12

The Economic Majority theory says that the power to control the Bitcoin protocol is held by those who [own] bitcoins.

But the article then goes on to read:

The ability for a protocol change to be successfully implemented ultimately rests with those who accept bitcoins in exchange for value.

So that refers to investors and those who accept bitcoins for income or revenue but then aren't immediately spending or cashing out the coins they received.

But that power doesn't lie with those who already hold the coins but instead it lies with those who are willing to accept the newly issued coins under the revised protocol or coins with taint from coins issued under a revised protocol.

So, is the Economic Majority those that already hold bitcoins or is it instead just those who will hold the bitcoins generated following a change to the protocol? If so, how would that be best worded?

Stephen Gornick
  • 27,040
  • 12
  • 67
  • 141

2 Answers2

8

Each entity's weight in the economic majority is closely related to its ability to devalue the coins in the protocol version they are against.

People (and their proxies) who are willing to offer goods or services (including traditional currencies) for Bitcoin can refuse to accept coins of the "wrong" protocol, while people who hold bitcoins can sell coins of the wrong protocol.

A detailed analysis might reveal the impact each of these groups has, though I suspect the former group has an advantage.

(Personal note: It's been said that I coined the term "economic majority" in this context. When I originally used it I meant the former group.)

Meni Rosenfeld
  • 19,700
  • 37
  • 70
  • How is a transaction that spends on the "wrong" protocol not also a valid transaction that confirms on the "right" blockchain? – Stephen Gornick May 09 '14 at 16:51
  • Oh wait, that's easy. Simply include as an input a UTXO that doesn't and won't exist in the "right" blockchain ... e.g., one whose coinbase is from the "wrong" blockchain. – Stephen Gornick May 09 '14 at 17:08
4

The economic majority includes both.

Components of the economic majority include those who hold bitcoins (who might be referred to as "old money") as well as those wishing to acquire bitcoins (who might be referred to as "new money").

Many who are "old money" will have lent out bitcoins.

The loan agreements will likely have the stipulation that if the rate of currency issuance varies, the repayments would need to be adjusted somehow -- affecting the principal and/or interest to be repaid. If there were to be a fork in the protocol where repayment was attempted with devalued coins, the lender could insist on repayment of coins that follow the protocol that was in force at the time when the loan was agreed to. (Essentially, coins that have no significant level of "taint" that exists after the fork). If the lender won't accept the devalued coins then the coins generated under the changed protocol are of no value to the borrowers.

So those who lend out their coins are essentially "buyers" of coins at future points in time (when the repayments occur) and thus are represented in the economic majority just as much as those considered "new money" who wlll buy from the next block of coins.

Stephen Gornick
  • 27,040
  • 12
  • 67
  • 141