Original: Fixing money: Satoshi’s disruption of human society

Author: Eli Ben Sasson        

Selected Overview

• The core innovation of Bitcoin lies in its broadness (decentralization), incentive-based integrity, and public verifiability.
• The challenges and opportunities facing Bitcoin.
• Hoping that one day Bitcoin can integrate zk-STARK technology through soft forks.

Bitcoin means different things to different people. I want to share what Bitcoin means to me and explain what I believe to be Satoshi's core innovation. First, I want to clarify that the true essence of Bitcoin's innovation does not lie in cryptography, the internet, or computer technology. These emerging technologies are merely means to achieve a goal. What Satoshi truly revolutionized is one of humanity's most important inventions: social structure.

Social Structure Requires Integrity and Consensus

"Integrity: doing the right thing even when no one is watching."

— C.S. Lewis

When it comes to social structure, you might think of friendship, cultural traditions, or today's popular social media. However, people often overlook that money is also a form of social structure. In fact, the essence of money is social structure.

Money is a system that carries immense value, and the existence of this value entirely depends on everyone collectively recognizing that money should "function like money." Therefore, to understand the essence of money as a social structure, we need to clarify two questions: what does it mean for money to "function like money," and why is it necessary for everyone to reach a consensus on this?

People have some basic expectations of money: it cannot be printed endlessly at will; the money you hold will not disappear or increase without reason; you can freely use your money, and so on. These characteristics constitute what I call the inherent integrity of money. In other words, the essence of money determines that even if you are not constantly supervising it, it will still operate as you expect.

However, the inherent integrity of money is only one aspect. On the other hand, money also requires credibility (i.e., perceived integrity), meaning that there must be a broad consensus on its integrity across society; otherwise, money cannot retain its value. For example, if there are rumors in society that the government will force banks to freeze assets, it will severely damage the credibility of money. Even if the rumors are false, money may begin to depreciate.

In summary, the value of money depends on both its inherent integrity and its credibility. Any structure whose value is entirely based on inherent integrity and credibility is a form of social structure. Money is the purest and most influential form of social structure (other forms will be discussed at the end of this article).

Human society has been continuously inventing and redefining money. The simplest method is for society to select a homogeneous and scarce physical resource to serve as money. In my elementary school days, this physical resource was chewing gum wrappers. In prisons, cigarettes served as currency; in some societies, it was shells, salt, and stones; for millennia until the eve of modern times, gold played the role of money. But today, most money has become digital, its scarcity relying on state endorsement, and the power to manage this resource is entrusted to a few specific companies (i.e., banks). To a large extent, the value of money depends on how much we trust the integrity of the state and its mechanisms that operate the monetary system.

Bitcoin is a completely new way to realize the social structure of money. Its innovation does not lie in the use of computer and internet technology, but in how it utilizes the internet to establish money as a social structure. Specifically, Bitcoin adheres to the following three unprecedented principles: (1) broadness (i.e., decentralization), (2) incentive-based integrity, and (3) public verifiability. We will explain these principles one by one.

Broadness (Decentralization)

Bitcoin is defined by a protocol, which is a set of programs run by numerous computers connected through the internet. Traditional money also relies on protocols (such as the SWIFT system), but the difference with Bitcoin is that its protocol invites everyone to participate in the operation of the system on an equal basis. Each of us can freely download the open-source software that defines Bitcoin miners, participate in creating new blocks with our own computers, and update the state of the Bitcoin ledger (i.e., who owns how many bitcoins). Moreover, broad participation is not just for convenience; the security, integrity, and value of Bitcoin are directly related to the broadness of its operating nodes. The more people participate in mining, the more secure the Bitcoin network becomes, and the more the public trusts its integrity.

In contrast, the traditional banking system does not welcome us to participate in its operations. At best, we can only understand our account situation within a very limited scope. "Broadness" is a true innovation in the history of human society, built on the principles of equality, autonomy, and democracy, which are the cornerstones of a free society. "Broadness" resonates with the ancient and fascinating idea of direct democracy, but goes further. Here, we are not only invited to vote and express opinions, but we are also equally empowered with the right to operate the "state." Bitcoin was born in the aftermath of the 2008 financial crisis, and this is no coincidence. The crisis brought about quantitative easing (i.e., unlimited money printing) and bailouts for "too big to fail" banks. With the increasing number of unbanked people globally and large-scale surveillance gradually infiltrating our daily financial transactions, the continued development of Bitcoin is a direct response to this situation. In other words, the emergence of Bitcoin is a rebellion and response to the continuous erosion of the credibility and inherent integrity of the traditional financial system.

Incentive-Based Integrity

Bitcoin mining is profitable — as long as you successfully mine a new block, you will receive a Bitcoin reward, and this process is open to everyone! This may be the most wonderful and astonishing part of Satoshi's invention. The Bitcoin protocol encourages participants to perform certain specific behaviors (creating valid blocks) through economic incentives (i.e., payment rewards) to ensure the integrity of the system. This method incentivizes and compels all miners to "do the right thing" even without supervision. If you deviate from the "right track" (i.e., the Bitcoin protocol), you will face economic losses because the electricity costs incurred for mining invalid blocks will be wasted, and you will not receive any Bitcoin as a reward. Cleverly, the value miners receive is not in dollars or euros, but in the form of Bitcoin itself. And Bitcoin, as a social structure, can only retain its value if the public trusts its integrity. This creates a virtuous cycle: miners are incentivized to operate with integrity without needing to coordinate with each other because violating the protocol is a foolish act — the Bitcoin you earn through hard work will depreciate, and ultimately, you will suffer the consequences.

Let’s compare this principle of "incentive-based integrity" with the traditional monetary system again. In the traditional system, we are not invited to participate in the operation of banks (banks lack broadness), and those who truly participate in the operation of banks do not receive equal direct value returns for maintaining the integrity of the bank or state currency. Instead, banks operate the system themselves or hire service providers. The integrity of the system does not rely on the incentives of the protocol but is enforced through contracts and the state legal system.

Imagine a world where banks offer equity (shares of the bank) or income (a portion of bank fees) as a return for broad and open operational networks; where the state opens up the authority for citizens to participate in the operation of the national monetary system and rewards their contributions with newly issued currency. I believe this is a superior and more democratic way for state monetary operations. I believe that adopting this higher standard will lead to more autonomous citizens and a more vibrant free society. Perhaps one day, inspired by Satoshi's invention of "Bitcoin," various countries will move towards this more ideal system. But at least today, this has not become a reality — and if one day society can truly achieve this leap, it will be entirely thanks to Satoshi's invention.

Public Verifiability

The third and final core part of Satoshi's innovation is public verifiability. This means that anyone can verify the complete integrity of Bitcoin, including all transaction records since the creation of the genesis block in 2008. More importantly, verifying all of this does not require a supercomputer; it can be done with just a laptop! This also means that I can use this laptop I am typing on right now to verify the latest Bitcoin block in real-time, personally participating in this broad and democratic integrity and the social consensus it relies on. As long as someone attempts to undermine the integrity of Bitcoin (i.e., the integrity of the network), we will all be aware of it.

It is necessary to compare this with traditional payment networks again. In the traditional system, centralized institutions (such as banks, credit card companies, etc.) rely on large computing nodes to process transactions. Ordinary users have no way to directly verify the integrity of the system. Even if we could gain some sort of viewing permission, the massive computational load could never be completed on a regular laptop.

Bitcoin's Innovation — Challenges and Opportunities

Let’s summarize. The innovation of Bitcoin lies in re-establishing the ancient social structure of money in a completely new way. This new realization leverages the internet and widely available low-cost computing devices, but its core innovation is based on three new principles: broadness, incentive-based integrity, and public verifiability.

The Sustainability of Broadness?

Broadness is the most fragile and concerning characteristic of Bitcoin, and it is what I worry about the most. Creating a new Bitcoin block requires a significant amount of electricity or relies heavily on luck. Clearly, luck is uncontrollable, so we can only focus on the electricity issue. One can imagine a dystopian future where the operation of the Bitcoin network — especially the massive electricity consumption used to secure the network — is completely controlled by a single or a few powerful entities (such as states or large corporations). This concerning future is not far-fetched for two reasons: (1) economies of scale may give large operators an advantage, gradually controlling a larger proportion of the computing power (i.e., Bitcoin's electricity consumption); (2) as Bitcoin becomes increasingly important in our lives and economy, powerful forces such as states and large corporations will inevitably attempt to control Bitcoin. If this happens, and Bitcoin mining is controlled by a single entity or a few collaborating entities, the consensus around Bitcoin's integrity will be weakened. These consensuses include, for example, its censorship resistance, no entry barriers, a cap of no more than 21 million coins, and a payment mechanism that does not require reporting additional information to centralized institutions. Once these core principles are eroded, Bitcoin will lose its value.

The broadness of Bitcoin is not inherently guaranteed by Satoshi's invention. Maintaining this characteristic is a long-term battle that everyone concerned about Bitcoin's value and mission must participate in together. Even if broadness is destined to exist only temporarily, the spirit of freedom it represents will shine like the brief yet glorious ancient Greek democracy, continuing to illuminate and inspire all those who care about human freedom throughout history.

Bitcoin's Global Scalability

The characteristic of public verifiability comes at a high cost for Bitcoin. To ensure that transaction verification can be completed using common devices, we must limit the computational load required to verify Bitcoin transactions. Based on the principle of "public verifiability," Bitcoin's processing capacity is limited to a maximum of about 10 transactions per second (10 TPS). This situation poses a significant limitation on Bitcoin's throughput and partly explains why only a very small number of people globally use Bitcoin for everyday shopping. Simply put, the current Bitcoin network lacks sufficient bandwidth to support everyone using Bitcoin for daily transactions. To achieve this goal, we need a Bitcoin network capable of processing thousands or even millions of transactions per second.

Thus, we seem to be caught in a dilemma — either we maintain the public verifiability of Bitcoin, but are limited by low bandwidth, unable to meet global usage demands; or we enhance scalability, allowing everyone to use Bitcoin for everyday purchases, but at the cost of losing transaction transparency, as ordinary devices can no longer easily verify all data, forcing us to rely once again on powerful centralized institutions. This is where mathematics and cryptography come into play.

Payment channels and the Lightning Network are an outstanding cryptographic solution applied to Bitcoin since March 2018. They expand Bitcoin's throughput capacity to nearly infinite levels by allowing the two parties in a transaction to settle directly. This situation is somewhat akin to a grocery store allowing customers to buy on credit, settling the bill at the end of the month, but the entire process requires almost no trust assumptions, with the Bitcoin network itself acting as an arbitrator to prevent one party from attempting to cheat.

However, this solution has two main drawbacks:

• Low capital efficiency. Both the grocery store and the customer must lock up a sum of money at the beginning of the month, and the locked amount often needs to be higher than the customer's monthly spending budget to successfully complete the payment process;
• Continuous monitoring is required. Both parties must constantly pay attention to the status of their payment channels; if one party fails to monitor in a timely manner, the other party may exploit this gap to steal funds.

Although a modification to the Bitcoin protocol (i.e., a soft fork) is needed, a different and better solution already exists. This is the Bitcoin solution I have dreamed of for over a decade, and it is the reason I dedicate myself to blockchain work every day. The zk-STARK protocol was invented by me and others 15 years ago when I was still a full-time academic professor of theoretical computer science. This protocol allows all of us to verify all Bitcoin blocks on our smartphones, even at a million times the data volume, without trusting any third party responsible for processing Bitcoin transactions. This solution completely addresses the two major drawbacks of the Lightning Network mentioned earlier. It has capital efficiency and no longer requires users to remain constantly vigilant. I first introduced this groundbreaking blockchain technology at the Bitcoin conference in 2013 and co-founded StarkWare in 2018 to promote the practical implementation of this technology. Since then, with the collaborative efforts of a growing zero-knowledge research ecosystem, we have successfully established zk-STARK technology as the ultimate solution for Ethereum scaling. I look forward to the day when Bitcoin can also integrate zk-STARK technology through a soft fork, and I am working towards this goal with many others in the ecosystem.

Bitcoin Beyond Currency

Money is constructed through society to fulfill specific social functions. As a social structure, the value of money depends on two factors: (1) it must operate with integrity; (2) society must generally recognize its credibility.

Money may be the most typical example of a social structure, but it is by no means the only one. In fact, there are many other systems, datasets, and programs that also serve society, carrying immense value, all of which are based on a broad consensus of social credibility. For example, land, property, and vehicle registration systems are social structures; electoral and governance processes are social structures; marriage registration systems, social titles, religious titles, and academic titles are also social structures. Even our personal reputations, such as credit histories and health records, are part of the social structure.

Most social structures are managed by monopolistic entities and central institutions appointed by national governments or nation-states. This leads to a question I will pose at the end of this article: Can these social structures be realized in a completely new way, namely Satoshi's way? And this way is built on the three principles of broadness, incentive-based integrity, and public verifiability.

免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。