It truly is a wonderful paper. Lots of information in it.
You don't need that much background knowledge to understand it, but it can take a few reads to wrap your mind around it.
I would suggest also taking a look at the annotated version of the whitepaper on Fermat's Library:
I wrote some of the annotations and tried as much as possible to make it so that this annotated version would provide a motivated reader with all the resources needed to truly understand the bitcoin protocol.
Yeah, the whitepaper is very approachable. It's amazing how simple it is.
Along similar lines (complex topics explained beautifully and simply by their creators), I recommend Relativity: The Special and General Theory[1] by the man himself. It's a great explanation of relativity without the need to have a strong math background. He explains it in the form of thought experiments, as only he could do. "What if you were in a cage in space with a rope tied to the top and it was being pulled upward by a giant at a constant acceleration (simulating gravity)? How would you perceive the world?" (Spoiler: This is gravity.) "What if you were on a spinning disk and had a ruler and tried to calculate pi?" "What if you were on a train moving really fast and two lightning bolts struck at the same time?"
When I first started learning about Bitcoin, I automatically assumed that the whitepaper would be filled with all kinds of fluff like most other research papers, so I never read it.
Instead I tried to learn from all the "Learn Bitcoin in 10 minutes", "Build your own Blockchain in 200 lines", and all that stuff, all of which are nothing more than a shallow scraping the surface type of pop-sci content.
The problem with these Medium articles and "intro to Bitcoin" posts is that they're trying too hard to abstract out something that's already simple, that the abstraction itself is much more complex than what it actually is. Not to mention the fact that after reading all that stuff, all you come away with is some abstraction, not the actual Bitcoin.
Anyway, so I thought why not just take a look at the whitepaper. And I was blown away. I've never seen a "research paper" with so little fluff. The whitepaper helped me understand Bitcoin much better than all the weird analogy intro blog posts that litter the web.
I recommend anyone to just start from the whitepaper.
I think I see where you're coming from here. When I see something typeset with Latex/in the Computer Modern font...the quick assumption I make is that I'm not going to understand a single word of it.
Surely, if 1000 people own 40% of a currency which had evangelical aims to service 7.5 billion people, then it is impossible to call it decentralised... Add this to the obvious fact that the vast majority of new bitcoins mined are from china, which due to the scale of processing power now has a monopoly due to capital barriers. The conclusion is... great experiment, but as in all deliberate implementations of social ,political, or economic theory. The real world is a very different beast to one man's view from a desk. I feel sorry for any new uneducated investors getting in now. This has become nothing more than a pyramid scheme that adds no value whatsoever to the world. Not cryptocurrency as an idea, but bitcoin's current iteration and implementation.
> Surely, if 1000 people own 40% of a currency which had evangelical aims to service 7.5 billion people, then it is impossible to call it decentralised...
Decentralized can have many meanings. What is important is that you can transact with anyone without a third party having any say. For that 99% of all coins could be in the hands of a single person as long as there would be enough left for others to use.
> Add this to the obvious fact that the vast majority of new bitcoins mined are from china, which due to the scale of processing power now has a monopoly due to capital barriers
As long as they do not collude to destroy or disrupt the network it has no relevance at all.
> This has become nothing more than a pyramid scheme that adds no value whatsoever to the world. Not cryptocurrency as an idea, but bitcoin's current iteration and implementation.
As Bitcoin is practically useless due to high fees and congestion, I agree. But not because the reasons you gave.
The white paper doesn't discuss wealth distribution at all. Bitcoin is a critique of money involving trust in entities not party to a transaction, and not much else. Where this leads us as far as far as wealth distribution goes is potentially interesting, but was never evangelized by the white paper or the community that built it.
The idea that money should be distributed more broadly than 1000 people controlling 40% of it sounds really nice, but it is missing the level of formalism that Bitcoin brings to the question of money.
> Surely, if 1000 people own 40% of a currency which had evangelical aims to service 7.5 billion people, then it is impossible to call it decentralised
Haha. Where do you get that? If a random guy says you so, don't believe in him.
In my view Bitcoin as a very important flaw it's distribution timing it should have been scheduled with a more linear curve and to last at least 100 years so you can achieve a fairer distribution or alternatively to have a small inflation system built in.
cryptocurrency can be used in the background for fiat money settlements, It has made me a better software engineer for sure, secure code will always be in fashion. Also the majority of online gambling which is a billion dollar industry is better suited with cryptocurrency. I don't think it is going away, it could crash 80% and I still wouldnt sell as long as the money remains programmable.
Equally elucidating are the responses on the Cryptography List from other cryptographers[1], plus the responses a few months later when Bitcoin 0.1 was released[2].
You can pretty easily tell which cryptographers read the whitepaper and which ones did not. :)
> I made the proof-of-work difficulty ridiculously easy to start with, so for a little while in the beginning a typical PC will be able to generate coins in just a few hours.
If only I had given up “just a few hours” back in 2009...
Thanks for sharing this. Of all the Sathoshi candidates, Hal Finney seems to be the closest (Not my analysis, but I tend to concur). Although he always denied it. When I read this[1] early reply by him, he seems to totally grok it.
I love reading papers that solve fundamental, well-known problems.
They frequently seem so obvious after-the-fact, like "how did we miss this?" Like, here, stated in just a few pages, is an idea that so many smart people have been chasing after for years. And it's presented so well that it seems intuitive, when in reality it was a very difficult challenge.
If anyone is wondering, the answer is that the academics had blinders on in their search for a cryptographic solution to the problem of decentralized transaction ordering, an impossible thing. Satoshi's solution is to accept that impossibility and use economic incentives to achieve eventual consensus instead, and it turns out eventual consensus is good enough.
The document is littered with references to CPUs, including the phrase "one CPU one vote." I think a Bitcoin where CPUs were doing the blockchain processing would be much different that the current one dominated by farms of dedicated hardware. I don't know if it would be better, but I think this is a pretty stark reminder that Bitcoin is not behaving as intended.
This has turned into an interesting question since some coins now are specifically designed to be resistant to ASICs. The downside for those coins is that botnets or general purpose hardware (that can be purchased or rented for an attack and then resold for other uses later) are a serious threat to the network. A potential benefit for Bitcoin is that the network may actually be more secure with custom ASICS because the people investing millions into developing the custom hardware stand to lose everything if they attack or seriously harm the network. That equipment would be useless for any other purpose, and that same dominating hardware makes the Bitcoin network immune to attack from general purpose hardware.
Satoshi's mining/minting algorithm is manipulative by design.
Less computational energy and the least amount if users produced the most coins (for minimal external capital input).
Satoshi could have used a linear curve anticipating network growth matching minting and computational increase, but instead choose to exploit late adopters.
Early adopters will attempt to psychologically exploit new users by selling their asset for more than the cost of production and acquisition.
This has directly created the situation where utility is not in use but in exploitation of passing the hot potato to greater fools.
Because creating the blockchain hasn't yet been shown to have either advanced the field of the study of economics, or increased our understanding of economics. It is often years later that economists are awarded.
Giving an award for Bitcoin right now would seem more like giving an award to the financial institutions that created securitized loan products before the housing crisis. Right now it seems more like a novelty technology that hasn't yet made itself relevant for long-term innovation except to generate excitement about it.
And you underestimate that you still can't give someone an award who does not exist to receive it.
This paper packs an enormous idea into a tiny package. It's worth reading - and re-reading.
If you've studied electronic cash systems and/or cryptographic systems before, the paper is quite easy to read. Otherwise it's a challenge. At least that's what I found.
Here's a companion article that fills in some of the blanks.
It seems to me, an understanding of financial systems and macroeconomics is much more useful (or at least as useful) in evaluating a currency than the technology behind it.
There's plenty of people who understand the blockchain quite well who have a pretty ... imaginative understanding of monetary theory.
Most of the information you need to understand to invest in Bitcoin (e.g. the distributed boiler room) is not contained in the white paper at all. Now that people are using Bitcoin as digital gold or digital tulips, one could even argue that the white paper is misleading.
Do you know how a fridge works? How about an airplane? How about how to make steel? How to sew a shirt? How to drill and process oil to make gasoline? Every level of the internet stack? How to program hardware drivers? How to farm everything you eat?
The white paper is very approachable, and Bitcoins is a technical marvel. My big problem with Bitcoins has nothing to do with blockchains, trust or even security. All of that looks great. My problem with Bitcoin is simply that it’s a deflationary currency, and can only ever be a deflationary currency.
Prove me wrong by spending, lending or investing your Bitcoins.
The reason being is that the owners of Bitcoin.org are actively trying to rewrite the white paper even against the larger community’s wishes. I believe sometime in the near future the owners will go ahead with their plans anyways as they seem to do that when it comes to other issues too.
I still don’t get how if I start trying a proof of work, and someone faster than me finishes the same proof of Work first, I would never mine a single bitcoin? Is that even the right question?
There's no continuous project you're working on. It's just getting a lot of chances of winning the lottery. If someone finishes before you, you just slightly alter the number you're searching for and continue on. You're also not really working towards the same thing. Your solution probably includes you sending the blockreward to yourself and their solution includes them sending it to themselves too, on top of that you may also choose other secondary transactions. The chosen transactions influence the number you need to find.
It does happen that two blocks are found at nearly the same time, before adjustments can be made. In those cases one of the two ends up getting 'orphaned', it's relatively rare compared to normal blocks though.
More hashpower inceeases the likelihood that your find your block before the other guy, but the PoW is stateless, there's no "progress" made u til you find the solution, it's purely random each time you increment the nonce and try a new hash, thus expected rewards follow a poisson distribution.
> someone faster than me finishes the same proof of Work first, I would never mine a single bitcoin?
That's right.
Now, probabilistically, you'd occasionally get lucky and get the full (big) mining reward, in proportion to your fraction of total hash power.
The alternative is that you join a mining pool, and then receive the same amount (in expectation), minus the pool fee, but with much smaller variance, as the larger pool will much more frequently get lucky and then distribute the reward (minus the pool fee) to the contributors in proportion to their hash power.
But either way, your expected reward will be approximately the same, whether or not you work in a pool (modulo the pool fee), it's just whether you get a large amount very rarely or a small amount very often.
I’d be interested in everyone else’s opinion about the odds that Bitcoin becomes an asset class to rival gold (say at least $2T market cap vs the $8T gold currently is). Right now I’m guessing 20%. Those odds still make the current price a positive expected value (since the 1/5 future has such a handsome payoff), but with a 4/5 chance of failure it wouldn’t be very smart to do this with more than a few percent of net worth. Thoughts?
I view this paper with both love and hate. I think it's technically brilliant and fascinating, and at the same time incredibly naive and will do far more harm than good in this world.
While a trust free payment mechanism sounds wonderful, this implementation cannot succeed in the real world. In my mind proof-of-work is already an ecological disaster. As long as the price of bitcoin goes up, there is an incentive for miners to commit more energy and resources - yet those resources do not increase productivity. Whether there is 1 transaction or 200k, Megawatts are wasted to mine that block. I doubt 99% of people getting into Bitcoin have a remote understanding of how this works. This concerns me far more than the threat of upending governments - my biggest fear is in fact that governments will instead choose to adopt this technology because they would love the ability to track the history of every transaction.
While there are several proposed solutions to many of bitcoins weaknesses, we live in the real world, and the real world goes where the money is. While bitcoin is decentralized in design, in reality, it is controlled by a few mining factions who ultimately control what code enhancements get adopted and how the game is played. Why would they want to increase the block-size, when a smaller block will lead to greater fees? Running a full node is getting expensive, and soon, only the deep pockets will be left to guard.
People will never get bitcoin. It's simply too confusing for the average person. The user experience is a disaster. You're telling me once I buy bitcoin, I'm supposed to transfer it to a hardware wallet? What's a hardware wallet? Wait, so if I accidentally am off by one character in the address I sent money too it's gone forever? There's no one I can call? Bitcoin should never have been any more than just a novelty for the technically inclined, or a technology used for something other than a currency. It's why I can't stand Coinbase - they are lining up the naive (and greedy) masses into the slaughterhouse.
I have non-technical friends who do not understand that their bitcoin is not backed by anything. They do not understand that the money they put in, was immediately taken out by someone else, and that the price of bitcoin is just a funny number. The $XXX billion dollar market cap is fiction. Owning a bitcoin does not give you claim to the output of some productive asset like a stock would. Unfortunately, history tells us we're in the early innings. The real dumb money is just getting in the door. But when the music stops, and the evangelists have squeezed enough out of this lemon, that funny number will go back to zero. And a lot of people who couldn't afford it will get really hurt.
I'm confident that I could be making a killing in bitcoin right now. But it's not about the money for me - my conscience just keeps saying stay away. I really hope either I've completely got it wrong or bitcoin just dies soon.
You managed to cram so much wrong into a post it's unbelievable. Let's start with your 'off by one' address scare tactic. Bitcoin addresses contain a built-in check code, so it's generally not possible to send Bitcoins to a mistyped address.
Ecological concerns? A global, nacent value exchange system uses a little more than the total electricity of holiday lights. In fact many miners use cheap unused energy that would be otherwise costly to build infrastructure to sell normally.
[+] [-] joaobatalha|8 years ago|reply
I would suggest also taking a look at the annotated version of the whitepaper on Fermat's Library:
- https://fermatslibrary.com/s/bitcoin
I wrote some of the annotations and tried as much as possible to make it so that this annotated version would provide a motivated reader with all the resources needed to truly understand the bitcoin protocol.
Michael Nielsen's blogpost about Bitcoin (http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-a...) is also a great read.
[+] [-] kharms|8 years ago|reply
[+] [-] knight17|8 years ago|reply
[+] [-] sayurichick|8 years ago|reply
https://learnbitcoin.cash
there is even a faucet (pretty much the site sends you a few pennies worth of BCH for free) and instructions to setup a wallet.
[+] [-] superquest|8 years ago|reply
When I finally (recently) did I was dumbstruck by its simplicity.
This was a big lesson for me: I should always at least try to understand these big ideas even if deep understanding will probably elude me.
[+] [-] zeven7|8 years ago|reply
Along similar lines (complex topics explained beautifully and simply by their creators), I recommend Relativity: The Special and General Theory[1] by the man himself. It's a great explanation of relativity without the need to have a strong math background. He explains it in the form of thought experiments, as only he could do. "What if you were in a cage in space with a rope tied to the top and it was being pulled upward by a giant at a constant acceleration (simulating gravity)? How would you perceive the world?" (Spoiler: This is gravity.) "What if you were on a spinning disk and had a ruler and tried to calculate pi?" "What if you were on a train moving really fast and two lightning bolts struck at the same time?"
[1] https://www.amazon.com/Relativity-Special-General-Albert-Ein...
[+] [-] cocktailpeanuts|8 years ago|reply
When I first started learning about Bitcoin, I automatically assumed that the whitepaper would be filled with all kinds of fluff like most other research papers, so I never read it.
Instead I tried to learn from all the "Learn Bitcoin in 10 minutes", "Build your own Blockchain in 200 lines", and all that stuff, all of which are nothing more than a shallow scraping the surface type of pop-sci content.
The problem with these Medium articles and "intro to Bitcoin" posts is that they're trying too hard to abstract out something that's already simple, that the abstraction itself is much more complex than what it actually is. Not to mention the fact that after reading all that stuff, all you come away with is some abstraction, not the actual Bitcoin.
Anyway, so I thought why not just take a look at the whitepaper. And I was blown away. I've never seen a "research paper" with so little fluff. The whitepaper helped me understand Bitcoin much better than all the weird analogy intro blog posts that litter the web.
I recommend anyone to just start from the whitepaper.
[+] [-] ashleyn|8 years ago|reply
[+] [-] hug0|8 years ago|reply
[+] [-] lawn|8 years ago|reply
Decentralized can have many meanings. What is important is that you can transact with anyone without a third party having any say. For that 99% of all coins could be in the hands of a single person as long as there would be enough left for others to use.
> Add this to the obvious fact that the vast majority of new bitcoins mined are from china, which due to the scale of processing power now has a monopoly due to capital barriers
As long as they do not collude to destroy or disrupt the network it has no relevance at all.
> This has become nothing more than a pyramid scheme that adds no value whatsoever to the world. Not cryptocurrency as an idea, but bitcoin's current iteration and implementation.
As Bitcoin is practically useless due to high fees and congestion, I agree. But not because the reasons you gave.
[+] [-] ftlio|8 years ago|reply
The idea that money should be distributed more broadly than 1000 people controlling 40% of it sounds really nice, but it is missing the level of formalism that Bitcoin brings to the question of money.
[+] [-] pcdinh|8 years ago|reply
Haha. Where do you get that? If a random guy says you so, don't believe in him.
[+] [-] FreeRadical|8 years ago|reply
[+] [-] elmar|8 years ago|reply
[+] [-] ojr|8 years ago|reply
[+] [-] jancsika|8 years ago|reply
You can pretty easily tell which cryptographers read the whitepaper and which ones did not. :)
[1]: http://www.metzdowd.com/pipermail/cryptography/2008-October/...
[2]: http://www.metzdowd.com/pipermail/cryptography/2009-January/...
[+] [-] Lxr|8 years ago|reply
If only I had given up “just a few hours” back in 2009...
[+] [-] aws_ls|8 years ago|reply
[1] http://www.metzdowd.com/pipermail/cryptography/2009-January/...
[+] [-] 2bitencryption|8 years ago|reply
They frequently seem so obvious after-the-fact, like "how did we miss this?" Like, here, stated in just a few pages, is an idea that so many smart people have been chasing after for years. And it's presented so well that it seems intuitive, when in reality it was a very difficult challenge.
[+] [-] garmaine|8 years ago|reply
If anyone is wondering, the answer is that the academics had blinders on in their search for a cryptographic solution to the problem of decentralized transaction ordering, an impossible thing. Satoshi's solution is to accept that impossibility and use economic incentives to achieve eventual consensus instead, and it turns out eventual consensus is good enough.
[+] [-] cwyers|8 years ago|reply
[+] [-] the_real_sparky|8 years ago|reply
[+] [-] cryptodogemoon|8 years ago|reply
Less computational energy and the least amount if users produced the most coins (for minimal external capital input).
Satoshi could have used a linear curve anticipating network growth matching minting and computational increase, but instead choose to exploit late adopters.
Early adopters will attempt to psychologically exploit new users by selling their asset for more than the cost of production and acquisition.
This has directly created the situation where utility is not in use but in exploitation of passing the hot potato to greater fools.
ecash should not exploit new users.
[+] [-] cyphunk|8 years ago|reply
[+] [-] gtrubetskoy|8 years ago|reply
[+] [-] shripadk|8 years ago|reply
[+] [-] TheCowboy|8 years ago|reply
Giving an award for Bitcoin right now would seem more like giving an award to the financial institutions that created securitized loan products before the housing crisis. Right now it seems more like a novelty technology that hasn't yet made itself relevant for long-term innovation except to generate excitement about it.
And you underestimate that you still can't give someone an award who does not exist to receive it.
[+] [-] jokoon|8 years ago|reply
It would justify a Nobel in software engineering, not economics.
[+] [-] Method-X|8 years ago|reply
[+] [-] garmaine|8 years ago|reply
[+] [-] apo|8 years ago|reply
If you've studied electronic cash systems and/or cryptographic systems before, the paper is quite easy to read. Otherwise it's a challenge. At least that's what I found.
Here's a companion article that fills in some of the blanks.
https://bitzuma.com/posts/how-bitcoin-works/
[+] [-] maerF0x0|8 years ago|reply
[+] [-] michaelchisari|8 years ago|reply
There's plenty of people who understand the blockchain quite well who have a pretty ... imaginative understanding of monetary theory.
[+] [-] wmf|8 years ago|reply
[+] [-] pfisch|8 years ago|reply
Do you see how stupid what you are saying is yet?
[+] [-] pimmen|8 years ago|reply
Prove me wrong by spending, lending or investing your Bitcoins.
[+] [-] DavidShares|8 years ago|reply
The reason being is that the owners of Bitcoin.org are actively trying to rewrite the white paper even against the larger community’s wishes. I believe sometime in the near future the owners will go ahead with their plans anyways as they seem to do that when it comes to other issues too.
Ref:
https://github.com/bitcoin-dot-org/bitcoin.org/issues/1904#i...
https://github.com/bitcoin-dot-org/bitcoin.org/issues/1325
[+] [-] cyrildorsaz|8 years ago|reply
[+] [-] qsucvatz|8 years ago|reply
[+] [-] m3kw9|8 years ago|reply
[+] [-] dan_mctree|8 years ago|reply
It does happen that two blocks are found at nearly the same time, before adjustments can be made. In those cases one of the two ends up getting 'orphaned', it's relatively rare compared to normal blocks though.
[+] [-] improv32|8 years ago|reply
[+] [-] FabHK|8 years ago|reply
That's right.
Now, probabilistically, you'd occasionally get lucky and get the full (big) mining reward, in proportion to your fraction of total hash power.
The alternative is that you join a mining pool, and then receive the same amount (in expectation), minus the pool fee, but with much smaller variance, as the larger pool will much more frequently get lucky and then distribute the reward (minus the pool fee) to the contributors in proportion to their hash power.
But either way, your expected reward will be approximately the same, whether or not you work in a pool (modulo the pool fee), it's just whether you get a large amount very rarely or a small amount very often.
[+] [-] tromp|8 years ago|reply
[+] [-] the_real_sparky|8 years ago|reply
[+] [-] fartnuggs|8 years ago|reply
Back to low fees, on chain scaling, and the future of p2p cash!
[+] [-] cyphunk|8 years ago|reply
[+] [-] scottnyc|8 years ago|reply
While a trust free payment mechanism sounds wonderful, this implementation cannot succeed in the real world. In my mind proof-of-work is already an ecological disaster. As long as the price of bitcoin goes up, there is an incentive for miners to commit more energy and resources - yet those resources do not increase productivity. Whether there is 1 transaction or 200k, Megawatts are wasted to mine that block. I doubt 99% of people getting into Bitcoin have a remote understanding of how this works. This concerns me far more than the threat of upending governments - my biggest fear is in fact that governments will instead choose to adopt this technology because they would love the ability to track the history of every transaction.
While there are several proposed solutions to many of bitcoins weaknesses, we live in the real world, and the real world goes where the money is. While bitcoin is decentralized in design, in reality, it is controlled by a few mining factions who ultimately control what code enhancements get adopted and how the game is played. Why would they want to increase the block-size, when a smaller block will lead to greater fees? Running a full node is getting expensive, and soon, only the deep pockets will be left to guard.
People will never get bitcoin. It's simply too confusing for the average person. The user experience is a disaster. You're telling me once I buy bitcoin, I'm supposed to transfer it to a hardware wallet? What's a hardware wallet? Wait, so if I accidentally am off by one character in the address I sent money too it's gone forever? There's no one I can call? Bitcoin should never have been any more than just a novelty for the technically inclined, or a technology used for something other than a currency. It's why I can't stand Coinbase - they are lining up the naive (and greedy) masses into the slaughterhouse.
I have non-technical friends who do not understand that their bitcoin is not backed by anything. They do not understand that the money they put in, was immediately taken out by someone else, and that the price of bitcoin is just a funny number. The $XXX billion dollar market cap is fiction. Owning a bitcoin does not give you claim to the output of some productive asset like a stock would. Unfortunately, history tells us we're in the early innings. The real dumb money is just getting in the door. But when the music stops, and the evangelists have squeezed enough out of this lemon, that funny number will go back to zero. And a lot of people who couldn't afford it will get really hurt.
I'm confident that I could be making a killing in bitcoin right now. But it's not about the money for me - my conscience just keeps saying stay away. I really hope either I've completely got it wrong or bitcoin just dies soon.
[+] [-] nmj|8 years ago|reply
https://en.bitcoin.it/wiki/Address
Ecological concerns? A global, nacent value exchange system uses a little more than the total electricity of holiday lights. In fact many miners use cheap unused energy that would be otherwise costly to build infrastructure to sell normally.
https://icenter.co/chinese-hydroelectric-crackdown-herald-de...
Too confusing? Seems familiar. Here's a video from 1994 with some talk show hosts confused about 'internet'. Just watch this, please.
https://www.youtube.com/watch?v=UlJku_CSyNg
[+] [-] jeandejean|8 years ago|reply