Has it only been a dozen years since Oct. 31, 2008, that Satoshi Nakamoto published a modest nine-page paper describing a new online payments system called “Bitcoin?” Depending on where one stands, that pseudonymous white paper — its author(s) remain unidentified — fostered either a fintech revolution or, as some believe, “the greatest scam in history.”
To mark the anniversary of the publication of “Bitcoin: A Peer-to-Peer Electronic Cash System,” Cointelegraph invited comments on the enduring vision of the paper’s author. Would Satoshi Nakamoto have been pleased with how Bitcoin and blockchain technology have developed and evolved over the past 12 years?
James Angel, an associate professor at Georgetown University’s McDonough School of Business, told Cointelegraph: “It has set in motion a revolution in finance with the rise of DeFi apps, smart contracts, and coin offerings, in addition to a payment revolution that is leading to central bank digital currencies.” Gina Pieters, an assistant instructional professor at the University of Chicago’s economics department, told Cointelegraph: “He would be pleased to see the evolution and new applications of his vision.”
The influence of Bitcoin’s (BTC) white paper goes beyond finance, Garrick Hileman, head of research at Blockchain.com, told Cointelegraph: “Its impact is worthy of being considered alongside other major technical innovations, such as the personal computer and internet.”
Would Satoshi be disappointed?
Satoshi’s vision was for a P2P, or decentralized, digital cash system — as referenced in the white paper’s title. The problem with incumbent digital commerce was that it relied exclusively on “financial institutions serving as trusted third parties to process electronic payments,” Satoshi wrote. This had inherent weaknesses. Transactions could be reversed, banks had to mediate disputes, and transaction costs were high. Satoshi’s solution was presented in the second paragraph of the white paper’s introduction:
“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”
In the 12 years since the paper’s publication, the need for P2P transactions — without interfering third parties — has become something of an article of faith among Bitcoinists. But, on reflection, has this aspect of Satoshi’s vision been fulfilled? David Yermack, a professor of finance at New York University’s Leonard N. Stern School of Business, told Cointelegraph:
“I think the greatest source of disappointment for Nakamoto would be the increasing centralization of blockchain governance in entities such as mining pools and even central banks, which are on the verge of launching their own cryptocurrencies. Nakamoto’s mission was to challenge the hegemony of central banks, and ironically, the greatest issuers of digital currencies seem likely to be the central banks themselves.”
Angel went further: “Satoshi would be appalled at the politics of concentrated mining pools that currently dominate the Bitcoin protocol.” While Pieters added that Satoshi would be disappointed that the “primary transactions of Bitcoin were not occurring through peer-to-peer trading, but rather intermediated by centralized exchanges or companies.”
Thwarting fraud
The matter of fraud in digital transactions has always loomed, and in Bitcoin’s white paper Satoshi proposed a way to solve the classic “double-spend” problem — where miscreants spend the same coin twice, something not difficult to do with electronic coins. He did this using a “peer-to-peer distributed timestamp server to generate computational proof of the chronological order of transactions.” In this way, explained Satoshi, “transactions that are computationally impractical to reverse would protect sellers from fraud.”
Solving the double-spend problem today is considered one of Satoshi’s greatest achievements. His Bitcoin blockchain has never been hacked (though the same can’t be said for the many crypto exchanges that trade BTC). Still, fraud associated with digital payments has not been squeezed out of the system. Would this have dismayed Bitcoin’s founder?
Angel said that Satoshi would “have been disappointed that Bitcoin did not turn into an everyday payment medium but instead a store of value for fearful fatcats and tax evaders.” Moreover, Satoshi would “have been saddened by the increase in inequality that Bitcoin’s history has created, with a few early adopters becoming whales and the other 99.99999% of the population as have nots.” Still, one assumes Bitcoin’s creator — whether man, woman or…
Read More: Crypto’s first white paper turns 12