Blockchain Cryptocurrencies In Depth

10 years on, we look at Bitcoin founder Satoshi Nakamoto’s groundbreaking work

The early passages of Satoshi Nakomoto’s paper Bitcoin: An Electronic Peer-to-Peer Cash System betrays little of the achievements, and subsequent seismic events, it sets into motion.

Written in LateX in a matter of fact tone, the paper lets loose on the inherent corruption of trust and states that ‘[w]hat 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.’

10 years later, Nakamoto’s dry tone still gives no suggestion as to the attack it was advancing against the existing financial world order. Many at the time sought to discredit the system as purely a playing ground for crypto-geeks and drug-dealers. Yet a decade on with Bitcoin soaring and having its moment in the mainstream, it’s difficult to deny the crucial elements of this first cryptocurrency exchange that had been laid down in this paper.

Firstly, their ability to remove the middleman  (which Nakomoto calls the double-spending problem) by creating a timestamp server that allows parties to see clearly the chronology of events. As the paper puts it, ‘a timestamp server works by taking a hash of a block of items to be timestamped and widely publishing the hash, such as in a newspaper.’ The hash here being a six-digit sequence that incorporated into a transaction and stored. Without explicitly stating what is now established lingo, Nakomoto gave us blockchain- in 5 lines of text and a rudimentary diagram that looks like it could have been sketched by a 5-year-old.

Nakomoto then piggybacks onto Hashcash in providing an effective proof-of-work system that deters attackers and scammers that make it exponentially difficult for them which is measured  ‘by a moving average targeting an average number of blocks per hour’ rather than the speed of the hardware. The network is then formed recursively by a set of rules that favour long chains of nodes. Once again, the paper’s author refers to the incentives that attackers might have in keeping the nodes honest and playing by the rules. He also uses his first analogy in the process: ‘The steady addition of a constant of amount of new coins is analogous to gold miners expending resources to add gold to circulation.’ And so mining enters the lexicon. a few pages later, and Nakomoto himself disappears from the limelight.

Nakomoto’s smooth prose writing gives little clue to who the man really is though some sure-minded folk, without any real justification, believe that the calibre of English could not possibly be from a middle-aged Japanese man. But everyone loves a mystery – so much so that the coin-spiracy theorists have a bunch of candidates who are the real Nakomoto.

In an age where nothing is private anymore, an identity that has been kept from the public at large draws intense speculation. Prior to pseudonomous author Elena Ferrante being outed as a translator in Rome, many mysterious identities had captured the public imagination including the secretive mathematicians of Bourbaki and the Italian writer-collective Wu Ming. Which is why the ‘best kept secret’ behind the true identity of Bitcoin’s creator – one Mr Satoshi Nakomoto—10 years after a pioneering work was published under his name, remains a mystery to be marvelled at.

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