Business

Larry Baker

The origins of Bitcoin: Satoshi’s Vision

This series looks back on the history of Bitcoin. Read part one here.

October 31, 2008 will forever hold a special place in the history of Bitcoin, for it was on that date that Satoshi Nakamoto announced the publication of the Bitcoin whitepaper. That moment in time will forever be when Satoshi’s original vision of Bitcoin was first set out, when Bitcoin’s creator began to define for the world what Bitcoin would become, and when its first detractor sought to redefine it for his own purposes.

At 2:10 p.m. EDT on October 31, 2008, Satoshi Nakamoto made his announcement of the white paper to the cryptography email list where several experts had assembled to explore how their expertise might help solve the political problems of their time. Satoshi’s suggestion of a peer to peer system of electronic cash, not beholden to the whims of a trusted third party and allowing perfect accountability of funds, was immediately recognized as a great solution in the face of the Great Recession which was becoming an obvious threat at the time.

Dr. Craig S. Wright, who has since revealed himself to be Satoshi Nakamoto, has explained that he created Bitcoin as a better method of transaction than what had existed at the time: the banking system that had failed the world with a lack of transparency.

The secret to Bitcoin’s success

The first person to respond to the Bitcoin whitepaper would forever start a debate on what Bitcoin should be. James A Donald, on November 2, 2008, questioned how big of a network would be needed to create a world where Bitcoin was the dominant currency. Satoshi explained that the secret to Bitcoin’s future success could be found in scaling:

Long before the network gets anywhere near as large as that, it would be safe for users to use Simplified Payment Verification (section 8) to check for double spending, which only requires having the chain of block headers, or about 12KB per day.

The bandwidth might not be as prohibitive as you think. A typical transaction would be about 400 bytes (ECC is nicely compact). Each transaction has to be broadcast twice, so lets say 1KB per transaction. Visa processed 37 billion transactions in FY2008, or an average of 100 million transactions per day. That many transactions would take 100GB of bandwidth, or the size of 12 DVD or 2 HD quality movies, or about $18 worth of bandwidth at current prices.

If the network were to get that big, it would take several years, and by then, sending 2 HD movies over the Internet would probably not seem like a big deal.

Crypto hot topic

Bitcoin became the hot topic of the cryptography mailing list, representing 32 of the 68 emails sent to the list in November 2018. Hal Finney showed his support for the idea, writing, “Bitcoin seems to be a very promising idea,” but he wanted to see the code before making any final decisions. Others, still not fully grasping the idea, suggested that it might be vulnerable to outside attacks.

But the bulk of the conversation was between Satoshi and James A Donald, his first rival. Donald questioned the viability of Simplified Payment Verification (SPV). He suggested networks would never be able to handle the bandwidth of Bitcoin transactions, suggesting Bitcoin be like a settlement layer to other transactions (much like what the Lightning Network has been developed to be). He questioned how a blockchain could work around the problem of double-spends.

In response, Satoshi patiently explained to him how each piece works. He explained that the distributed ledger was a natural defense against brute force attacks and government intervention. He explained how the blockchain works to weed out double spends. And of course, he had confidence in his original design to scale massively, solving the problems Donald thought he’d avoid with a settlement layer.

In Donald’s eyes, Satoshi hadn’t figured out what the full picture of Bitcoin should be. He dismissively wrote on November 15, “I really should provide a fleshed out version of your proposal, rather than nagging you to fill out the blind spots.”

At the time, Satoshi was polite about it, with maybe one exception where he summarized Donald’s argument as a “lengthy exposition of vulnerability.” Even when Donald was at his most dismissive, Satoshi offered to share his work and teased the upcoming launch of Bitcoin, noting his faith in his “year and a half” of work on the project.

Satoshi’s true feelings

In the years that have followed, Dr. Craig Wright has expressed his true feelings during those fateful weeks after the whitepaper’s release. He was trying to make a better system of money, and Donald was fearful of government intervention. Donald wanted a censorship resistant and anonymous form of money, which Wright has since linked to Donald’s seedier history with child pornography. Wright wanted traceable money. Donald wanted to disappear from the radar of the law.

Everything found in this November 2008 exchange, as these cryptography experts explored what the Bitcoin white paper could be, have come to define the history of Bitcoin that followed. Wright mined the Genesis Block on January 3, 2009, and released the first version of the Bitcoin software a few days later on January 9 giving birth to Bitcoin. The original vision of Bitcoin, using the ticker symbol BSV, has stuck to the original white paper and views that Satoshi expressed in the weeks that followed. It scales to the needs of the world, and does everything the white paper promised it would.

BTC was created from those who would have argued with Satoshi in November 2009. The BTC developers seek to guard it against governments rather than work with them, and focus on the anonymous nature they believe it should have. Crucially, they refuse to allow it to scale, limiting its usage and think by doing so it will remain as a store of value for those who wish to pursue illicit activity.

October 31, 2008 will forever be the birthday of Bitcoin, which now only lives as BSV. It’s the only coin the Satoshi of 2008 would recognize as his creation.

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