“Sorry to be a wet blanket. But, writing a description of Bitcoin for general audiences is bloody hard.

There’s nothing to relate it to.”

- Satoshi Nakamoto, July 5, 2010

How the Constraints of Digital Define Bitcoin(a Bitcoin parable by James D’Angelo)

“What is Bitcoin?” Harvard April 30, 2014

2008 – the story begins

it wasn’t just coincidence that Bitcoin, as an idea, was born in 2008 amid the turmoil of the financial crisis

the average person focused on the idea of money

bitcoin addressed similar ideas• money creation • monetary control • quantitative easing

the pragmatics

there were those who thought the bailouts were acceptable & fed acted appropriately

the activists

there were those who didn’t. chaos, mistrust, anger – focused on big central organizations that wielded financial power...

the programmers

One group turned to software to address the problems that they perceived with money. one person in particular...

Satoshi Nakamotoanonymous, but uses male japanese pseudonym

“The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.” - Satoshi Nakamoto, Feb 2009

Satoshi Nakamoto

His view: inside software there is a solution to the financial crisis.

His solution - turning ones and zeros into money.

excellent writer. intimate history of finance & cryptography

the dream was not new

IBM, Milton Friedman, others

cypherpunks (not cyberpunks)

cypherpunks advocate the widespread use of cryptography as a route to social & political change.

inside the digital domain, inside cryptography, they could sidestep the problems of money created by politics, banks and special interests. Since 1980 a primary aim was digital currency.

advantages of going digital• fast (velocity of money)• weighs nothing• programmable• internet ready• international• easy accounting• cheap – no need for gov. issuance/protection• etc. etc. etc.

but digital was proving elusive

digital is great for copying

perfect copies of music

perfect copies of videos, photos & data

perfect copies of messages

perfect copies of transactions, digital tokens, messages, etc.

but perfect copies makes bad money

counterfeits that are indistinguishable from Real McCoys

the double spending problemnetworks are noisy and transmission across networks is far from instantaneous

a hacker can capitalize – the problem was so nasty that experts deemed it impossible

but in 2008, the fires were rekindled

satoshi rifled through the new tech

inflamed & frustrated, satoshi looked elsewhere. studied BitTorrent - released in 2001. In 2008 p2p accounted for

approximately 50% of all internet traffic

Napster - Trojan Horse?

launched in 1999, shut down in 2001. Napster’s failure became an important case-study for hackers and a turning

point in the design of modern software systems.

Napster = centralized

BitTorrent’s SolutionBitTorrent’s coup de grace was to flip the problem of file storage on its head. Instead of central servers, the BitTorrent algorithm chopped all the media files up into tiny pieces and scrambled them on users’ computers everywhere.

never centralize again

satoshi’s decisionArmed with his Napster story, he was determined to find the

centralized part of banks. But what was it?

the ledger

a bank’s heart is not the vault, it is the ledger

Turn the Bank Inside OutSatoshi thought, “what if I could turn a bank inside out? Instead of one central party controlling the ledger, what if every user were recruited to maintain a constantly updated copy?”

public ledgers - not so great

Bank ledgers are the ultimate tragedy of the commons. High incentive to game the system. Result: centralization

centralized = mistrust & anger

The decentralized ledger (blockchain)To create his decentralized ledgers, Satoshi paired two main technologies. Nothing was newer than 2001.

• Proof of Work - 1997 (solves the double spending problem)

• Elliptic Curves - 1987 (solves unique access to the ledger)

digital’s weaknesses as strengthsTurn the weaknesses of digital into strengths. The strength of the digital was perfect copies – okay – so copy the ledger, everywhere, instantly. In turn, he made the uniqueness the flaw – any ledgers with even one comma not agreeing with the masses would be discarded, leaving fraudsters powerless.

Satoshi’s MasterstrokeEliminate cash to make currency.

the blockchain is a new form of public goodnot state, not private, it is ‘other’ – truly public

fuel for permissionless innovation

smart contracts, mesh networks, notaries, voting, government, etc.

no need to ask to use it, no fees for employing the tech, no oversight on provable transactions, contracts, etc

full transparency (optional)

gangsters use it (optional anonymity)

a measure of any currency is amorality

dirty socks vs. the dollar

a strong currency is accepted by more people

its a baby currency

easy to steal, volatile, could disappear tomorrow“If you don’t believe me or don’t get it, I don’t have time to try

to convince you, sorry.” Satoshi July, 2010

What is Money?perhaps cash (gold, dollars) has always been just a placeholder

until we could finally decentralize the ledger. does it need to have intrinsic value? is mass a negative? we don’t know.

but bitcoin will help us learn.