Theory of Bitcoin: The Bitcoin White Paper, second paragraph – CoinGeek

Bitcoin is not secured by cryptography! Thats important to understand, and you will understand it better after watching the latest Theory of Bitcoin episode with Bitcoin creator Dr. Craig S. Wright and Money Button founder (and now Engineering Head, Fabriik Smart Wallet) Ryan X. Charles.

Such is the level of minutiae the pair delve into in these conversations explaining Bitcoin philosophy, were in the third episode of the Bitcoin White Paper series and were only up to the second paragraph of the Introduction. However this is probably the right time to go deep, as it brings clarity to the technical details that come later.

Trivia: Dr. Wright prefers Hieronymus Bosch to Van Gogh. Its one of the many points that help to explain Bitcoin without actually talking about Bitcoin; something of which these video discussions have several.

Understanding Bitcoins (non-cryptographic) security model

Much of this discussion revolves around how Bitcoin is made secure. For many years, they point out, academics thought that a decentralized, peer-to-peer, timestamped server was an impossibility. And this is why it was necessary to examine security models outside the computer science field to find the answer.

This is why it was probably only possible for Bitcoin to come from the mind of a polymath whos studied a diverse range of fields. Dr. Wright talks about his experience analyzing the behavior of botnets, the rationality of criminals, and economic incentives both honest and dishonest, and how it led to Bitcoins security model.

Based on cryptographic proof instead of trustwhat does that mean? Charles asks. Dr. Wright explains how this kind of proof can verify an incident occurred, the identity of the parties involved (using external methods), and the details of the transaction itselfbut Bitcoins security is actually economic in nature.

This is why, if you hear someone say Bitcoin is secured by cryptography, it means theyre repeating something theyve heard elsewhere and probably dont understand Bitcoin.

Satoshi Nakamotos words have been misunderstood often. But were talking about normal parlance, not the hijacked language, Dr. Wright says.

Does such thing as cryptographic proof actually exist? Charles asks.

Yes, but only as an attestation. It can attest to a state. In law, digital signatures only work if theyre attached to a real-world identity. Because being able to decrypt something is not proof of anything, by itself.

Ergo, the proof that prevents the double-spending of a Bitcoin transaction is actually Bitcoins public ledger, not the cryptography. The hash itself isnt the security, its the fact you broadcast it to everyone.

Timestamping and the rationality of being honest

Using hashes and proof-of-work is merely the best way to order events in time. And with money transactions, timing is everythingthe first transaction is always the one that counts, at least in terms of what money went where.

Its computing power, CPU power, that processes transactions (not the hashing power itself). Dr. Wright says.

Ive heard people very specifically misunderstand this point, Charles says. This leads to a brief but still-relevant tangent on how and why its been misunderstood, why the rationale and use-cases for BTC seem to change regularly, and the various agendas people may have behind arguments to keep block sizes artificially small.

Economically rational behavior is what keeps Bitcoin honest, because it keeps those whove made large investments in processing Bitcoin transactions honest. It makes no sense to attempt a double-spend even with 51% of the network. Theres the issue of whether any money you could potentially make from doing so is really worth it, for one (spoiler: probably not). There is a cost to committing a crime, Dr. Wright says. How long can you keep the double-spend valid? Can you actually capture the money you made from the action, and then continue to avoid detection and retribution forever? (evidence on the blockchain ledger is permanent and widely disseminated, remember).

Criminals are often more rational in their actions than the average person, Dr. Wright says, for this very reason. Thus, the Bitcoin blockchain itself remains honest even if a few participants arent.

In the last section of the episode theres another tangent into objective truth which leads to a discussion of art appreciation, and the aforementioned Dutch painters. Overall its another fascinating dive into not only Bitcoin, but the minds and motives behind creating it. This extra knowledge not only builds a greater understanding of Bitcoin, but is also strangely comforting the next time you get into a discussion about Bitcoin yourself.

To watch previous episodes of the Theory of Bitcoin, subscribe to theTheory of Bitcoin YouTube channel here.

New to Bitcoin? Check out CoinGeeksBitcoin for Beginnerssection, the ultimate resource guide to learn more about Bitcoinas originally envisioned by Satoshi Nakamotoand blockchain.

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Theory of Bitcoin: The Bitcoin White Paper, second paragraph - CoinGeek