
What Satoshi Did Not Know (2015) [pdf] - MrXOR
https://www.ifca.ai/pub/fc15/89750001.pdf
======
svara
With the benefit of hindsight, the biggest thing Satoshi didn't know (or
didn't foresee) was that the idea of "one CPU, one vote" was flawed, a victim
of its own success, because of mining ASICS.

A consequence of that is that bitcoin and related cryptocurrencies really
aren't as decentralized as claimed.

It's fascinating how things just seem to have a way of becoming centralized
once enough money is involved, even when engineers thought hard about how to
avoid that (see also: the internet).

~~~
alexmingoia
"one-CPU-one-vote" comes from Satoshi contrasting the alternative of "one-IP-
address-one-vote".

It's not about equality but fairness. Anyone can invest and purchase CPUs
whereas the allocation of IPs is political. Satoshi never stated or expected
one CPU should map to one individual person.

Satoshi said _" At first, most users would run network nodes, but as the
network grows beyond a certain point, it would be left more and more to
specialists with server farms of specialized hardware.”_ –
[https://satoshi.nakamotoinstitute.org/emails/cryptography/2/](https://satoshi.nakamotoinstitute.org/emails/cryptography/2/)

 _“The design supports letting users just be users. The more burden it is to
run a node, the fewer nodes there will be. Those few nodes will be big server
farms. The rest will be client nodes that only do transactions and don’t
generate. "_ –
[https://satoshi.nakamotoinstitute.org/posts/bitcointalk/287/](https://satoshi.nakamotoinstitute.org/posts/bitcointalk/287/)

~~~
svara
Thanks for this, I wasn't aware of these quotes that definitely provide
important context for my comment.

I think my broader point stands, though: despite engineering efforts towards
decentralization, market forces push Bitcoin towards centralization (due to
mining pools and due to consolidation amongst manufacturers of mining
hardware).

The most important counterbalance to this is not in the Bitcoin protocol, but
also an economic one: large mining operations have an interest in keeping up
(at least the perception of) decentralization, because that's why people like
Bitcoin.

At that point however, you're back to a system where the safeguards are not of
a technical nature at all. Maybe Satoshi foresaw that to some degree, but
apparently he wasn't able to engineer around it.

~~~
AniseAbyss
You will notice how all those giant servers are all located in first world
countries where the infrastructure and political stability is good.

~~~
demosito666
Is this sarcasm or you're calling China "where the infrastructure and
political stability is good"?

------
onelastjob
Colin Lemahieu set out to solve at lot of the problems that Bitcoin suffers
from by creating Nano (nano.org). He did this by having each account have its
own blockchain, rather than using one blockchain for all transactions. The
result is Nano transactions take under 1 second (fully confirmed) and there is
no fee for transactions. It's also scalable with 1465 confirmations per second
(aka transactions) reached on the test net the other day. There is no mining
involved, so Nano is environmentally friend and voting is done using a system
called ORV (open representative voting) which is similar to delegated proof of
stake, but doesn't require actually staking and risking coins. Instead it is
more like a liquid democracy system, where you delegate your voting weight to
a representative you select and can change at any time. Because there are no
mining fees, there is no incentive for centralization and for this reason it
is expected that the Nano voting weight will become more distributed and
decentralized over time as adoption increases. From a tech perspective, Nano
really is amazing.

~~~
Geee
I hate that there still hasn't been a thorough security / plausibility review
on Nano; at least I haven't seen one. No one seems to take it very seriously.
Maybe it's too good to be true.

~~~
onelastjob
A security audit of Nano was completed by Red4Sec in July of 2019. You can
find an overview of the audit here[1] and the full Red4Sec report here[2].
"Red4Sec has been able to determine that the overall security level of the
asset is optimal."

[1][https://medium.com/nanocurrency/nano-protocol-security-
audit...](https://medium.com/nanocurrency/nano-protocol-security-audit-
summary-and-full-report-48760be8ab3d)
[2][https://content.nano.org/Nano_Final_Security_Audit_v3.pdf](https://content.nano.org/Nano_Final_Security_Audit_v3.pdf)

~~~
Geee
This seems to be an vulnerability analysis of the Nano source code. I meant
the monetary security and game theoretic plausibility of the protocol itself.

E.g. how do we know which blocklattice is the correct one? (in Bitcoin it's
the longest chain, which contains most energy and thus can't be created from
thin air). Are there enough incentives to keep the network running and
decentralized? Etc.

~~~
onelastjob
Each Nano account is its own blockchain. These accounts interacting form the
block lattice. So it's not as though there are competing block lattices in
Nano. In Bitcoin there can be a sidechain that can overtake the main chain (if
the sidechain becomes longer than the main chain) and then cause a reorg of
some blocks. But I don't think anything like this is possible in Nano. You'd
have to ask the devs though to know for sure on the official Nano forum at
forum.nano.org

In terms of the incentives to keep the network running without mining fees or
proof of stake rewards, the Nano community and devs think that merchants and
other services using Nano will save significant amounts of money by not having
to pay credit card processing fees. This will incentivize those merchants and
service providers to run their own node (which only costs around $60 per
month) in order to keep the network healthy and decentralized. The lack of
mining fees and proof of stake actually disincentivizes the kind of
centralization we are seeing with Bitcoin mining.

------
dnprock
I think Satoshi didn't know that Bitcoin would not be a medium of exchange. It
will remain digital gold. Bitcoin cannot fulfill its original promise to be
electronic cash. This is the hardest hurdle for bitcoiners to understand. They
think that sky high value of Bitcoin would transform it into a medium of
exchange. But I think it's a false promise from Satoshi.

[https://bitflate.org/post/2019/11/24/bitcoin-will-not-be-
a-m...](https://bitflate.org/post/2019/11/24/bitcoin-will-not-be-a-medium-of-
exchange.html)

The biggest hurdle for cryptocurrency adoption is a medium of exchange. Most
investors waste their time playing around with buzzwords like DeFi.

~~~
uncletammy
> Bitcoin cannot fulfill its original promise to be electronic cash.

Not as long as the Bitcoin core developers are actively sabotaging BTC's
development so Blockstream can sell you the solution. Bitcoin was hijacked and
it may never recover.

~~~
tenuousemphasis
Lol, what? Only a small portion of Bitcoin Core contributors work at
Blockstream. You should think critically rather than merely accepting as facts
everything Bitcoin Cash proponents tell you.

------
morpheos137
Bitcoin is useful as a trust-less medium of exchange but in the real world,
legitimate trade involves some level of trust and enforceability of implicit
or explicit contracts. Nobody needs a blockchain for legitimate transactions
because there is the accounting ledger which is transparent to the law and
whose falsification constitutes an illegal act. For example your bank can not
deduct money from your account without cause. You do not need a blockchain for
the value stored in your account to be secure because falsification of ledger
balances is a crime. You don't need to encrypt the account (equivalent to
hiding money in an obscure place) because stealing is a crime and if bank
robbery or failure happens you have the FDIC to ensure your balance to a
certain degree (ask users of Bitfinex circa 2015 or 2016 about this...) Thus
Bitcoin is largely a solution in search of a problem unless you are dealing in
a black market or trying to hide money from legitimate authorities for some
other reason.

The dollar is a highly decentralised currency in actual practice. Yes, the
federal reserve or treasury can increase or decrease supply of dollars but in
practice in recent years the value of a dollar is set by its usability in the
real world not the actions of a central authority at the margins. In fact I
would venture to say that if the central authorities started to undermine the
value of the dollar for global commerce the central authorities would lose
their power over the dollar before the dollar lost its value. Many more
countries than the USA use dollars. In fact the vast majority of physical
dollars, if not dollar balances exist outside of US jurisdiction.

The only way that the dollar can and will be dethroned is if some other
currency becomes widely used in commerce. That certainly wont be Bitcoin but
it could be another digital currency like maybe Ripple. Bitcoin is not very
useable in actual commerce. The processing time of transactions is tremendous,
and the deflationary and volatile nature of the currency makes it an
unsuitable store of value or unit of account. There is no reason to expect in
the future bitcoin will stabilise. Its price is set by exchange speculation
and a decreasing rate of new coin supply. Unless commerce overtakes exchange
speculation as the price setting mechanism for bitcoin it wont be very useable
for legitmate commerce.

~~~
srtjstjsj
You're assuming fiat currency is reliable, which is proven wrong in many
jurisdictions.

~~~
bawolff
Its reliable enough for the average person's purposes in my juridsiction. If
we're talking about market forces that is really all that matters.

------
SoylentOrange
This is a great read and obviously Gavin has thought a lot about some of the
deep problems in Bitcoin, especially from the crypto side.

I was a bit disappointed to see that he punted* on one of the more well-known
“shallow” problems: the energy consumption of Bitcoin mining, and the wasted
computing power therein. The problem is much easier to understand than to
solve, and I appreciate there is only so much room in the text. However I did
hope he might at least acknowledge that this is among the more important
technical hurdles for Bitcoin to overcome.

[*] there is a rather cheeky dismissal of Proof of Stake which obliquely
addresses this issue

~~~
Geee
It's not really a problem. There's lots of energy around, and consuming energy
isn't bad per se.

Most Bitcoin miners run on renewables nowadays, because renewables are the
cheapest sources of energy when miners can locate to them.

Also, the main assumption of Bitcoin's security model is that it's rather
impossible to centralize energy production on this planet (or in the
universe). Proof-of-stake assumes decentralization of ownership, which is a
flimsier assumption, and will fail asymptotically.

~~~
minerjoe
"run on renewables nowadays".

I don't think that is true. At least not here in Montana. We've had several
large farms pop up in old industrial parks due to the very low cost of
electricity here. It's from coal.

~~~
Geee
Most Bitcoin miners are in Montana? [https://cointelegraph.com/news/study-
over-74-of-bitcoin-mini...](https://cointelegraph.com/news/study-over-74-of-
bitcoin-mining-is-powered-by-renewable-energy)

------
cageface
We hackers are naturally inclined to look for technical solutions to social
problems but more and more I think this very rarely works. It's too easy for
people in power to twist any particular technical solution to their own ends
so the really important thing is controlled who holds power in the first
place.

------
aey
These articles on HN always remind me how much more work crypto has to do in
terms of education to the general technical public. Crypto Twitter is a
recursive bubble.

------
CryptoPunk
Great to see Gavin Andresen's writings getting exposure here.

Andresen, along with Roger Ver, laid much of the ground work for Bitcoin's
massive run up in adoption, brand recognition and price.

Their subsequent ousting by a group that basically acted like trolls, to
sabotage Bitcoin's plan to hard fork to remove the 1 MB block size limit, and
thereby prevent it from becoming a ubiquitous electronic cash, has irked me to
no end.

~~~
uncletammy
I'm not sure why you're being downvoted but you're exactly right.

Love or hate Roget Ver, you'd be hard pressed to find any historical
accounting of Bitcoin's rise to fame where he's not mentioned in a favorable
light.

Gavin Andersen was the best steward that Bitcoin core ever had. He managed to
keep the more toxic contributors at bay for a long time although they
eventually forced him out through highly unethical means (
[https://www.livebitcoinnews.com/core-developer-calls-
andrese...](https://www.livebitcoinnews.com/core-developer-calls-andresens-
acts-the-final-straw/) )

> Their subsequent ousting by a group that basically acted like trolls

Gavin thought so too ( [https://cointelegraph.com/news/former-bitcoin-cores-
gavin-an...](https://cointelegraph.com/news/former-bitcoin-cores-gavin-
andresen-hits-blockstream-labels-greg-maxwell-and-samson-mow) )

> to sabotage Bitcoin's plan to hard fork to remove the 1 MB block size limit,
> and thereby prevent it from becoming a ubiquitous electronic cash

Here's part of the story as told by one of the more honest core devs:
[https://blog.plan99.net/the-resolution-of-the-bitcoin-
experi...](https://blog.plan99.net/the-resolution-of-the-bitcoin-experiment-
dabb30201f7)

edit: spacing

------
mudlus
This is pretty dated. Segwit has been implemented. The lightning network is
growing. No mention of sidechains like Liquid. No mention of Taproot.

Satoshi is great proof that you don't need to know everything to understand
something enough to make something, read some David Deutsch.

~~~
uncletammy
> Segwit has been implemented

Segwit adoption plateaued around 60% and has been steadily decreasing ever
since. It's a piss poor substitute for real scaling by increasing the block
size like Satoshi had intended. Even if it had been a good idea, the core devs
butchered the implementation.

> The lightning network is growing.

Not even close. The lightning network is the ultimate vaporware. It was
promised as the solution to Bitcoin's scaling problems NINE YEARS AGO (
[https://twitter.com/starkness/status/676599570898419712](https://twitter.com/starkness/status/676599570898419712)
) and is to this day considered unsafe and "experimental". It failed to
deliver on just about every promise it made. Even the core devs have abandoned
it for Liquid.

> No mention of sidechains like Liquid

Finally, we get to see the reason that a handful of Bitcoin core devs have
been holding Bitcoin hostage for ten years. Liquid is a centralized Bitcoin
sidechain that allows exchanges to pay extra in order to clear their
transactions faster than would otherwise be possible on Bitcoin's now neutered
base layer. Liquid was recently criticized for being fundamentally insecure
after this embarrassment ( [https://www.coindesk.com/blockstreams-liquid-
network-sent-8m...](https://www.coindesk.com/blockstreams-liquid-network-
sent-8m-in-btc-unsafely-says-bitcoin-developer) )

> No mention of Taproot.

Wake me when it's merged. The sad truth is, ever since some of the core devs
formed Blockstream and hijacked BTC, they have added almost no new features on
the protocol level. The only one they were willing to work on is Segwit and
only because it solidified their power over BTC. They have no incentive to
make BTC better. If BTC worked well, nobody would want to buy Liquid.

------
MrXOR
Was Satoshi a Cryptographer?

EDIT: (probably) No [1]

[1] [https://cointelegraph.com/news/satoshi-nakamoto-had-
outside-...](https://cointelegraph.com/news/satoshi-nakamoto-had-outside-
cryptography-help-says-early-bitcoin-dev)

~~~
claudiulodro
I like the theory that Satoshi was Paul Le Roux:
[https://en.wikipedia.org/wiki/Paul_Le_Roux#Satoshi_Nakamoto_...](https://en.wikipedia.org/wiki/Paul_Le_Roux#Satoshi_Nakamoto_candidate)

~~~
macspoofing
I think it's either Hal Finney or Dave Kleiman. Both have background in crypto
and security, and both have been deceased since early 2010s - just before the
meteoric rise of bitcoin. The second part is key, because given the prominence
and status of bitcoin they would have been unable to stay anonymous or silent.

~~~
heimatau
>I think it's either Hal Finney or Dave Kleiman.

You must be a new bitcoin user. Before Craig Wright came into the scene, has
anyone heard of Kleiman? Legit question. What evidence is there of Dave? Dave
wasn't even around then, zero evidence exists outside of CSW's claims.

~~~
mrkramer
American computer security specialists did. He was getting interviewed by US
TV stations so he had some reputation in the security industry.

And btw who heard of Jeff Bezos before Amazon? Nobody.

You can not judge somebody just by looking at their past. People change and
evolve.

~~~
heimatau
I apologize for not being clear enough. "has anyone heard of Kleiman? Legit
question." By this I mean what substantive proof exists that Kleiman was
interested with the underlying technologies that bitcoin incorporates?

> He was getting interviewed by US TV stations so he had some reputation in
> the security industry. The field is pretty vast. This is like saying because
> I've made websites, I can somehow fix your laptop. (I probably could but I
> couldn't come up with a solution fast and well thought out.) Satoshi was
> clearly meticulous about this, if you've read enough of their posts, it's
> clear as day.

> And btw who heard of Jeff Bezos before Amazon? Nobody. A lot of top talent
> is in hedge funds. So, I'm sure many people were looking. It is fair to say
> I choose a weak logical argument but the point is still valid (hopefully the
> added clarity to my intent pushes us deeper into our actual points).

> You can not judge somebody just by looking at their past. People change and
> evolve. Sure, this applies if we're trying to gauge someone's character but
> this doesn't apply in the expertise required to be Satoshi. Terry Tao
> (expert mathematician) isn't going to just randomly come up with the next
> bulletproof SHA function. It's out of his scope. Bitcoin is out of the scope
> of Kleiman's skillset. I have seen zero evidence to the contrary, other than
> a false narrative (perpetuated by 'news') that him and CSW created Bitcoin.
> Even the court has thrown out numerous dated evidence [1,2].

Being a computer forensics specialist doesn't easily port to creating a blend
of PGP, Hashcash, eCash, bitgold, etc. Satoshi was an expert at this stuff.
What evidence shows that Kleiman did anything? Even in the Kleiman/CSW court
cases, there isn't evidence that's been produced by either party. That's the
court of law. Please don't avoid this point, no evidence exists to tie Kleiman
even to the ideas of digital cash. I haven't seen any and I looked into it
heavily, maintaining an open mind. I got no dog in the fight, just a sizable
curiosity to this mysterious character.

[1] - [https://decrypt.co/21995/us-judge-throws-out-craig-
wrights-l...](https://decrypt.co/21995/us-judge-throws-out-craig-wrights-
latest-excuse) [2] - [http://blockchaingrade.org/experts-dissect-craig-
wrights-sat...](http://blockchaingrade.org/experts-dissect-craig-wrights-
satoshi-testimony-and-court-documents)

~~~
mrkramer
Like Gavin Andresen said Satoshi wasn't a cryptographer.

First reference in Bitcoin Whitepaper is "W. Dai, b-money". But Satoshi never
heard of it, Adam Back suggested to Satoshi to read it and he decided to
reference it in Bitcoin Whitepaper.

"I suggested Satoshi should look into B-Money, which he didn’t seem to know
about at that time, and this is how I think B-Money was added to the
paper."[1]

Satoshi said to Wei Dai "I was very interested to read your b-money page. I’m
getting ready to release a paper that expands on your ideas into a complete
working system. Adam Back (hashcash.org) noticed the similarities and pointed
me to your site."[2]

Satoshi seemed to be very good C++ programmer who had interests in electronic
cash and cryptography but not a cryptographer.

Look and hear what Gavin said in his presentation:

[https://youtu.be/rQ3e1Pzu7iI?t=766](https://youtu.be/rQ3e1Pzu7iI?t=766)

[1][https://cointelegraph.com/news/adam-back-on-satoshi-
emails-p...](https://cointelegraph.com/news/adam-back-on-satoshi-emails-
privacy-concerns-and-bitcoins-early-days)

[2][https://nakamotostudies.org/emails/satoshi-and-wei-dai-
corre...](https://nakamotostudies.org/emails/satoshi-and-wei-dai-
correspondence/)

~~~
heimatau
When I said 'no proof exists', I didn't mean 'no proof of authority'. I mean
no document exists. Assuming Satoshi 'covered ones tracks' is a straw-man
because then you open up the possibility to anyone being Satoshi, not an
exclusive person.

Please understand that many people talked with Satoshi through email as well.
Those emails are mostly private. When someone points to an authority, the
entire argument is a straw-man, even with someone very relevant to the
discussion.

> Satoshi seemed to be very good C++ programmer who had interests in
> electronic cash and cryptography but not a cryptographer.

What physical circumstantial evidence exists that is shows Kleiman was good at
anything you've described or was even interested in these during 2008 or
earlier (heck, I can't find anything prior to 2013)? What about any interest
into any digital cash/gold attempts?

The argument you're giving is fairly persistent in the crypto community. I'm
not entirely sure why, except intellectual laziness. The irony here is 'proof
of authority' argument...is an absolute contradiction to what bitcoin's
primary function is (trustless 3rd party system). Why are people lifting up a
3rd party and not the code/evidence? An opinion (no matter how relevant) isn't
what we're looking for, we are looking for evidence. Did scientific reasoning
leave everyone?

(edited for grammar)

------
ctulek
I won’t call Bitcoin a success as long as its value is measured in dollars.

~~~
sanjams
So is the euro not a success either? Or any other currency in the world for
that matter?

~~~
_heimdall
That's completely unrelated. The Euro wasn't designed as an alternative to
make USD obsolete. The Euro did do exactly what it was designed for, to unify
much of Europe under one currency and economic system.

------
moonbug
missed point 0: Economics.

