Bitcoin as a Communication Protocol: Security, Stability, and Immutability

In the world of software, you have to run to stay in the same place. But Bitcoin is different.

It is often said that Bitcoin is resistant to change. Development seems slow, and all the fundamental principles have remained unchanged since the network's inception. But how is this possible when anyone can easily introduce changes to the software code?

In the world of software, you have to run to stay in the same place. Software changes every day. We eagerly install new versions to benefit from new features and a refreshed look. In this world, immutability means the same as outdated. Immutable means unsupported, and unsupported technologies are associated with old, dusty hardware in the basement. Therefore, it is initially difficult to appreciate a system that does not participate in the race for updates.

Bitcoin is not ordinary software. It is a communication protocol, a set of rules and procedures that enable communication among network participants. Communication protocols are not applications and operate on a different philosophy. Hurry is not advisable because stability and immutability are key to the success of the Internet protocol. This unique conservatism is a source of trust in the protocol and the services built on it, as well as helping to maintain information security and confidentiality. Stability and immutability also facilitate protocol interoperability between different systems and devices. They also enable backward compatibility, allowing users to benefit from new features and technologies without losing the ability to communicate with older systems.

Language and Chess

The essence of open communication protocols is easier to understand through examples outside the internet. There are many phenomena around us that exhibit the characteristics of such protocols. The first example that comes to mind is language. It is also a set of rules and procedures that enable communication. Similar to Bitcoin, it is an open protocol because it has no owner, and its rules and procedures are accessible to everyone. Anyone can also modify it freely, for example, by creating new words, original phrases, or changing the meaning of existing words. These processes occur daily, and although they increase the risk of communication errors, there remains a broadly accepted corpus that ensures the functionality of this protocol in a specific geographic area or within certain types of social relations.

Games also exhibit the characteristics of open communication protocols. For example, one could say that chess is a protocol that defines the rules of communication between players using a 64-square chessboard and specific types of pieces. Chess is also a protocol that has no owner, and anyone can introduce changes to it. However, such changes affect the nature of the game, and after their introduction, we usually have a different game altogether. Despite the possibility of making changes, alterations to the general consensus regarding the rules of the chess protocol are rare. Classical chess, developed in Europe between the 13th and 15th centuries, has remained virtually unchanged since that time.

Although the consensus rules of the chess protocol have remained unchanged for six hundred years, innovations have emerged in the world of chess. Various types of gameplay have been created, such as correspondence chess or blitz chess. The game is played using different materials, such as wood, plastic, or metal, and in some matches, the pieces are represented by human players (live chess). There are also portable versions, travel editions, elegant editions, and decorative editions of chess. Sometimes chess becomes a work of art. Nowadays, it is also available in the form of software that allows playing against opponents from all over the world or computer programs. This software combines gameplay with applications for learning strategies, monitoring progress in learning, analyzing one's own game, reviewing historical matches, and accessing communities of chess enthusiasts.

As a communication protocol, classical chess has withstood the challenges of time because it fulfills its task better than other protocols, which is to enable an engaging, unpredictable, tactically and strategically complex gameplay based on deceptively simple rules. Individuals who choose to change the rules of the game for their own enjoyment or experimental purposes merely create "chess variants" (e.g., antichess, where capturing a piece is mandatory) or even different games (e.g., checkers). The rules of classical chess remain fundamentally unchanged, and the consensus in the communication protocol remains unaltered. The determination of which protocol is "better" is solely based on the choices made by players worldwide.

Internet Communication Standards

Of course, language and chess are only considered communication protocols in a broad sense. Today, when we talk about open communication protocols, we usually refer to the communication standards used in computer networks. For example, the TCP/IP internet protocol defines the basic principles of communication between different types of devices on the internet. It can be said to be the communication foundation of the modern world. On top of this foundation, additional layers are built—protocols that enable more specialized types of communication, such as the well-known HTTP protocol for handling the World Wide Web or the SMTP protocol for electronic mail communication. Many readers are familiar with or at least recognize protocols such as IMAP, POP, DNS, or FTP. Each of them provides a specific type of communication built upon the common TCP/IP protocol.

The initial versions of the TCP/IP protocol were developed back in the 1970s. Since then, it has been enhanced and adapted to dynamically evolving IT systems, but its fundamental elements, such as its layered structure, addressing, and basic data transport protocols, have remained unchanged and are still used today by all internet users.

Bitcoin as a Communication Protocol

So, in a sense, Bitcoin is not entirely immutable. It is constantly improved by talented programmers from around the world. However, like other communication protocols, it is resistant to change. The key is not to chase the fads that sweep through the market of so-called cryptocurrencies. The key is security, stability, and backward compatibility. In this regard, Bitcoin is uncompromising and unmatched in the market. No other crypto asset can compare in these aspects; they are not even close. Bitcoin plays in its own league.

The immutability of Bitcoin relates to its fundamental principles, known as consensus rules. For example, these rules include the principle that a transaction must contain a cryptographically verifiable signature confirming access to the spent coins to be considered valid. Another rule is that the data size stored in a block does not exceed a specified limit, or the rule that transactions related to coins previously spent in the same block or any earlier block from the same address are invalid. There is also the rule that a valid block creates a specific number of new bitcoins, which halves every 210,000 blocks (approximately every 4 years). These examples are equivalent to the rules regarding the number of chessboard squares, types of chess pieces (pawns and figures), and the rules governing their movement on the chessboard. Changing these rules would make Bitcoin cease to be Bitcoin.

Just like the immutability of the rules in classical chess, the immutability of Bitcoin consensus rules is guaranteed through decentralisation. This means that the users themselves choose the rules of the communication protocol; there is no central institution that can impose changes to these rules. Bitcoin has succeeded because it is more commonly chosen than its modifications (social consensus). The ability to choose Bitcoin as the preferred protocol cannot be practically limited because the software is widely and easily accessible.

The choice of Bitcoin as a communication protocol is made by anyone who decides to make or accept Bitcoin payments. If we want to have complete assurance that we are using Bitcoin and not some imitation, we can run our own node on the network by installing Bitcoin Core software. Running our own node allows us to interact with the network directly, without needing to trust anyone else, and in a completely censorship-resistant manner. We can independently verify newly mined blocks and every transaction recorded on the blockchain, thereby enforcing consensus rules among other users. We can independently verify the balances in our wallets. We have direct access to the entire history of the network, while also strengthening it by joining tens of thousands of other nodes, making it even more decentralised. Since our node rejects any blocks or transactions that violate consensus rules, we help ensure the immutability of these rules.

If someone decides to violate the consensus rules, their actions will be rejected by all nodes. Because there are so many nodes and they are controlled by unrelated individuals, it is practically impossible to break these rules. Introducing a change requires convincing users to install a new version of the software. Proposed software changes are recorded as Bitcoin Improvement Proposals (BIPs), numbered, and then undergo a rigorous process of verification, consultation, and testing within a broad community that anyone can join. Most of these changes are not ultimately implemented, with the focus primarily on the security and stability of the network. Even if a particular modification is introduced in a new version of the software, it does not alter the consensus rules and maintains backward compatibility. Less trusting users do not have to update their nodes if they choose not to. Automatic update functionality does not exist, which is one of the elements of the security system.

Global Monetary System

The described conservatism of Bitcoin combined with its unparalleled resistance to any attacks is precisely what one would expect from a system that could serve as the foundation of a global monetary system. No other system is decentralised to even a comparable degree, and therefore, none are as stable and secure. Particularly, systems based on proof-of-stake protocols and controlled by specific individuals or institutions lose in this competition from the very beginning. The need to trust the entities controlling the protocol, who can make changes to it, is not an advantage but rather a disqualifying flaw of these systems. For instance, the awareness that the Ethereum Foundation can alter the monetary policy of its token at any moment or even roll back the blockchain(!), thereby violating consensus rules, practically eliminates the possibility of seriously considering that asset. It may be suitable for storing local library cards or bored monkey drawings, but not for settlements between nations.

A global monetary system must be based on a protocol that guarantees stability and immutability of its functioning rules. It should not require trust in a foundation, corporation, brilliant programmer, or anyone else, allowing it to be utilised between competitors and even potential adversaries. Users of this system should have the assurance that they will be treated on equal terms. They should also be certain that transactions will not be censored, access to the system will not be cut off, and the currency itself will not be devalued by one user at the expense of others. Thanks to its conservatism, Bitcoin is the only system that provides such certainty.

(The original Polish version was published in iMagazine issue 6/2023. The English version has been prepared with the assistance of ChatGPT-4 by openai.com)