

Critics, however, say it needs a "benevolent dictator" or at least some "adults" to manage the expansion that it needs to cope with the increasing number of transactions. Someone, or some group, must decide how to meet users' requirements, they say.

Trades are handled by thousands of "mining" computers around the world which validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes.   Continued...

A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture shot May 27, 2015. REUTERS/Benoit Tessier/Illustration/File Photo