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October 13, 2022   Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Metaverse, NFTs, FinTech and Alternative Finance, Innovation and Resources, Stories, Web3, Decentralization, DAOs   No comments

Was Satoshi right?

Tristram Waye for Bitvo | Oct 13, 2022

Satoshi Nakamoto - Was Satoshi right?

Going back to the source is an important exercise

  • The value of revisiting source documents is underrated. One of the challenges of the modern world is also one of its essential services, curation. Over time a source document becomes overshadowed by narratives and interpretation. The narratives are then curated into a covering on top of the original thought, writing, or source. And eventually, the narratives can shape the source into something that wasn’t intended to be.
  • Bitcoin Whitepaper: If you haven’t read the Bitcoin whitepaper recently, the one thing that stands out is clarity. It is punctuated by laser focus and brevity. The writing is crystal clear. It does an excellent job of communicating the complexities of the Bitcoin concept in simple easy to understand language.
    • Looking back, we can’t completely imagine the context when the Bitcoin whitepaper appeared for the first time. There were some other e-currency examples that had come before, but this one was the one that stuck. It’s kind of like the way many guitar players talk about hearing Eddie Van Halen for the first time. When they heard that first record, they knew it was special. And in that moment, they knew exactly what they wanted to do.

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  • Describing Bitcoin in 2010: Throughout 2009 and 2010, we can see Satoshi engaged in a discussion around what Bitcoin was and what it does. The whitepaper may have been elegant, but once things got moving, early adopters and key developers got involved. Then it started to take on a life of its own. In a February 11, 2009 post, Satoshi describes Bitcoin. The emphasis here was around the concept of money and the relationship with trust. Then he goes on to discuss the double spend problem, solution, and the network.
    • At the end of this post, he says that Bitcoin “…takes advantage of the nature of information being easy to spread but hard to stifle.” This observation was timely and prescient because we are watching this nature in the battle over free speech across social media, the press, and payments, going on today.
  • What stands out when compared to today?
    • The statement about non-reversible payments is interesting. While it eliminates the role of the middlemen in mediation, it may require the presence of some form of escrow to eliminate fraud. He discusses escrow in the whitepaper shortly after and in other posts that follow.
    • The peer-to-peer network that tackles the double spending problem is inferred to be the answer. And it accomplishes this process with computational proof and chronological order of transactions.
    • All economic systems have both incentives and disincentives, including the Bitcoin software. Users (miners) are incentivized to participate and secure the network. But the network structure also disincentivizes abuse.  In our current financial system, the incentives and disincentives are increasingly less clear. For every disincentive enforcement, a fine represents a cost of doing business rather than a deterrent. This leaves the entire system open to abuse because the incentives for abuse appear to scale and pay off nicely.

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  • Then finally, we see the new vision of what privacy is. This is a model where identities are hidden, but transactions are public rather than everything kept private.
  • In August 2010, we can see Satoshi is seemingly aware of one of the pitfalls ahead. In this post, he clearly describes Bitcoin as being more like a collectible or a commodity. In other words, it’s not like a stock, which appears to show some understanding of a future Howey Test issue.
  • In one post, he says how micropayments will be impractical. Then the following day, he lays out the case as if a precursor for the thinking behind the Lightning Network.
    • The discussion includes assumptions about the scaling potential based on bandwidth and storage changes over time. That they would grow while becoming cheaper at the same time. This has turned out to be an accurate assumption, but whether it will continue isn’t clear.
  • Logo: It is also interesting that he is instrumental in developing the logo for Bitcoin. This logo was a brilliant marketing exercise. Remember, an electronic coin is defined in the whitepaper as a series of digital signatures, but the logo gives us something more familiar.
  • Evolution:  From there, the Bitcoin narrative has evolved to become a hedge, digital gold, the new reserve currency of the world, the only real form of money, and the only cryptocurrency. The narrative depends on the ideological camp you belong to.  More importantly, it was the catalyst for more than twenty thousand crypto, token, altcoin, and infrastructure projects across the globe.

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