This year, October 31 marked the 14th anniversary of the release of one of the most significant white papers of this century – Satoshi Nakamoto’s “Bitcoin: A Peer-to-Peer Electronic Cash System”. Its 2008 release launched “a revolution in finance” and “heralded a new age for money, an era that derived its value not from government decree but from efficiency and technological ingenuity,” as NYDIG celebrated in its Nov. 4 newsletter.
However, not many realize that Satoshi’s nine-page white paper was initially met with some skepticism, even among the cypherpunk community where it first appeared. This reluctance may be understandable since previous attempts to create a cryptocurrency have failed – for example David Chume’s Digicash efforts in the 1990s – and it doesn’t seem at first glance that Satoshi was bringing anything new to the table in terms of the technology.
“It was technically possible to develop Bitcoin in 1994,” Jan Lansky, chair of the Department of Computer Science and Mathematics at the University of Finance and Management in the Czech Republic, told Cointelegraph, explaining that Bitcoin relied on three technical improvements that were available at the time: Merkle Trees (1979) , blockchain data structure (Haber and Stornetta, 1991) and proof-of-work (1993).
Peter Vessenes, co-founder and chief cryptographer of Lamina1 — a layer-one blockchain — basically agreed: “We certainly could have mined Bitcoin” in the early 1990s, at least from a technical perspective, he told Cointelegraph. The necessary encryption was at hand:
“Bitcoin’s elliptic curve technology is a technology of the mid-1980s. Bitcoin does not need any in-band encryption like SSL; the data is unencrypted and easy to transfer.”
Satoshi sometimes gets credit for creating the proof-of-work (PoW) protocol that Bitcoin and other blockchain networks (though no longer Ethereum) use to secure digital ledgers, but here, too, he has precedents. “The idea of proof-of-work to combat spam was proposed by Cynthia Durk and Mouni Naor in 1992,” Vessenes added.
Proof-of-work, which is also effective at thwarting Sybil attacks, sets a high economic price for making any changes to the digital ledger. As explained in a 2017 paper on Bitcoin Origins by Arvind Narayanan and Jeremy Clarke, “In the design of Dwork and Naor, email recipients would only deal with emails that were accompanied by proof that the sender had performed a moderate amount of computational work — thus, Evidence of action. ’ As the researchers note:
Calculating proof might take a few seconds on a normal computer. Thus, this would not pose any difficulty for ordinary users, but a spammer wishing to send a million emails would require several weeks, using equivalent hardware.”
Elsewhere, “Merkle trees were invented by Ralph Merkle in the late 1980s — so we had hash functions that were safe at the time,” Vessenes added.
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So why did Satoshi succeed while others faltered? Was the world simply not ready for a decentralized digital currency earlier? Are there still technical limitations, such as accessible computer power? Or maybe Bitcoin’s real audience has not yet come of age – a new generation that mistrusts central authority, especially in light of the Great Recession of 2008?
Create “untrusted” systems
David Chaum has been called “perhaps the most influential person in the cryptocurrency space.” His 1982 doctoral thesis, Computer Systems Created, Maintained, and Trusted by Mutual Shady Groups, predicted several elements that were eventually going to find their way into the Bitcoin network. It also presented the main challenge to be solved, namely:
“The problem of creating and maintaining computer systems that can be trusted by those who do not necessarily trust each other.”
Indeed, an academic exploration of the origins of blockchain technologies by four researchers from the University of Maryland hailed “the 1979 work of David Chaum, whose vault system embodies many elements of blockchain.”
In an interview with Cointelegraph last week, Chum was asked if Bitcoin could actually have launched 15 years ago, as some have argued. He agreed with the University of Maryland researchers that all of the key blockchain elements were already in place in his 1982 thesis — with one major exception: the Satoshi consensus mechanism:
“The details of [Satoshi’s] consensus algorithm differ, as far as I know, from those found in the literature on consensus algorithms.”
When pressed for specific details, Chaum was reluctant to say much more than that the 2008 white paper described “a fairly ad hoc… rudimentary mechanism” which in fact “could be made to work — in one form or another.”
In a recently published book, Oxford sociologist Villy Lidonvirta also focuses on the uniqueness of this consensus mechanism. Satoshi spins cryptocurrency registrars/auditors