“White Paper” Bitcoin: that it was correct, what incorrect, and what we have yet to learn

“White Paper” Bitcoin: that it was correct, what incorrect, and what we have yet to learn

This article provides a retrospective look at one of the main instruments through which began the era of the Blockchain technology. This, of course, about the “white book” of the first cryptocurrencies Bitcoin was published in 2008, the mysterious Satoshi Nakamoto.

After ten years, we can conclude that some points of the white paper turned out to be prophetic, others incorrect. And some of the properties of Bitcoin are not measurable so far.

“White paper” Bitcoin is one of the most original and influential documents of programming in history. It spawned a multibillion-dollar industry and thousands of other “white papers”.

But it makes sense to look at the document at the critical angle (and on those elements of the original design of the Bitcoin network that have been neglected) to ask yourself: what was the “white book” was correct, what incorrect, and what questions we have still no answer.

What is the Creator of Bitcoin was right

One of the hallmarks of really successful ideas is that we forget how people perceived the world around her. Many of the fundamental innovations of Bitcoin become apparent only with hindsight.

After all, it’s easy to forget that cryptocurrencies remained in the “research the swamp,” a large part of the last decade.

After the failure of numerous attempts to build a functioning system in the nineties (for the most part, using ideas expressed by David Chuma in the eighties), some publications still appeared. But most researchers were convinced that non-state currencies is simply not a viable market.

Before the advent of Bitcoin decentralized systems were actively developed in the two thousandth years (usually described as peer-to-peer network), also conducted research of technologies of anonymization (development of Tor browser and other systems).

But all these developments were not considered as mandatory for payment system. What brought Bitcoin?

1. Incentives for miners. One of the key innovations of Bitcoin is to stimulate mining through inflation and the Commission. This model proved successful, although few could have foreseen. Most peer-to-peer systems to pre-balinova era, offering open participation (anyone can manage Noda network), suffer from “Sybil attacks” and other problems. Many attempts have been made to motivate honest participation, but before Bitcoin it was possible to nobody.

2. Lightweight node. Simultaneously supports full and lightweight (or SPV) nodes in the Bitcoin network has proven its effectiveness, and integrated into the Bitcoin structure blocks has made the introduction of lightweight nodes natural function.

3. Scripting. Being a limited support scenario development in the Bitcoin network (not mentioned in the “white book”) allowed to carry out several important functions, such as accounts with multiple signatures and payment services. To provide a system that provides something more than an ordinary transaction, it was a wise decision.

4. The definition of long-term incentives. Satoshi did not participate in industrial mining or mining pools, at least he didn’t mention this in the “white book”. However, the document on Bitcoin includes a very thoughtful idea about the risks of centralization:

“[offensive] sooner or later must realize that it is more profitable to play by the rules, which will give him a few more coins than all the rest put together, instead of undermine the whole system for their own enrichment”.

Despite the large number of theoretical attacks described since then, none of them were not executed in practice. Satoshi has established a strong principle — that the miners have a long-term incentive not to attack, because they invest in the health of the entire ecosystem.

What “white paper” Bitcoin made a mistake

We omit some of the fancy features in earlier versions of the Bitcoin code, such as payment by IP address, and integrated e-Commerce system that never saw the light.

But some features turned out to be incorrect, and should not be repeated.

1. ECDSA. At that time, as the signature algorithm was a better choice than, say, RSA, he is still inferior to the technique Snorre in all aspects. Most likely, Satoshi just didn’t know about this possibility (because of the “patent wars” for the legacy Snorre). Today benefit from the use of signatures Snorra obvious, if not to take into account more advanced schema BLS.

2. The plasticity of the transaction. This unintentional difficulty has led to problems for payment systems and made possible the attack on the stock exchange Mt.Gox. Today in a more reasonable network design the developers will use SegWit to verify the absence of plasticity of the hashes of the transactions.

3. New features. It is quite obvious that the decision to not include Bitcoin popular functions, like pay-to-script-hash (P2SH) and CheckLocktimeVerify (CLTV) was a mistake, even though they were added in later soft-fork.

4. Limited bit coins. Emission of Bitcoins is limited to 21 million coins, but more importantly, he has the minimum units of approximately 2^52 Satoshi. If Bitcoin was really conceived as the only unit on the planet, ought to provide several million units per person. The current number is insufficient for daily payments (even rounded to the tens of dollars) and large savings.

5. All the blocks in one chain. Taking into account the importance of the word “blockchain”, it should be noted that the placement of blocks in a linear chain is hindsight that leads to the appreciation of the process of confirming the old blocks lightweight node. If Bitcoin has a transaction correctly in the tree order, why not do the same for units? A list of omissions would also be an important addition. It is curious that the draft Certificate Transparency (created independently at the same time as Bitcoin) uses the correct architecture and places the new blocks in the tree view, whereas only a few successors of Bitcoin deviated from the linear design of the circuit.

6. The lack of required information about the network state. Bitcoin miners control the state of the system through incoming payments which are unspent outputs (UTXO). But this information does not apply to every unit and should be taken from transaction history. So lightweight nodes is difficult to confirm current network status and the consumption status of the transfer. Could be easy enough to include an obligation for UTXO in each block, and a subsequent system (e.g., Ethereum) are already doing so.

7. Analysis of a simplified attack. In the “white paper” Bitcoin has received increased attention (approximately a quarter of the text) analysis of the chances of a successful miner at the fork in the possession of at least 51% of mining power. Subsequent studies have identified many other attack vectors (e.g., selfish mining), and now the analysis looks outdated.

8. One CPU, one vote. Satoshi described the Bitcoin system, most of which are miners that use their own processors. However, for many years in the production of coins is dominated by specialized equipment. Although the benefit or harm of ASIC mining is a controversial moment in the original document about it isn’t.

What we still don’t know

1. The mystery of the SHA-256 algorithm. The use of hash-based computational puzzles (“proof of work”, PoW) in the network of Bitcoin is one of the most popular topics of debate in the community. If this algorithm is too much electricity? Does strengthen ASIC chips decentralization? Could the tasks developed for mining on graphic cards to provide better incentives at a lower price? Who will win in the end “the proof of share ownership” (PoS)?

2. The block size and other restrictions. Limit block size to 1 megabyte, at least, remains a contentious issue, as well as 10-minute intervals between blocks. A subsequent blockchain network thrive larger and smaller intervals blocks. Whether conservative architecture of Bitcoin is justified in the long run?

3. Anonymity. The argument that the Bitcoin anonymous due to the use of public keys contained in the “white book”, with time, turned out to be flawed due to the development of analytical technologies transaction. Such systems as Confidential Transactions, Monero or zcash for offer more reliable security and confidentiality. On the other hand, for the network of Bitcoin have proposed many schemes for entanglement activity by mixing transactions. Whether anonymity is a critical feature that was not accounted in the blockchain of Bitcoin?

4. Inflation. The Bitcoin network strives to avoid inflation, but many economists said that in fact, the implemented mechanism is deflationary, because in the end, the coin can come out of trafficking when they lose the keys (or coins until it becomes impossible to spend after transaction “evidence of burning”). Zero inflation is actually requires to make a minor issue new coins to cover the “lost” mass. If Bitcoin the lack of this opportunity has been a mistake and we are still many years did not know, as inflation is being destroyed slowly.

5. The transition to the commissions for transfers. Bitcoin is gradually moved from the scheme of rewarding the miners with the inflation mechanism to the transaction fees. No one knows what happens, but some studies admit that the paid transactions can cause serious instability in the post-inflationary world.

6. Limited programmability. Bitcoin has set serious constraints on the ability of programming networks to maintain the simplicity of the transaction confirmation (and the cost is predictable). The Ethereum project has demonstrated the considerable demand for more extensive programming model, although it raises concerns in scalability. So is Bitcoin “disabled” in the long term due to weaker programming model?

News tags
Let's Disqus