How the Constraints of Digital Define Bitcoin

1. “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

2. “What is Bitcoin?” Harvard April 30, 2014 How the Constraints of Digital Define Bitcoin (a Bitcoinparable by James D’Angelo)

3. 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

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

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

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

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

8. If you could make digital money… • fast (velocity of money) • weighs nothing • programmable • internet ready • international • easy accounting • cheap – no need for gov. issuance/protection • etc. etc. etc.

9. “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 anonymous, but uses male japanese pseudonym

10. Who is Satoshi Nakamoto? excellent writer. intimate history of finance & cryptography His view: inside software there is a solution to the financial crisis. His solution - turning ones and zeros into money. Watershed moment: Data = Money & Money = Data

11. the dreamwasn’t new IBM, Milton Friedman, others

12. cypherpunks advocate the widespread use of cryptography as a route to social & political change. cypherpunks (not cyberpunks) 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.

13. but digital was proving elusive

14. digital is great for copying

15. perfect copies of music

16. perfect copies of videos, photos & data

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

18. but perfect copies makes bad money counterfeits that are indistinguishable from Real McCoys

19. the double spending problem networks are noisy and transmission across networks is far from instantaneous a hacker can capitalize – the problem was so nasty that experts deemed it impossible

20. but in 2008, the fires were rekindled

21. 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

22. 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.

23. Napster = centralized

24. Decentralize Everything

25. BitTorrent’s Solution BitTorrent’s coup de grace was to flip the problem of file storage on its head. Instead of a central server, the BitTorrent algorithm developed thousands of copies oftorrent filesand scrambled them on users’ computers everywhere. never centralize again

26. The government was stumped Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks seem to be holding their own. - Satoshi Nakamoto

27. satoshi’s decision Armed with his Napster story, he was determined to find the centralized part of banks. But what was it?

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

29. Turn the Bank Inside Out Satoshi 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?”

30. public ledgers - not so great Bank ledgers are the ultimate tragedy of the commons. High incentive to game the system. Result: centralization

31. centralized = mistrust & anger

32. 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)

33. digital’s weaknesses as strengths Turn 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.

34. Satoshi’s Masterstroke Eliminate cash to make currency.

35. One public ledger, two creations

36. The Naming Problem

37. The end of the parable…beginning of the innovation

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

39. no need to ask to use it, no fees for employing the tech, no oversight on provable transactions, contracts, etc fuel for permissionless innovation smart contracts, mesh networks, notaries, voting, government, etc.

40. full transparency (optional)

41. a measure of any currency is amorality gangsters use it (optional anonymity)

42. a strong currency is accepted by more people dirty socks vs. the dollar

43. 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 its a baby currency

44. 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.