Two Theories of Bitcoin

Bitcoin Immutability

The word “immutability” often comes up in descriptions of Bitcoin. In the past, the word was used to describe the fact that transactions in the block chain are effectively unchangeable. They form a ledger, which becomes increasingly definitive over time as it is secured by proof-of-work. Transactions can be added to blocks in the block chain. As the chain is extended and those transactions are buried by proof-of-work, tampering with the historical record becomes prohibitively expensive. They become an effectively immutable record for all practical purposes. Let’s call this property “ledger immutability”.

Protocol Immutability and Bitcoin’s Monetary Properties

Some of Bitcoin’s protocol rules protect its sound money properties. For example, the coin issuance schedule is a protocol rule that limits how many coins miners can create in the coinbase transaction. Enforcement of this rule as new blocks are added to the chain is what caps the Bitcoin supply at the eventual 21 Million coin limit.

Extreme Consensus

So what are we to make of these assertions? Before trying to determine their validity, let’s examine the underlying premises. The reasoning reveals an underlying theory about how Bitcoin’s consensus rules are determined.

  • The ease or difficulty of changing consensus rules is dependent on a property of Bitcoin called protocol immutability.
  • The ease or difficulty of making protocol changes is less dependent on the particulars of the specific change, and more dependent on Bitcoin’s protocol immutability.
  • The degree of protocol immutability can be influenced by the Bitcoin community. Successful resistance to one change will make it more likely that the network will reject other changes in the future.

Market Consensus

In contrast to Extreme Consensus, the theory of Market Consensus offers a different understanding of how the properties of Bitcoin’s protocol are maintained or changed [3]. A basic outline of the theory of Market Consensus is as follows:

  • Bitcoin’s protocol rules are ultimately enforced by the decisions of those willing to commit economic value to them.
  • Different consensus rules are treated differently by the market depending on how they affect Bitcoin’s properties.
  • The market will favor rules that are perceived to bring value to the system. These will be rules that strengthen Bitcoin’s monetary properties.

Two Lenses

These two theories of Consensus can be viewed as two lenses through which people perceive Bitcoin and the community surrounding it. Let’s see how these two lenses shape perceptions differently around a few specific issues:

Issue 1 — Censorship and contentious debate

Since believers in Extreme Consensus view social consensus as the vital protective force that holds Bitcoin together, they view those who push for contentious changes as hostile attackers. Because of this perception, strong advocacy for contentious change is met with combative push-back, and denounced as being dangerous. This is a protective reaction against the contentious argument which is seen as hostile. In the extreme, this protective impulse can lead to censorship or social ostracism.

Issue 2 — Hard Forks and Soft Forks

A block chain splits into two coins when a minority enforces stricter rules than the economic and hash-rate majority of the network. This can either be a loosening of rules by the majority where a minority does not follow (hard fork), or a minority tightening rules and splitting away from the majority (soft fork). In the Extreme Consensus world view, these splits represent a failure of social consensus to preserve the protocol’s immutability. This would mean that the forces keeping the network in consensus are weak, and Bitcoin could continue fracturing into myriad incompatible networks, thereby destroying the network.


This article is an attempt to describe two schools of thought on how Bitcoin consensus is formed.The two theories have been compiled by analyzing the logical implications of some common arguments.

Update 2017–04–03

Please see Elliott Olds’ article for an excellent FAQ on this topic. He uses the terms “Market Governance” and “Near-Unanimous Social Consensus Governance” in place of “Market Consensus” and “Extreme Consensus”.

Update 2017–04–04

I have published an addendum to this article here:




Thank you to Roger Murdock and Zangelbert Bingledack who provided review and editorial feedback for this article.



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