Fulfilling Satoshi’s Vision
https://medium.com/@EricRSammons/fulfilling-satoshi-s-vision-605e80845d0f#.spg7w1eas
Fulfilling Satoshi’s Vision
The legend of Satoshi Nakamoto, the creator of Bitcoin, has reached nearly mythical proportions. At a time when the world was reeling from financial crisis after financial crisis, this unknown, unassuming man introduced a radical idea: what if instead of depending on governments — and the men and women who run them — to determine our financial fate, we could find a technological solution? A solution that defies convention: a cryptographically secure digital currency that can be trusted because it is trustless, that can be stable because it is digital, and that was created by man but isn’t beholden to man’s whims. Initially Satoshi was ignored, ridiculed, and dismissed, but that only deepens the mythology behind the man. Despite these obstacles, his solution — Bitcoin — has become a legitimate currency that has the potential to change the world of economics and finance forever.
Satoshi’s mysterious disappearance a few years ago only heightens the fervor surrounding him. Within the Bitcoin community, if someone can show Satoshi’s support for his ideas, then he is sure to get widespread acceptance. Likewise, any effort to change one of Satoshi’s fundamental principles — such as the 21 million bitcoins money supply — is sure to be rejected with extreme prejudice. This widespread devotion to Satoshi has been largely beneficial to Bitcoin, for devotion to Satoshi usually means devotion to his vision. But like any devotion, it can be misapplied, and what appears to be faithfulness to Satoshi’s ideas can actually become a deviation from them. Bitcoin is in danger of this happening right now.
Technological and Economic Genius
Most people are good at a few things, and the really brilliant are very, very good at one thing. Think of the world-class concert pianist — he may be terrible at math or science, but he is outstanding in his one field of expertise. Satoshi Nakamoto stands out from even that select crowd by being a genius at two distinct disciplines: technology and economics. An intimate understanding of both disciplines was necessary to create Bitcoin. Without technological expertise, he would never have been able to create a secure, stable, digital currency. But without economic expertise, his technological creation would have likely been worthless — tokens shared between a few geeks until the fad dissipated. By being a genius in both field, Satoshi succeeded in creating a unique synthesis that is both a technological and an economic marvel. One can never overstate the brilliance behind the creation of Bitcoin.
With the disappearance of Satoshi, it has been left to lesser individuals to guide the project forward. As Bitcoin continues to grow and be developed, there are unfortunately no new Satoshis around to guide it. Some of those involved might be outstanding technological giants (even more technologically adept than Satoshi himself, perhaps?), and others might be outstanding in the field of economics. However, without Satoshi, it is up to the Bitcoin community to meld the principles of both these fields soundly to keep Bitcoin growing, robust, and in line with Satoshi’s original vision. Unfortunately, events in recent months do not provide hope that Satoshi’s brilliant meld of economic and technical imperatives is being carried forward. It seems rather that the technological savants have set the path for Bitcoin, oftentimes at the expense of economic reasoning.
The blocksize debate is of course the primary arena of this deviation. What was initially a simple anti-spam measure — the 1MB block size limit — has turned into a sacred number that cannot be changed. The significant economic problems with maintaining the 1MB limit are ignored, with promises of grand future technological solutions (Segregated Witness, Sidechains, Lightning Network) to allegedly resolve any issues. Instead of seeing that the actions of users reveal their economic incentives, many Bitcoin leaders instead want to allow only certain transactions on the main Bitcoin network, dismissing all others as “spam” or otherwise somehow unworthy of being included on the Bitcoin blockchain. Unlike Satoshi, who allowed technology to serve his economic vision, the core developers are letting technology get in the way of sound economics.
This is changing the economic vision from an “electronic payment system” (as Satoshi called Bitcoin in his original whitepaper) to an end-of-the-line backend settlement system.
Satoshi’s Revenge
But the genius of Satoshi lives on, for he created a “failsafe” in Bitcoin to prevent his vision from ever being truly co-opted. He made Bitcoin open-source. Because it is open-source, anyone, for any reason, can fork Bitcoin and create his or her own cryptocurrency. If Bitcoin were to deviate too much from Satoshi’s vision, there is nothing to prevent another person, or group of people, from making a cryptocurrency more in line with his original ideals.
Some people, in their devotion to Satoshi, believe that Bitcoin, and Bitcoin alone, is the only possible digital currency that can be faithful to Satoshi. Any altcoin is by their definition a scam or technologically bankrupt. But as I’ve argued before, altcoins are an important part of the cryptocurrency ecosystem, and in fact might be necessary to keep Satoshi’s original vision alive.
I’ve elucidated previously three arguments for the need for altcoins. Let me expand on them further here:
Altcoins provide competition for Bitcoin. I have heard many Bitcoin maximalists argue that no coin can ever truly compete with Bitcoin. It has already won. They dismiss altcoins as utterly unworthy of discussion, but soon enough they’ll be preaching to an empty room considering the rate at which Bitcoin users are fleeing to these very altcoins. Not long ago the Bitcoin market cap was over 90% of the total cryptocurrency market; now it is under 80%. Further, innovation is happening at a break-neck speed with altcoins, while Bitcoin can’t even change one constant.
Altcoins allow for experimentation. Many altcoins will fail. In fact, most altcoins will fail. But failure is the first step to success. Without the failures of previous altcoins to confirm what doesn’t work, we can’t know what definitively will work in the future. By having smaller coins experiment, altcoins allow for innovation to occur at a fast pace.
Altcoins provide for niche solutions. Satoshi envisioned a peer-to-peer electronic cash system, but the world has come to realize that cryptocurrency and blockchain technology can be much, much more. Projects such as Ethereum and MaidSafe push the boundaries of what we think blockchains can do. Any wholesale dismissal of altcoins exposes limited thinking and a failure of imagination.
Will an altcoin eventually supplant Bitcoin? I don’t know and no one else does either. The beautiful thing about this space is that no one is declared the permanent winner — the market can shift from one coin to the next depending on how well a coin meets the market’s needs. My guess is that there will be many winners, because cryptocurrency technology can be used to solve a variety of real-world problems.
But is any altcoin currently in the running to fulfill Satoshi’s vision of a “electronic payment system” that can challenge Bitcoin’s dominance? There are a few contestants, but the project I think has the best potential is Dash, for it is determined to address the weaknesses of Bitcoin, while building on its strengths.
Dash: Satoshi’s Vision Fulfilled?
Now that Bitcoin has been in existence for more than seven years, both its strengths and its weaknesses have been revealed. For a project that was initially ignored and then mocked by the financial world (and had its obituary written countless times), Bitcoin is amazingly resilient. It has shown to the world that blockchain technology works, and, for certain use cases, works amazingly well. It has solved the problem of exchanging value between strangers without trusting a third party. Those of us who have been involved in Bitcoin for years should step back every once in a while and marvel at its capabilities. It is truly a technological and economic miracle.
However, the past seven years have also exposed some of Bitcoin’s weaknesses. Here are the main ones:
1) Scalability. Bitcoin, as currently designed, is incapable of handling the number of transactions necessary for it to be a truly global payment network. How that capacity can be increased has been hotly debated, which leads us to the next weakness.
2) Governance. As has been clearly demonstrated in the ongoing Block Size debate, efforts to scale Bitcoin have been fraught with dissension and acrimony (with no real changes yet to show for it). Decision-making power has coalesced around a few core developers, backed by a small circle of miners, with little avenue for the majority of Bitcoin users to have any say in the direction of the project.
3) Slow confirmation times. A true payment system needs to be instant; however, Bitcoin transactions take on average 10 minutes to be secured (confirmed), which is an unacceptable amount of time for commerce in the 21st century. And lately that first confirmation can take much, much longer, due to increasing (and increasingly ignored) network congestion.
4) Anonymity. Bitcoin has never been truly anonymous, but instead pseudononymous. However, in order to be truly fungible, a currency needs complete anonymity. It doesn’t matter if the currency was previously used by drug-dealers, pedophiles, or politicians, those coins should be worth the same as coins used in more pristine hands. Further, recording transactions publicly on the blockchain has other downsides, such as the inability of companies and individuals to protect their financial information from prying eyes.
5) Ease of Use. Bitcoin is still in the early adopter phase, and as such, it is still difficult for the average person to use. But ever since Bitcoin hit mainstream consciousness (around late 2013), promises of improving ease-of-use have been common, while actual improvements have been nonexistent. Making something as complex as Bitcoin easier to use is easier said than done.
Dash, as a fork of Bitcoin, maintains the strengths of its elder brother, but let’s look at how it is working to address each of Bitcoin’s weaknesses:
1. Masternode Network. Dash has incorporated an innovative 2nd-tier network of nodes that powers the cryptocurrency. These “masternodes” are incentivized by receiving part of the block reward, and as such, are required to be more powerful, and more stable, than a regular Bitcoin node. Thus, masternodes allow for scalability far beyond Bitcoin. The Masternode Network allows Dash to implement other, more robust, features to the cryptocurrency than would be possible with ordinary nodes, as can be seen in the next three features.
2. Decentralized Governance. Dash is inherently more adaptable than Bitcoin, because it has a built-in consensus mechanism for making changes to the project based on the voting of the Masternode owners. Ongoing, unresolved debates like the block size limit can be handled in an orderly — but completely decentralized — fashion. This allows for a faster pace of innovation in accordance with market demands and technological needs.
3. InstantX. Dash has implemented a means to execute secure transactions instantly (less than 4 seconds). Called “InstantX,” this features locks a transaction using the Masternodes so that it can be considered secure even before being confirmed in the blockchain.
4. PrivacyProtect. Formally called DarkSend, PrivacyProtect is a feature that allows a user to anonymize the coins he or she holds. Unlike Bitcoin, which allows for tracing transactions throughout the whole blockchain, PrivacyProtect essentially hides the origin and destination of users’ coins.
5. Evolution. Currently in development, Evolution is next-generation Dash, which has a significant focus on user-friendliness. For example, instead of sending money to a long alphanumeric string, users will be able to use a name-based system for transferring value. Sending cryptocurrency will be as easy as sending an instant message to a friend.
Dash offers a lot to be excited about, but it should also be noted that the cryptocurrency is still in its infancy (it is just over 2 years old), and still has a small user base. Its features have not been used on a wide scale, a scale which could expose its own unique weaknesses. But like Bitcoin, Dash is open-source, which allows its innovations to be copied and used in other cryptocurrency projects. Thus, Dash, like Bitcoin, must constantly innovate and improve, meeting the real-world needs of users, if it is to continue to grow.
Satoshi’s vision of a peer-to-peer electronic payment system demands both technological and economic expertise. It is doubtful any one person can fill his shoes. However, due to the open nature of cryptocurrency, his vision can be adapted and implemented by anyone and everyone who is interested, and the market can decide which project most perfectly meets those lofty goals. The peer-to-peer electronic payment system of the future may not be Bitcoin, but Satoshi’s vision can still prevail.
https://medium.com/@EricRSammons/fulfilling-satoshi-s-vision-605e80845d0f#.spg7w1eas
Fulfilling Satoshi’s Vision
The legend of Satoshi Nakamoto, the creator of Bitcoin, has reached nearly mythical proportions. At a time when the world was reeling from financial crisis after financial crisis, this unknown, unassuming man introduced a radical idea: what if instead of depending on governments — and the men and women who run them — to determine our financial fate, we could find a technological solution? A solution that defies convention: a cryptographically secure digital currency that can be trusted because it is trustless, that can be stable because it is digital, and that was created by man but isn’t beholden to man’s whims. Initially Satoshi was ignored, ridiculed, and dismissed, but that only deepens the mythology behind the man. Despite these obstacles, his solution — Bitcoin — has become a legitimate currency that has the potential to change the world of economics and finance forever.
Satoshi’s mysterious disappearance a few years ago only heightens the fervor surrounding him. Within the Bitcoin community, if someone can show Satoshi’s support for his ideas, then he is sure to get widespread acceptance. Likewise, any effort to change one of Satoshi’s fundamental principles — such as the 21 million bitcoins money supply — is sure to be rejected with extreme prejudice. This widespread devotion to Satoshi has been largely beneficial to Bitcoin, for devotion to Satoshi usually means devotion to his vision. But like any devotion, it can be misapplied, and what appears to be faithfulness to Satoshi’s ideas can actually become a deviation from them. Bitcoin is in danger of this happening right now.
Technological and Economic Genius
Most people are good at a few things, and the really brilliant are very, very good at one thing. Think of the world-class concert pianist — he may be terrible at math or science, but he is outstanding in his one field of expertise. Satoshi Nakamoto stands out from even that select crowd by being a genius at two distinct disciplines: technology and economics. An intimate understanding of both disciplines was necessary to create Bitcoin. Without technological expertise, he would never have been able to create a secure, stable, digital currency. But without economic expertise, his technological creation would have likely been worthless — tokens shared between a few geeks until the fad dissipated. By being a genius in both field, Satoshi succeeded in creating a unique synthesis that is both a technological and an economic marvel. One can never overstate the brilliance behind the creation of Bitcoin.
With the disappearance of Satoshi, it has been left to lesser individuals to guide the project forward. As Bitcoin continues to grow and be developed, there are unfortunately no new Satoshis around to guide it. Some of those involved might be outstanding technological giants (even more technologically adept than Satoshi himself, perhaps?), and others might be outstanding in the field of economics. However, without Satoshi, it is up to the Bitcoin community to meld the principles of both these fields soundly to keep Bitcoin growing, robust, and in line with Satoshi’s original vision. Unfortunately, events in recent months do not provide hope that Satoshi’s brilliant meld of economic and technical imperatives is being carried forward. It seems rather that the technological savants have set the path for Bitcoin, oftentimes at the expense of economic reasoning.
The blocksize debate is of course the primary arena of this deviation. What was initially a simple anti-spam measure — the 1MB block size limit — has turned into a sacred number that cannot be changed. The significant economic problems with maintaining the 1MB limit are ignored, with promises of grand future technological solutions (Segregated Witness, Sidechains, Lightning Network) to allegedly resolve any issues. Instead of seeing that the actions of users reveal their economic incentives, many Bitcoin leaders instead want to allow only certain transactions on the main Bitcoin network, dismissing all others as “spam” or otherwise somehow unworthy of being included on the Bitcoin blockchain. Unlike Satoshi, who allowed technology to serve his economic vision, the core developers are letting technology get in the way of sound economics.
This is changing the economic vision from an “electronic payment system” (as Satoshi called Bitcoin in his original whitepaper) to an end-of-the-line backend settlement system.
Satoshi’s Revenge
But the genius of Satoshi lives on, for he created a “failsafe” in Bitcoin to prevent his vision from ever being truly co-opted. He made Bitcoin open-source. Because it is open-source, anyone, for any reason, can fork Bitcoin and create his or her own cryptocurrency. If Bitcoin were to deviate too much from Satoshi’s vision, there is nothing to prevent another person, or group of people, from making a cryptocurrency more in line with his original ideals.
Some people, in their devotion to Satoshi, believe that Bitcoin, and Bitcoin alone, is the only possible digital currency that can be faithful to Satoshi. Any altcoin is by their definition a scam or technologically bankrupt. But as I’ve argued before, altcoins are an important part of the cryptocurrency ecosystem, and in fact might be necessary to keep Satoshi’s original vision alive.
I’ve elucidated previously three arguments for the need for altcoins. Let me expand on them further here:
Altcoins provide competition for Bitcoin. I have heard many Bitcoin maximalists argue that no coin can ever truly compete with Bitcoin. It has already won. They dismiss altcoins as utterly unworthy of discussion, but soon enough they’ll be preaching to an empty room considering the rate at which Bitcoin users are fleeing to these very altcoins. Not long ago the Bitcoin market cap was over 90% of the total cryptocurrency market; now it is under 80%. Further, innovation is happening at a break-neck speed with altcoins, while Bitcoin can’t even change one constant.
Altcoins allow for experimentation. Many altcoins will fail. In fact, most altcoins will fail. But failure is the first step to success. Without the failures of previous altcoins to confirm what doesn’t work, we can’t know what definitively will work in the future. By having smaller coins experiment, altcoins allow for innovation to occur at a fast pace.
Altcoins provide for niche solutions. Satoshi envisioned a peer-to-peer electronic cash system, but the world has come to realize that cryptocurrency and blockchain technology can be much, much more. Projects such as Ethereum and MaidSafe push the boundaries of what we think blockchains can do. Any wholesale dismissal of altcoins exposes limited thinking and a failure of imagination.
Will an altcoin eventually supplant Bitcoin? I don’t know and no one else does either. The beautiful thing about this space is that no one is declared the permanent winner — the market can shift from one coin to the next depending on how well a coin meets the market’s needs. My guess is that there will be many winners, because cryptocurrency technology can be used to solve a variety of real-world problems.
But is any altcoin currently in the running to fulfill Satoshi’s vision of a “electronic payment system” that can challenge Bitcoin’s dominance? There are a few contestants, but the project I think has the best potential is Dash, for it is determined to address the weaknesses of Bitcoin, while building on its strengths.
Dash: Satoshi’s Vision Fulfilled?
Now that Bitcoin has been in existence for more than seven years, both its strengths and its weaknesses have been revealed. For a project that was initially ignored and then mocked by the financial world (and had its obituary written countless times), Bitcoin is amazingly resilient. It has shown to the world that blockchain technology works, and, for certain use cases, works amazingly well. It has solved the problem of exchanging value between strangers without trusting a third party. Those of us who have been involved in Bitcoin for years should step back every once in a while and marvel at its capabilities. It is truly a technological and economic miracle.
However, the past seven years have also exposed some of Bitcoin’s weaknesses. Here are the main ones:
1) Scalability. Bitcoin, as currently designed, is incapable of handling the number of transactions necessary for it to be a truly global payment network. How that capacity can be increased has been hotly debated, which leads us to the next weakness.
2) Governance. As has been clearly demonstrated in the ongoing Block Size debate, efforts to scale Bitcoin have been fraught with dissension and acrimony (with no real changes yet to show for it). Decision-making power has coalesced around a few core developers, backed by a small circle of miners, with little avenue for the majority of Bitcoin users to have any say in the direction of the project.
3) Slow confirmation times. A true payment system needs to be instant; however, Bitcoin transactions take on average 10 minutes to be secured (confirmed), which is an unacceptable amount of time for commerce in the 21st century. And lately that first confirmation can take much, much longer, due to increasing (and increasingly ignored) network congestion.
4) Anonymity. Bitcoin has never been truly anonymous, but instead pseudononymous. However, in order to be truly fungible, a currency needs complete anonymity. It doesn’t matter if the currency was previously used by drug-dealers, pedophiles, or politicians, those coins should be worth the same as coins used in more pristine hands. Further, recording transactions publicly on the blockchain has other downsides, such as the inability of companies and individuals to protect their financial information from prying eyes.
5) Ease of Use. Bitcoin is still in the early adopter phase, and as such, it is still difficult for the average person to use. But ever since Bitcoin hit mainstream consciousness (around late 2013), promises of improving ease-of-use have been common, while actual improvements have been nonexistent. Making something as complex as Bitcoin easier to use is easier said than done.
Dash, as a fork of Bitcoin, maintains the strengths of its elder brother, but let’s look at how it is working to address each of Bitcoin’s weaknesses:
1. Masternode Network. Dash has incorporated an innovative 2nd-tier network of nodes that powers the cryptocurrency. These “masternodes” are incentivized by receiving part of the block reward, and as such, are required to be more powerful, and more stable, than a regular Bitcoin node. Thus, masternodes allow for scalability far beyond Bitcoin. The Masternode Network allows Dash to implement other, more robust, features to the cryptocurrency than would be possible with ordinary nodes, as can be seen in the next three features.
2. Decentralized Governance. Dash is inherently more adaptable than Bitcoin, because it has a built-in consensus mechanism for making changes to the project based on the voting of the Masternode owners. Ongoing, unresolved debates like the block size limit can be handled in an orderly — but completely decentralized — fashion. This allows for a faster pace of innovation in accordance with market demands and technological needs.
3. InstantX. Dash has implemented a means to execute secure transactions instantly (less than 4 seconds). Called “InstantX,” this features locks a transaction using the Masternodes so that it can be considered secure even before being confirmed in the blockchain.
4. PrivacyProtect. Formally called DarkSend, PrivacyProtect is a feature that allows a user to anonymize the coins he or she holds. Unlike Bitcoin, which allows for tracing transactions throughout the whole blockchain, PrivacyProtect essentially hides the origin and destination of users’ coins.
5. Evolution. Currently in development, Evolution is next-generation Dash, which has a significant focus on user-friendliness. For example, instead of sending money to a long alphanumeric string, users will be able to use a name-based system for transferring value. Sending cryptocurrency will be as easy as sending an instant message to a friend.
Dash offers a lot to be excited about, but it should also be noted that the cryptocurrency is still in its infancy (it is just over 2 years old), and still has a small user base. Its features have not been used on a wide scale, a scale which could expose its own unique weaknesses. But like Bitcoin, Dash is open-source, which allows its innovations to be copied and used in other cryptocurrency projects. Thus, Dash, like Bitcoin, must constantly innovate and improve, meeting the real-world needs of users, if it is to continue to grow.
Satoshi’s vision of a peer-to-peer electronic payment system demands both technological and economic expertise. It is doubtful any one person can fill his shoes. However, due to the open nature of cryptocurrency, his vision can be adapted and implemented by anyone and everyone who is interested, and the market can decide which project most perfectly meets those lofty goals. The peer-to-peer electronic payment system of the future may not be Bitcoin, but Satoshi’s vision can still prevail.