Economic-Majority Signaling for OP_CTV Activation

Economic-Majority Signaling for OP_CTV Activation

Original Postby ZmnSCPxj

Posted on: March 3, 2024 11:36 UTC

The ongoing debate in the Bitcoin community about implementing changes to the consensus protocol, particularly through opcodes like OP_CTV, has sparked a significant discussion on how such alterations could impact the network's security and stability.

Some advocates propose maintaining the Bitcoin consensus unchanged indefinitely to prevent potential exploitation risks. This perspective underscores the importance of user participation in activating or blocking consensus changes, as highlighted in the write-up "Money: The Unit of Caring" on LessWrong, which posits that the willingness to risk resources is a genuine indicator of support for or against these changes.

The process of achieving consensus change in Bitcoin involves convincing miners to adopt new rules, raising questions about the power dynamics between miners and ordinary users. Users who own unspent transaction outputs (UTXOs) might prefer specific rules, leading to a scenario where different chains emerge following a split, each adhering to distinct rule sets. Miners are then faced with a choice, as they can only mine one version of the chain at a time. Economic incentives play a crucial role in this decision-making process because miners aim to maximize earnings, which are influenced by the market value of the coins they mine. By selling coins on the less preferred chain, users can affect its value, thereby indirectly influencing miners' choices based on economic considerations. This dynamic illustrates the potential for users to exert control over the direction of Bitcoin's development through market mechanisms.

An innovative approach to expressing preferences for or against specific consensus changes involves betting mechanisms. For instance, participants can make bets regarding the activation of OP_CTV, using specially crafted transactions that become valid or invalid depending on the outcome of the proposed change. This method relies on creating transactions that exploit the rules of opcodes, such as OP_CTV or OP_NOP, to establish conditions that reflect whether the change has been activated. Through these conditional transactions, users can place economic bets on the future state of the Bitcoin protocol, providing a market-based signal of support or opposition to miners and other stakeholders.

This betting strategy is not universally applicable to all potential opcode changes, especially those involving OP_SUCCESS in Tapscript, due to technical limitations. However, it offers a viable mechanism for opcodes replacing OP_NOP in P2WSH, illustrating a broader principle that economic signals, generated through market activities and betting markets, can influence consensus decisions in decentralized networks like Bitcoin. The underlying assumption is that economic incentives, driven by the collective actions of users and miners, can guide the evolution of the Bitcoin protocol in a way that aligns with the preferences of its economic majority.