How Bitcoin won the race…

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This article was first published on Dr. Craig Wright’s blog, and we republished with permission from the author.

Many people falsely believe that Bitcoin is a cryptocurrency. Bitcoin is not encrypted. Bitcoin is the first digital cash system that presents cleartext and is completely traceable.

It is finally time to start explaining why I created Bitcoin. Why I spent nearly 25 years of my life, so far, on a project. To explain what ‘BlackNet’ was originally designed to be and what I transformed it into. Bitcoin represents “CryptoCredits.” The cypherpunks wanted to create a darknet market that would be completely anonymous and encrypted. It would have been a market that would have allowed Silk Road to be operable without being taken down. A system that would have allowed illicit funds to remain untraceable. One that was designed to enable assassination markets and the sale of illegally obtained information and national secrets and one that Tim May personally said could have been used to leak information about the Manhattan Project, had it been around at the time.

Timothy C. May (1992) argued that it was a race. He had also said, “In any case, it’s too late. The genie’s nearly completely out of the bottle. National borders are just speed bumps on the information highway.” He was right. A decade ago, people were still trying to work on the creation of a digital currency system. E-gold, bit gold, Liberty Dollar, and multiple other systems were attempts to create an anonymous cryptocurrency. Such was the race.

The race was one of finding and implementing an anonymous digital currency system that would work. It was a race to create a cryptocurrency that could spread and be implemented across society before an alternative digital currency could be found. The alternative, which they did not want to see, was Bitcoin. You see, Bitcoin is not encrypted in any form. Bitcoin presents sheer cleartext, and Bitcoin is completely traceable. In the past eleven years, Bitcoin, along with the mechanism of blockchain technology, has formed the universal method of creating digital currencies and digital cash. Every single attempt at creating a cryptocurrency such as in the form of Tim May’s concept of an encrypted, anonymous digital system has stopped. The technology behind Bitcoin has become so widely adopted that the race has been lost. Bitcoin has won. And the reason is that Bitcoin is not even remotely analogous to a cryptocurrency. It is truly digital cash, but it is completely traceable and always recoverable.

The anarcho-capitalist movement is neither anarchist nor capitalist. When Tim May and others started using the term in the late 1980s, it was not to represent libertarian or capitalist or conservative thought, but a “a pastiche of The Communist Manifesto.” Timothy C. May’s Crypto Anarchist Manifesto remains the basis of the crypto-anarchist movement. Yet few understand that it, the entire concept of “anarcho-capitalism” was designed in a manner that encapsulated communism and redefined it following the 1980s error of Reagan and Thatcher and capitalist concepts.

In 1992, Tim knew of the problems. The problems he referenced included “national security concerns, use of the technology by drug dealers and tax evaders, and fears of societal disintegration”. Tim went on to say (May, 1992):

Many of these concerns will be valid; crypto anarchy will allow national secrets to be trade freely and will allow illicit and stolen materials to be traded. An anonymous computerized market will even make possible abhorrent markets for assassinations and extortion. Various criminal and foreign elements will be active users of CryptoNet. But this will not halt the spread of crypto anarchy.

Tim was smart enough to call his form of communism “anarcho-capitalism”.

Just as the technology of printing altered and reduced the power of medieval guilds and the social power structure, so too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions. Combined with emerging information markets, crypto anarchy will create a liquid market for any and all material which can be put into words and pictures. And just as a seemingly minor invention like barbed wire made possible the fencing-off of vast ranches and farms, thus altering forever the concepts of land and property rights in the frontier West, so too will the seemingly minor discovery out of an arcane branch of mathematics come to be the wire clippers which dismantle the barbed wire around intellectual property. (May, 1992)

You need to look at it all as an integrated whole. Tim’s concept was a world where only information had value. All property becomes digital. In the words of another Silicon Valley techno control freak, “software is eating the world.” When you understand that such individuals or that everything would go online, and everything would be linked technically, through digital records, you start to see the goal. It becomes not merely intellectual property but all property. If your house record is now linked through digital databases, and your ownership is an online property record, the ownership of your house has become intellectual property. The next step of such concepts is to take the clippers to all property. Tim did not just want to free intellectual property, he wanted to kill the concept of property altogether. Unfortunately, Tim’s ideas have become widespread within Silicon Valley. They are the concepts of technocrats such as those associated with Google and Facebook and Twitter.

It is for the same reason that they promote the concept of a universal basic income and it is for the same reason that they believe they know best. As with the controlling class in Plato’s Republic, the technocratic leaders of Google and Facebook want to tell you how to live the life they think is best for you. It is the vision that Tim started.

John Gilmore shared many of the same ideas with Tim. Gilmore is one of the early promoters of the Free Software Foundation (FSF) and the fifth employee of Sun Microsystems and founder of CyGNUs Solutions, a company that was behind many of the early free software and GNU projects. The company is now part of Red Hat. It may seem altruistic and honourable for somebody to support free software. But, there are always alternative motives. For example, Gilmore supported free software and benefited through the integration with commercial hardware platforms.

It was not about making software affordable but about making hardware profitable. Early hardware platforms required a strong base of software. To compete with Microsoft and Intel, other platforms needed to increase the range of offerings, which sometimes meant gaining an advantage through a reverse-engineered recreation of commercial software. Much of it benefited from the work of Tim May and others, who used the early versions of BlackNet to profit. Tim May worked for Intel, and retired with share options that enabled him to continue working on his own projects. One such project involved selling corporate secrets, which included chip designs, software source code, and much more. Some secrets went to Chinese companies and Chinese government officials, some of it went to other nations, including ones on the restricted list, and some of it merely became sold for hypocritical profitable gains, as corporate espionage.

Wei Dai (1998) wanted to work on an anonymous form of digital currency. One that could not be cracked or altered. His first protocol presents what most individuals want Bitcoin to be. A redefined version of the second protocol is what I used to create Bitcoin:

In the second protocol, the accounts of who has how much money are kept by a subset of the participants (called servers from now on) instead of everyone. These servers are linked by a Usenet-style broadcast channel. The format of transaction messages broadcasted on this channel remain the same as in the first protocol, but the affected participants of each transaction should verify that the message has been received and successfully processed by a randomly selected subset of the servers.

Wei did not like the second concept. Which is why nobody explored the concepts around the economics of the system or took it to fruition in creating a working system. Individuals like Tim May sought to create a system that did not have a small subset of servers. In my case, I created servers that would always end up aggregating towards competitive commercial systems. I didn’t see bandwidth capacity as a problem (and I still don’t)¹:

As the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware.  A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.

Bitcoin has already passed the stage where “the number of network nodes consolidates into a smaller number of professional server farms”².

Mining or running a node involves not merely finding a proof-of-work solution, which is an exceedingly small part of mining. Mining is how transactions are validated, recorded, and journaled. Section 5 of my white paper defines what is necessary to run a node. The only consensus mechanism within Bitcoin lies in the creation and broadcast of a valid block, that is, a block that needs to be accepted by other nodes for 100 further blocks in depth. If a node’s block is not accepted for 100 blocks, you do not get paid. Here lies an aspect of Bitcoin that seems to be ignored by those creating false narratives such as “selfish mining”. They cherry-pick how the system works, to make room for their scaremongering and “FUD”.

And it does not matter what system the principle is applied to. Even on Ethereum version 2, the system aggregates to form a small number of professional servers. The sole difference with Ethereum is that proof of stake removes the deanonymisation process of proof-of-work. Proof-of-work is not a security tool. It ensures that all the node farms can be attributed and held accountable. Proof of stake allows one individual using a set of keys to act as if they owned many bearer shares and to devote each bearer share independently to seemingly multiple individuals. In other words, each of the staked amounts of thirty-two ETH can be attributed to a different entity—even when they are in fact owned by the same individual. Here, of course, lies the reason for implementing proof of stake. It is not to create distributed “democratised” systems, but rather to implement a system that allows groups to secretly control the system while giving them plausible deniability.

Such a scenario, though, is very simple to legally bypass. Each staking entity would be required to provide know your customer (KYC) details. In effect, a verification node on Ethereum exceeds the Fifth Money Laundering Directive (5MLD) requirements for reporting custodial amounts. But, criminals will be criminals.

The Alert Key

The system of the alert key within Bitcoin was an early attempt at creating a system that would allow the freezing of assets. All of it acts outside of the protocol. The design of Bitcoin, with it ending as a small number of commercial server farms, is such a one that naturally results in commercial entities that are subject to court orders and law. Proof-of-work deanonymises the system. Commercial nodes cannot operate without leaving a trace of who they are. Commercial nodes cannot sell on regulated exchanges to fund their operations and be anonymous. Bitcoin solves the problem of anonymity. Users may be users, and exchange small amounts of money, directly, using the client system I created: simplified payment verification (SPV). Nodes, on the other hand, will always become visible to the world.

I admit, I had not thought through all of the issues when I launched Bitcoin in 2009. At the time, there were many problems that I, with the limited resources I had, was not able to solve. In the subsequent twelve years, time and other resources have changed. Some people like to argue that they can simply hive Bitcoin off into a user activated soft fork (UASF). Which would leave the system with no consensus and hence no chain. Alternatively, merely changing the proof-of-work algorithm would lead to a different group of nodes (miners) on exchanges. Such exchanges are all public, and are all easy to control. An exchange cannot operate if coins (bitcoin) cannot be exchanged for fiat money. Miners need to be able to pay for the bills attributed to the cost of electricity—not in bitcoin, but in the local currencies. It follows that users have no say on the protocol.

If the developers implemented a hard fork to change the node structure and protocol, any subsequent exchange would be violating securities rules and court orders. Ask Liberty Reserve about it.

Imagine if gold turned to lead when stolen.  If the thief gives it back, it turns to gold again.

The rest of the year will bring a lot of changes. Bitcoin and its unauthorised copies (BTC, BCH, etc.) will be shown to have been traceable and ‘seizeable’ from day one. Bitcoin was never “censorship-resistant” in the way that people make claims about. In fact, it was designed not to be. Allowing the cryptocurrency that a small group of people wanted would require the system to be encrypted. As noted, Bitcoin is not encrypted any point. The underlying system, the blockchain only functions through the public dissemination of information. That is, any blockchain network requires traceability and the ability to change the system.

I have not been working on solutions to any other problem with any other system, but I don’t need to. Once changes are made to Bitcoin and the unauthorised copies of Bitcoin’s database (BTC, BCH, etc.), law enforcement globally will understand how much power they have over digital cash based on a blockchain. Bitcoin is private. It is not anonymous. Like every financial system database, Bitcoin presents a write once read many (WORM) database. You don’t change a WORM database. You append. It’s not a difficult concept; read-only accounting systems, including those associated with Oracle, have been doing the same for decades. Following the Sarbanes-Oxley (SOX) Act of 2002, every single public company in the United States has utilised WORM database structures on the company’s accounting systems. Changes always need to be made. Like with Bitcoin, changes are achieved by appending records.

It only works because Bitcoin has a cleartext database structure. The nature of Bitcoin was designed to be unencrypted, and hence not form a cryptocurrency, ensuring that the system could always be read. If Bitcoin could be created in a manner that was unable to be widely viewed and validated, it would not be possible to update the ledger. It is only because the system is distributed across commercial nodes and as an unencrypted database that it is possible to do so. The nature of the blockchain is one that requires all the public information to be in cleartext. As such, every variant that calls itself a cryptocurrency, including Ethereum, can be easily captured.

Bitcoin was never designed to be politically decentralised. Bitcoin was the system Tim May wanted to race against. It is the system he feared. Bitcoin is not anarcho-capitalist (i.e., communist); it is pure conservative capitalism.

Decentralisation

The concept of decentralisation that is put forward is the great lie and fraud within the industry. Bitcoin, and any blockchain network for that matter, is not decentralised in the claimed manner. Bitcoin is robust in being run by a number of commercial entities. Every single blockchain that can ever exist is maintained by a small number of entities. BTC is managed by three developers. They control all the commits. Ethereum is managed by only five developers, who manage nearly all the commits.

2021 is the year of myths disappearing and never returning. All the lies that have been promoted around Bitcoin, and systems based on blockchains following Bitcoin’s design, will be shown for what they are. Of course, many people are going to fight me on it. Many people have made money through Ponzi schemes and defrauding investors for a decade now. Such individuals and companies have lied to corporate regulators, the police, courts, and just about every other part of society that matters.

2021 is the year that crypto-communism dies. It is a year where such disingenuous technocrats find out that their scheming and frauds come to an end. The misrepresentations and lies promoting Bitcoin as a system outside government control will be shown to be hollow and vapid. Bitcoin doesn’t stop the state. Bitcoin doesn’t take down banks. Bitcoin destroys cypherpunks—and all that they ever stood for.

Footnotes
[1] Wright, C. (2008, Nov 2). Re: Bitcoin P2P e-cash paper. The Cryptography Mailing List. https://www.mail-archive.com/[email protected]/msg09964.html
[2] Wright, C. (2010, Aug 5). Re: Flood attack 0.00000001 BC. bitcointalk.org. https://bitcointalk.org/index.php?topic=287.msg7687#msg7687

References
Dai, W. (1998). b-money. http://www.weidai.com/bmoney.txt
May, T. (1992). The Crypto Anarchist Manifesto. Cypherpunks electronic mailing list, Usenet release. https://groups.csail.mit.edu/mac/classes/6.805/articles/crypto/cypherpunks/may-crypto-manifesto.html