Bitcoin’s struggles – four important lessons in community governance


Recent articles – and a 13 percent price drop – have brought attention to Bitcoin’s internal struggles. Here’s four lessons for community managers.

two-guys-arguingYesterday I posted a feel-good story about how RethinkDB used Github to build their NoSQL database with the help of a passionate open source community. But a recent New York Times piece on the ecosystem struggles at Bitcoin is a corrective. Communities are potent business assets, but they splinter when confronted with leadership turmoil and ideological disputes.

In A Bitcoin Believer’s Crisis of Faith, Nathaniel Popper of the New York Times paints a portrait of a Bitcoin community in disarray. As developers leave the community or divide into factions, Bitcoin itself could be in jeopardy – or so the article implies.

Hopper’s piece references the recent departure of developer Mike Hearn, who left a job at Google’s Swiss headquarters two years ago to throw his lot in with Bitcoin (all told, he’s been a Bitcoin developer for five years – to mark his departure, he sold the rest of his Bitcoins).

Hearn was amongst a core group of developers who took on the maintenance of the software that governs the creation of new Bitcoins and manages the financial transactions network. Upon Hearns’ departure he posted a blunt blog post which made clear his departure was based on Bitcoin’s fractured community:

Why has Bitcoin failed? It has failed because the community has failed. What was meant to be a new, decentralized form of money that lacked “systemically important institutions” and “too big to fail” has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have broken down, and as a result, there’s no longer much reason to think Bitcoin can actually be better than the existing financial system.

His disappointment over the community’s turmoil is palpable:

Bitcoin has gone from being a transparent and open community to one that is dominated by rampant censorship and attacks on bitcoiners by other bitcoiners.

The network’s ability to handle a high transaction volume is no trivial thing. Resolving that problem was reportedly a cause of the rifts, which led to a proposed fork in the Bitcoin code base that ruptured the community further. The high ideological stakes made this tough: some Bitcoiners believe that the proposed solution would put control of Bitcoin back in the hands of the financial institutions they hope to undermine. The story gets ugly, with death threats and intentional malware attacks.

So why hasn’t this dispute caused Bitcoin’s price to fall through the floor? Hopper:

Mr. Hearn says he thinks that getting the opposing camps together will now be very difficult. He believes that the dangers of the current impasse have not been reflected in the price of Bitcoin because the full debate has been censored in many of the online forums where Bitcoin is discussed.

I don’t have an inside angle on Bitcoin, so I’m not in a position to call Bitcoin a “failure” as Hearns does. But I do see lessons from this struggle for enterprises looking to build their own communities, or tap into open source.

1. Be clear about the limitations of democracy and autonomy, Nothing backfires in enterprise communities as badly as promising a democracy, when in fact community members do not have a deciding vote. People can sniff out faux-democracy. In most cases, a clear line of authority in key decisions is not only preferable, but accepted. That was evidently the case with Bitcoin also, where up until 2014, a long-time developer, Gavin Andresen, acted as a sort of benevolent dictator with final say on key issues. After he moved on from that role, Bitcoin was thrust back into a murkier situation where ideals and factions clashed.

2. Institute codes of conduct and process rules from the beginning. Like Reddit, Bitcoin seems to struggle with the hardcore/ugly side of a “free” ethos. When no topics are off-limits – and suddenly some are prohibited – the free speech ethos collapses. As members fought back against what they perceived as censorship, some created their own forum. Hearns:

Eventually, some users found their way to a new uncensored forum. Reading it is a sad thing. Every day for months I have seen raging, angry posts railing against the censors, vowing that they will be defeated.

This new forum is probably a healthy response to a feeling of censorship, but it fractures the community further. Siloed conversations can never lead to consensus. One of RethinkDB’s co-founder posted a “Github issue etiquette” blog that outlined the proper workflow, including owning up to mistakes. It also includes some behavioral codes of conduct. A clear code of conduct means that those who believe that “anything goes” can be dealt with if they post content that is cruel, offensive, or divisive. (I also like these “future of work” values/guidelines from Goodworkcode, as well as OpenStack’s community code of conduct.

3. Beware heavy-handed censorship, but don’t give in to “anything goes.” Some enterprise communities are intolerant of dissenting views. This may come in the form of blogs or comments that are deleted without explanation. If too much of this type of heavy-handed moderation occurs, folks will create a separate forum just like Bitcoin members did. Being open about why rules are enforced – and using those enforcements rarely but consistently – is the key.

4. Treat your community managers like superheroes. I remain baffled by the lack of organization status, financial investment, and overall elevation of community managers. This is one of the hardest jobs to do well. If you claim your ecosystem is important, than the managers who know who to empower community members, and step in with sensitivity when conflicts arise are invaluable. Mark Finnern, former Chief Community Evangelist at SAP and the founder of Playful Enterprise, recently published useful community guidelines that fill in some gaps here: 10 (was 7) Criteria to Add the Right Mix of People Into Your Enterprise Tribe [E-Tribe]. Bitcoin isn’t necessarily in the position to recruit and cultivate community managers in a structured way – but your company is.

Final thoughts

I am NOT taking the view that these tips could solve a community predicament as complex and Bitcoin’s. Though Bitcoin did lose some value last week (13 percent), it has not cratered. A recent post by Rupert Hackett, Bitcoin is not dying, offers a contrasting view while acknowledging community issues that led to Hearn’s departure.

While the future of Bitcoin has implications for financial innovation, its success or failure won’t stop the inevitability of digital currency. And Bitcoin’s underlying technology, the blockchain, is now receiving the institutional investment to proceed on its own course (IBM, Intel, et al)

Fortunately for enterprises, community problems rarely have such high stakes. Enterprise communities have the opposite problem – generating the passion that Bitcoin’s community has in abundance. Open source brings potential, but the culture that drives it often differs from the culture inside company walls. The time to wrestle with that is now.

Updated point four slightly for clarity, 1/21/2016. I also changed the title slightly to “important”.

Image credit: two businessmen arguing © photoniko –

    Comments are closed.

    1. Waqar says:

      I’m not so easily convinced. This is neither fact, nor data driven. You don’t see any bar graphs, do you? This is the same kind of authoritarian hog wash that one finds everywhere. If we look at the work of Philip Zimbardo, we learn that people require supervision, though not necessarily overlords. This is the key difference between, for example, a leader and a boss. Unlike the nation though, in the case of bitcoin there is more of a “social contract,” so the reality is that it actually has more integrity than many stable systems that are merely stable due to overwhelming power and force. Just like anything, things go up and down, and this author is posing authoritarian blah blah blah, which is like hitting someone when they’re down. It would have made no sense to write something like this a few months ago. Think about that.

      1. Jon Reed says:

        “In the case of bitcoin there is more of a “social contract,” so the reality is that it actually has more integrity than many stable systems that are merely stable due to overwhelming power and force”

        It’s a fair point and as I said in the conclusion, I’m not offering advice on how Bitcoin should address its issues. Others active in Bitcoin still see a promising future in the current situation. In reference to bar charts, Hearns, the developer who left Bitcoin, did post some charts and data in his blog post.

        My post is about enterprises learning from Bitcoin but applying those lessons in a more structured community. That doesn’t mean a superior community than Bitcoin – just a different type of community. As you point out the best communities are not authoritarian – ideally they are as self-regulated as possible.

    2. Stuart Aldridge says:

      How has bit coin failed? Volatile may be. Bit coin has increased in value by 100% in the last year. As mobile phones by passed the “wired phone networks” in Africa, I think you will find block chain currencies are a game changer. Central banks and private banks could well be legacy institutions? The only thing that will stop this will be one world government control.

      1. Jon Reed says:

        I think maybe you missed something here – I wrote about community struggles and a short term drop in price, not a failure. I mentioned in the conclusion that others hold the view Bitcoin will move through these issues and linked to a contrasting view. I also noted, as you did, that the impact of blockchain seems inevitable. Whether Bitcoin is the key triumph of the blockchain, or just one success story, or an early pioneer that didn’t reach all of its potential – that remains to be seen as of this writing. I intentionally used the word “struggle” and not “failure” in the article title for this reason. The word “failure” used in the quotes in this article is from a disillusioned developer who sees failure not necessarily in Bitcoin but in certain ideals he felt the community once represented. That’s his viewpoint.

        1. greg says:

          Hi Jon,

          blockchain is simply a private wallet that holds the community-created or public medium of exchange – bitcoin. if you trust the entitiy, that offers the wallet, that it won’t misplace or steal the bitcoins “inside it”, the blockchain has fulfilled its obligation. how bitcoins are mined and traded pretty much remains very public and subject to public scrutiny as well they should be regardless whether one person leaves or stays within the ‘original’ framework.

          my 2 satoshis,


          1. Jon Reed says:

            Thanks Greg. This piece was primarily trying to pull lessons from bitcoin’s community challenges. Secondarily I was commenting on bitcoin’s future but that’s not something I can really see in a crystal ball. My feeling is that these community issues, which stemmed partially from a fight about how to handle bitcoin transactions at scale – do matter. Will bitcoin become the dominant decentralized crypto-currency? Time will tell. I don’t think it’s a fait accompli but despite recent partnerships, it’s still bitcoin’s race to lose. Blockchain on the other hand – or versions of it – are not tied to bitcoin and are clearly the key technology here with many potential use cases beyond currency (have a look at Derek’s recent piece on blockchain for more on that).

    3. says:

      I look forward to any negative information on bitcoin because it creates wonderful buy opportunities. With that said I would not say your article is particularly negative. You point out valid points.

      1. Jon Reed says:

        Thanks John – I’m not surprised to see passionate feedback to the piece as Bitcoin certainly evokes that – to its credit. I wouldn’t say I’m negative on Bitcoin, from what I have seen it is facing an important crossroads but in the history of such things, such adversity can be overcome. To be honest given what Bitcoin has done to advance the blockchain, if it folded tomorrow I would not view it as a failure. But then I have a pretty aggressive view about failure having seen in my own life how I didn’t start to succeed until I was prepared to expose myself to more failure.

        It would be foolish to render a verdict on Bitcoin at this time, nor did I claim to have a deep enough inside knowledge to offer a definitive one. Whether this is a buying opportunity, well I’m betting you would know more about that than I do 🙂

        – Jon