AFTER 10 YEARS, BITCOIN HAS CHANGED EVERYTHING—AND NOTHING
TEN YEARS AGO today, someone using the name Satoshi Nakamoto sent an academic paper to a cryptography mailing list proposing a form of digital cash called "bitcoin." The pseudonymous Nakamoto, whose true identity remains unknown, described an idea for "mining" a limited amount of this virtual currency through a peer-to-peer scheme that wouldn't depend on a bank, government, or any other central authority. Once people started using bitcoin, it would be impossible for a government to pull the plug, as happened with previous attempts to create digital money, such as E-Go
Today Bitcoin is a global phenomenon. Individual bitcoins sell for thousands of dollars. The price has dropped steeply from its peak of nearly $20,000 in December 2017, but recall that, at the beginning of 2017, one bitcoin sold for less than $1,000. Meanwhile, hordes of other cryptocurrencies have launched, though none has attracted quite as much interest from users or investors as bitcoin, and venture capitalists pour millions into startups looking to capitalize on the underlying technology.
It all started with the white paper. When Nakamoto published the paper, many of the underlying concepts of Bitcoin already existed, including the idea of issuing digital money to people who devoted computing resources to a problem. But Emin Gün Sirer, a computer science professor at Cornell University, credits Nakamoto with a major breakthrough: a way to ensure that users trust one another, and the network, without relying on gatekeepers.Bitcoin relies on a ledger called the “blockchain.” Every transaction is cryptographically signed and recorded in the blockchain, which is distributed to every participant in the Bitcoin network, preventing anyone from double-spending their coins.
Because it’s difficult, if not impossible, to tamper with the ledger, anyone can download the Bitcoin software and blockchain and participate in the network. There are no corporations that control entry into the network or government bureaucrats demanding that you file paperwork to participate. Building a currency system without the need for gatekeepers wasn’t a problem many were focused on, but once it was solved it moved the idea of decentralized digital currency from the academic fringes to the nightly news.
Proving that this was possible was a major contribution to computer science," Sirer says. "Satoshi opened the door to revamping the entire finance industry.”The rise of Bitcoin happened largely without Nakamoto, who disappeared from the internet in late 2010, leaving the Bitcoin software in the hands of some early collaborators. Attempts to track down Nakamoto have been at best inconclusive. They include a Newsweek cover story claiming that Nakamoto wasn’t a pseudonym but the real name of a retired engineer living in Temple City, California, which has been largely debunked, and WIRED’s reporting on Australian academic Craig Wright, who has claimed to be Nakamoto but been unable to prove it.For all of Bitcoin's success, it hasn't lived up to Nakamoto's dream of a currency for day-to-day transactions, remaining largely a medium for speculators. In part, that's because transactions are incredibly slow. Sirer has estimated that Bitcoin processes around three transactions per second, a poor showing compared to Visa’s 3,674 transactions per second. Meanwhile, other problems have emerged, such as the Bitcoin network's alarmingly huge carbon footprint, which one report suggests is already on par with that of a small country.
Nakamoto’s successors on the Bitcoin project, along with the developers of rival cryptocurrencies, are working to solve these problems, but in ways that sometimes radically diverge from the original white paper. The Bitcoin project is considering an innovation called the Lighting Network that would speed up transactions by moving most transactions outside of the blockchain. Sirer, meanwhile, is working on new protocols that address both speed and environmental impact. Others have created new cryptocurrencies that try to address a whole host of Bitcoin issues, from performance to privacy."Technically, Satoshi has been outclassed in every imaginable way," Sirer says. "And for the issues we still face, [Satoshi’s writing] provides no solution."That led Sirer to declare on Twitter in June that "Satoshi is dead." Sirer didn't mean that literally, but in the sense that Nietzsche wrote that "God is dead": Even Satoshi wouldn't be able to resolve the sorts of disputes the cryptocurrency community now faces.
Jonathan Sidego, an executive at the hedge fund Numeraiagrees with Sirer that Nakamoto’s paper has little guidance to offer on the problems now facing bitcoin and that the public will interpret Nakamoto’s writings in different ways.
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But that's not to say that Nakamoto or the white paper are irrelevant. "The white paper is definitely worth reading for anyone interested in understanding the concepts that allow blockchains to work," Sidego says. "The paper is short and surprisingly readable, so definitely worthwhile."Neha Narula, director of the MIT Media Lab’s Digital Currency Initiative, agrees. Asked during a panel at WIRED's 25th anniversary event what what one book or paper on cryptocurrency she'd recommend everyone read, Narula picked the white paper. "It's amazing how the white paper still holds up," she says. "It's still the best way to understand how bitcoin works."She also thinks that Nakamoto’s subsequent silence is a big part of the Bitcoin creator’s legacy. “One of the coolest things about Bitcoin is that the creator stepped away,” she says. “So many people feel like they have ownership over this thing. I think if the person who created it, who started it, was still around, people wouldn't feel like they could have a piece of it too.”