Bitcoin’s Academic Pedigree
Taken from Bitcoin’s Academic Pedigree
In your opinion, what did Satoshi "invent" that was truly innovative?
He did not invent linked timestamping.
He did not invent Merkle trees.
He did might have re-invented some concepts related to Byzantine Fault Tolerance. He does not cite any specific prior work in the Whitepaper related to this topic, although on the basis that papers had been released as early as 1982 and a landmark paper in 1999, the possibility that he simply built upon the "general idea" of the field of research seems more likely. The primary idea behind Satoshi’s BFT is that honest behaviour is (economically) incentivised, which takes some of the burden of otherwise assuming that honest behaviour can be blindly assumed.
Proof of Work (PoW) was initially concieved in 1992, with the aim of reducing (email) spam. Adam Back’s Hashcash from 1997 was released first as software, and later in 2002 as a Specicifcation (paper).
As the name suggests, in hashcash Back viewed proof of work as a form of cash. On his web page he positioned it as an alternative to David Chaum’s DigiCash, which was a system that issued untraceable digital cash from a bank to a user.3 He even made compromises to the technical design to make it appear more cashlike. Later, Back made comments suggesting that bitcoin was a straightforward extension of hashcash. Hashcash is simply not cash, however, because it has no protection against double spending. Hashcash tokens cannot be exchanged among peers.
Many other applications were quickly found for PoW a-la Hashcash.
In bitcoin, for the first time, puzzle solutions don’t constitute cash by themselves. Instead, they are merely used to secure the ledger. Solving proof of work is performed by specialized entities called miners (although Nakamoto underestimated just how specialized mining would become).
Miners are constantly in a race with each other to find the next puzzle solution; each miner solves a slightly different variant of the puzzle so that the chance of success is proportional to the fraction of global mining power that the miner controls. A miner who solves a puzzle gets to contribute the next batch, or block, of transactions to the ledger, which is based on linked timestamping. In exchange for the service of maintaining the ledger, a miner who contributes a block is rewarded with newly minted units of the currency. With high likelihood, if a miner contributes an invalid transaction or block, it will be rejected by the majority of other miners who contribute the following blocks, and this will also invalidate the block reward for the bad block. In this way, because of the monetary incentives, miners ensure each other’s compliance with the protocol.
Bitcoin neatly avoids the double-spending problem plaguing proof-of-work-as-cash schemes because it eschews puzzle solutions themselves having value. In fact, puzzle solutions are twice decoupled from economic value: the amount of work required to produce a block is a floating parameter (proportional to the global mining power), and further, the number of bitcoins issued per block is not fixed either. The block reward (which is how new bitcoins are minted) is set to halve every four years (in 2017, the reward is 12.5 bitcoins/block, down from 50 bitcoins/block). Bitcoin incorporates an additional reward scheme—namely, senders of transactions paying miners for the service of including the transaction in their blocks. It is expected that the market will determine transaction fees and miners' rewards.
Nakamoto’s genius, then, wasn’t any of the individual components of bitcoin, but rather the intricate way in which they fit together to breathe life into the system. The timestamping and Byzantine agreement researchers didn’t hit upon the idea of incentivizing nodes to be honest, nor, until 2005, of using proof of work to do away with identities. Conversely, the authors of hashcash, b-money, and bit gold didn’t incorporate the idea of a consensus algorithm to prevent double spending. In bitcoin, a secure ledger is necessary to prevent double spending and thus ensure that the currency has value. A valuable currency is necessary to reward miners. In turn, strength of mining power is necessary to secure the ledger. Without it, an adversary could amass more than 50 percent of the global mining power and thereby be able to generate blocks faster than the rest of the network, double-spend transactions, and effectively rewrite history, overrunning the system. Thus, bitcoin is bootstrapped, with a circular dependence among these three components. Nakamoto’s challenge was not just the design, but also convincing the initial community of users and miners to take a leap together into the unknown—back when a pizza cost 10,000 bitcoins and the network’s mining power was less than a trillionth of what it is today.
What is a Sybil Attack, and how has it been solved in the past? How does proof of work enable Sybil resistance for new nodes joining the Bitcoin network?
What is the "fair exchange" problem, and how does it apply to the blockchain?
Why do the authors of Bitcoin’s Academic Pedigree believe that bitcoin was ignored by academia for a long time? What reputation/relationship does bitcoin have with academia today?