Bitcoin miners occupy an outsized place in how people imagine the network functions. Brian Armstrong, who runs Coinbase, has promoted the idea that miners vote on protocol changes. Paul Sztorc, an eco
Bitcoin miners occupy an outsized place in how people imagine the network functions. Brian Armstrong, who runs Coinbase, has promoted the idea that miners vote on protocol changes. Paul Sztorc, an economist at Bloq, sees it from another angle. Miners don't set policy. They respond to what users want, filtered through market prices.
The distinction matters because it inverts how many people understand Bitcoin's power structure. Sztorc argues that users hold the real leverage. If miners misbehave, users can switch to a different proof-of-work system. "Changing the proof-of-work function is a trivial detail for programmers, a temporary inconvenience for users, and permanently devastating for miners," Sztorc said in a recent presentation. "They're not in a position to make threats, which is the source of all power."
This connects to what Bitcoin was built to solve from the start. When Satoshi Nakamoto released the network in 2009, he identified a core problem: traditional currency required too much trust. "The root problem with conventional currency is all the trust that's required to make it work," Nakamoto wrote in 2009.
Bitcoin served a purpose for people locked out of mainstream finance. PayPal and credit cards wouldn't accept them. The darknet markets represent the clearest example of Bitcoin finding an audience with a genuine need. Speculation arrived next. Once people saw profit potential, they bought in. But speculation does something useful in Sztorc's model. It establishes a price for bitcoin. That price determines how much miners earn per block, in both rewards and transaction fees.
Ethereum Classic demonstrated this dynamic after Poloniex began trading it. Miners switched to mining that original Ethereum chain because speculators valued it as an immutable alternative to the hard-forked version. Where the market saw value, miners followed.
According to Sztorc, the hierarchy of power in Bitcoin has several layers. Users have needs. Developers write code to address those needs. Investors then assess whether developers have succeeded or will succeed. Their assessments determine how much mining activity the network sees. "In my view, miners are lowest in the hierarchy of influence," Sztorc said during his presentation.
He frames mining as a derivative of the value the network generates. "Mining is caused, it is not a cause." Miners respond to changes in demand for bearer cash, to modifications developers make to the code, to waves of speculation moving through markets. They don't drive these changes. They react to them.
The concentration of mining power in China becomes less concerning when viewed this way. Sztorc challenges the assumption that geographic concentration creates political danger. "It conflates geographic concentration with the idea that something has a center that is privileged," he said. "So, you could go to Mastercard headquarters and prevent Wikileaks from getting money. PayPal, e-gold, Liberty Dollar, Liberty Reserve — these are examples of a centralization that is completely different from what we see in Bitcoin."
Since users can switch proof-of-work algorithms if miners abuse their position, the location of mining hardware matters far less than people assume. If the Chinese government seized all the mining equipment in the country, it would make financial sense for them to keep mining and collect the revenue. Otherwise, users would change the algorithm, the equipment would become useless, and bitcoin would continue with a new consensus mechanism. The miners lose everything. The network persists.
