Jimmy Song, during a debate with an IBM engineer, reiterated his firm position: a blockchain must be decentralized or it should not exist.
According to Song, there is no middle ground between centralization and decentralization: it is either one or the other.
Author and partner at Blockchain Capital, Song reiterated this stance several times during a debate with IBM engineer and Hyperledger Fabric co-lead Chris Ferris at SXSW on Thursday. Speaking at the Hilton Austin, Song put it bluntly: “Either you control your stuff or you don’t. It’s zero or one.”
The debate pitched permissioned blockchains — private networks built for enterprise — against permissionless blockchains, the open-source technology that underpins Bitcoin and similar networks. Billed in the festival schedule as a “deathmatch,” Song made it clear he intended to give the audience a decisive argument.
“Why do you need permission if it’s supposed to be decentralized?” he asked. “There has to be an entity giving you permission, and that is by definition centralized.”
While Song presented decentralization as a binary choice, Ferris argued that blockchains can exist on a spectrum. Permissioned blockchains may be less decentralized, he conceded, but the added trust mechanisms can reduce perceived risk.
“Permissionless blockchains don’t necessarily solve the trust problem,” Ferris added.
To illustrate how far he would push his position, Song cited Ethereum’s fork following the infamous DAO hack, when developers and users agreed to roll back transactions to recover stolen funds.
“I think Ethereum is a permissioned blockchain,” Song said, explaining his view:
When Vitalik says, “These particular transactions aren’t particularly beneficial to the ecosystem so we’re going to roll them back,” that, to me, is a permissioned blockchain.
On stage, Song argued that using blockchain for anything other than Bitcoin is wasteful. “Blockchain is really useful for Bitcoin,” he said during the debate. “Everything else has a central point of failure.”
Before the debate, Ferris said he hoped to show that different blockchain types serve different use cases, and those use cases should determine how much decentralization is required.
“Part of the conversation will surely be that Bitcoin doesn’t solve the same problems we’re trying to solve in an enterprise context,” Ferris said.
He explained that IBM primarily builds products to help large enterprise partners share information rather than to transfer money. For example, Big Blue recently announced a platform to record legal status information for businesses across France. Seeking common ground, Ferris argued there is room for both approaches.
“I think there are a ton of use cases where permissioned blockchains make a lot of sense,” Ferris said. “I also think there are a ton of use cases where a permissioned blockchain makes no sense.”
Song refused to concede any middle ground. He argued that any blockchain other than Bitcoin could just as well run on a faster, cheaper centralized database.
“A permissioned blockchain is an oxymoron because it’s a centralized database masquerading as something decentralized,” Song said.
The QuadrigaCX Exchange
The collapse of the QuadrigaCX exchange highlighted the contrast between the two positions better than any other part of the debate.
The Canadian exchange’s owner died, and roughly $190 million of cryptocurrency went missing after it emerged he was the only person with access to the system’s private keys. Both Song and Ferris saw this as a disaster, but they drew very different conclusions.
Ferris brought up Quadriga toward the end of the debate, saying: “The whole point of permissioned, enterprise blockchains is reducing risk.”
His vision describes a system where major protocol participants know one another. “We can put a governance model and a legal framework around this that says, ‘If you do something to disrupt the system, we’ll sue the pants off you and you’ll regret it,’” Ferris said.
Song saw that as precisely the problem. If a governing body can intervene and punish platform operators, that undermines the core idea of decentralization.
Ferris viewed Quadriga as an illustration of the user-experience problem with permissionless systems, since it starkly highlights Bitcoin’s lack of recourse when private keys are lost.
But Song considered that lack of recourse to be a feature, not a flaw:
“You are either self-sovereign or you’re not.”
Bitcoin Core
Bitcoin itself has its own concentrations of power, a point raised by the debate’s moderator, Angela Walch, a professor at St. Mary’s University School of Law.
Walch referenced the inflation bug disclosed in September 2018, when developers initially downplayed the bug’s implications before rolling out a fix.
“They listed a total of 11 people who knew about it. Those people decided how they would resolve the issue,” she said. “At first, they told certain miners. That miner was given privileged information.”
She used this example to argue that core Bitcoin developers hold significant influence over the network. Users had to trust that none of those leaders would undermine Bitcoin before the final disclosure. “I’m arguing that those people were exercising centralized power,” she said.
Song replied that Bitcoin Core is not the only Bitcoin software and that it is open source, released under an MIT license that warns users to use it at their own risk. If something in the Bitcoin software is wrong, users should be able to discover and report it.
“If the goal is mass adoption, hyper-bitcoinization,” Walch said, “90 percent of people won’t understand how the code works, so saying it’s open source isn’t an out.”
Ferris expanded on this point, noting that a small number of people maintain Bitcoin’s codebase and arguing that if something happened to all of them, the project would face chaos.
Ultimately, the debate circled back to the question of sovereignty. Should users be collectively responsible for ensuring core maintainers are not malevolent, or should the state serve as a fallback?
“You’re talking about regulation and governance frameworks like they’re a bad thing,” Ferris began.
Song responded: “Most of the time, they are.”