Balance of Power Fallacy

Power in Bitcoin rests with miners and merchants. Yet these two powers are not "balanced" between each other, as if locked in some sort of checks-and-balances system. Miner power is orthogonal to merchant power. Miners control transaction selection and merchants control validity, and these cannot control each other.

The balance of powers in Bitcoin is between individuals and the state. Individuals can be miners and can be merchants. With broad distribution of these activities it becomes difficult for state actors to disrupt or subvert the money. Even states create systems that attempt to isolate their moneys from political control. Bitcoin is no different in that sense.

The idea that miners and merchants are in an adversarial position is a failure to understand the Bitcoin security model. These two powers cannot control each other, and the system is not designed for them to do so. Merchants purchase a service from miners and as such the two are engaged in trade. Merchants purchase mining services that meet their rules for a satisfactory fee. They are free to split and miners are free to not mine at all, or to not select particular transactions for whatever reason suits them. Trade is neither adversarial nor asymmetrical, it is voluntary and mutually-beneficial.

This failure in understanding leads people to believe that mining can be centrally pooled as long as merchants are not centralized in validation, as the economy can control the behavior of mining, rendering the system secure. This belief is incorrect but unfortunately people are drawing this invalid conclusion from recent events. A closely-related fallacy is the belief that a proof-of-work fork by merchants can control miner behavior.