Bitcoin is a technical and economical phenomenon. However, there are legal dimensions to Bitcoin that are hidden to most but vital to understand as they hint at how things might play out in the future—especially concerning BSV in comparison to BTC.
Dr. Craig Wright has published an article called “Forking and Passing Off” on his website. While there are different legal topics presented in the article, I will only focus on the contractual side of Bitcoin today.
The topic of Bitcoin as bound under contract is also discussed by Dr. Craig Wright, Joel Dalais and myself here:
Time to realize Bitcoin is a contract
In the article, Dr. Craig Wright says:
Bitcoin has an issuer. In January 2009 (…) I issued 21 million bitcoin, where each individual bitcoin is an indivisible set of 100 million tokens. To distribute the tokens (…), I set up a contractual arrangement where nodes (which many people call miners today) act within a set of common rules that I defined.
Pay attention to the passage, “I set up a contractual arrangement.” Bitcoin is bound under contract. But what does that mean?
Bitcoin is not just code running on its own since inception
A contract is an agreement between parties that creates mutual obligations.
Concerning Bitcoin as bound under contract, it means that Satoshi Nakamoto made an offer (unilateral, meaning to anyone who is willing to accept and fulfill the terms) and nodes (miners) accept this offer by enforcing the Bitcoin rules (validating transactions, creating blocks).
What are the obligations though? From Satoshi Nakamoto’s side, he declares to pay the nodes for performing work in the Bitcoin network by the automatically distributed Bitcoin block rewards. From the node’s side, they simply have to accept the offer and perform their work—if successfully done, they get remunerated in Bitcoins.
This is—in short—the Bitcoin contract.
“As long as the rules of Bitcoin, the basic protocol does not change, I am bound under a unilateral contract to the nodes, acting as agents within the system.”
Differentiating issuance and distribution
When Dr. Craig Wright initially brought Bitcoin into existence, all Bitcoin tokens (satoshis) were issued. That means there are no “new coins to be found” by miners/nodes, no Bitcoins are “created” when block rewards are paid out. All Bitcoins are already issued, period.
What nodes do is distribute the already issued Bitcoins, acting as agents of Dr. Craig Wright.
The transfer of ownership of Bitcoins from the creator of Bitcoin to the nodes happens in the distribution. Dr. Craig Wright is paying the nodes for their work in the Bitcoin network with transferring ownership of the Bitcoins to the nodes:
Node operators are paid at a predetermined rate, based on a combination of a decreasing subsidy and the collection of fees from users of the network. (…) The tokens are paid as consideration for the effort of validating transactions to the nodes.
Let us look at BTC then, especially since SegWit
For BSV, which is the original Bitcoin according to the Bitcoin whitepaper, all of this is not a problem at all. We are sure who the issuer of Bitcoin is, and we know the contract is still ongoing as nodes enforce the rules set by Satoshi Nakamoto.
However, what about BTC concerning the contractual arrangement?
Since SegWit was implemented, BTC nodes stopped enforcing the Bitcoin rules according to the whitepaper as well as the Bitcoin website from 2008 and the end-user license agreement (EULA) in the original Bitcoin software (which are, as a mixture, the content/basis of the Bitcoin contract).
From a sole contractual perspective, this means that BTC miners are not in a contract with Satoshi Nakamoto anymore. This leads to a lot of questions:
- Who did issue the SegWit-coins?
- Who is distributing them?
- Who is offering “BTC/SegWit” to the BTC nodes?
- What is the content of the “BTC/SegWit contract”, as it cannot be the original Bitcoin whitepaper?
- What about BTC nodes that mined BTC before SegWit (in accordance with the original Bitcoin contract) and then switched to mining SegWit (not in accordance)? Have they violated non-contractual or secondary contractual obligations (bad faith / deceptive practices / non proper care)?
Keep in mind: when Dr. Craig Wright issued all Bitcoins, Bitcoin had little or no valuation/market cap, you could say there was no value to Bitcoins back then. So he basically issued something that was not worth anything (and he even incurred hard costs to issue and set up Bitcoin).
This is different in BTC/SegWit though. When SegWit was implemented, which means an issuance and distribution of a new digital asset, BTC/SegWit-Coin already traded at a very high valuation.
If you issue a billion dollar worth of coins, you have an issue. And this issue is: taxes.
Bitcoin SV is stable in more ways than we thought
The whole contractual perspective on Bitcoin helps us understand that Bitcoin SV is not only
- stable code-wise (locked down protocol on a software level),
- economically stable (stable foundation to build onto),
- but also contractually stable.
Bitcoin SV nodes are enforcing the original Bitcoin rules and are getting remunerated accordingly. They are in an ongoing contractual agreement with Dr. Craig Wright.
Users and even nodes do not have “a say” in this contract, as the unilateral offer in itself is not negotiable.
Dr. Craig Wright recently wrote an article called “The Myth of Bitcoin as a Voting System”:
I wasn’t ever voted into the system; I created Bitcoin, and I didn’t give over the control of the protocol. (…) There are no democratic changes that come from miners, or, as they are really called, nodes. The only changes in Bitcoin are cosmetic or selectively created, within the protocol. I set the protocol in stone so that there wouldn’t be any voting on anything other than on honesty. It is how Bitcoin really works.
There is no voting in Bitcoin as many BTC proponents think. You cannot just democratically vote yourself into a contract between private parties. Democracy is a political structure, while contracts are legal structures.
Users of Bitcoin are not part of the contractual agreement between Satoshi Nakamoto and the nodes, and even the nodes cannot “vote” afterwards on the contractually set rules.
Therefore, Bitcoin SV is not only stable on a software level and economically, but is also stable as bound under contract.
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