In Math We Trust

Bitcoin, Cryptocurrency and the Journey To Being Your Own Bank

Simon Dingle

• Publisher: Tracey McDonald Publishers
• Year: 2018
• ISBN:
  9780620777032
• Topic: Volkswirtschaftslehre
• Subtopic: Währungspolitik

A highly readable account of a complex subject, In Math We Trust is all you need to find out about Bitcoin, cryptocurrency, the future of money and the journey to being your own bank.

Money is the most important human invention after language. It provides tokens for the faith we have in each other and society, but that trust has been violated repeatedly throughout history by the middlemen and authorities we rely upon in order to transact with each other.

Now a new kind of money promises to rescue us from these tyrants and return us to the roots of money, without relying on third-parties.

Instead of putting our faith in banks and governments, we can trust math.

Simon Dingle has been working with Bitcoin and other cryptocurrencies since 2011, designing products that make it easier to engage with this new world of money. He is also a broadcaster, writer and speaker who makes complex subjects simple for his audiences. Having led the product team at one of the world's first Bitcoin exchanges and on other popular fintech products, Simon continues to design and invest in projects that make money more fair, this in addition to his weekly radio show that helps people with technology more generally.

In this book Simon looks at the evolution of human trust that not only explains how cryptocurrencies work and the origins of Bitcoin, but how you can use these networks to take control of your own financial universe.

MONEY FOR THE INTERNET

The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.

Satoshi Nakamoto

THE STORY OF BITCOIN begins on Halloween of 2008 when a mysterious message was posted to an online cryptography mailing list. Mailing lists are groups of people that use email to discuss things. In the early days of the internet they existed for everything from woodwork to rocket science.

The message in question contained a link to a white paper, which is a document that guides readers through a complicated issue, and was signed by an author named Satoshi Nakamoto along with the message:

I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.

This now-famous sentence introduced a combination of ideas that had been progressing in cryptography and computer science since the early nineties, all centred on improving the way that people can trust each other in online interactions.

Another project that was prominent in these communities at the time is Hashcash, which was proposed by a British cryptographer named Adam Back in 1997.

Hashcash aimed to solve one of the biggest issues plaguing early use of the internet – junk email. The idea was to make sending an email more difficult computationally so that individual messages would become more expensive. Spammers rely on being able to send large volumes of messages to their victims and doing so would be impossible if it took longer and cost more.

The system would create a kind of digital stamp for email. These stamps would be generated by computers that would have to process a complex math sum by guessing what the answer was over and over again until they got it right. By providing the correct answer it could be proved which computer did the work and generated the stamp.

This offered an additional advantage in that it would allow receivers to verify the sender of an email message, further limiting the powers of spammers and criminals that often rely on making email messages look as though they were sent by someone else – like your bank.

With Hashcash you could trust that the sender of the email was who they said they were, because their digital stamp – or signature – could not have been created by anyone else.

The rate at which a computer can crunch through numbers is referred to as ‘hash rate’, hence the name.

The Hashcash algorithm was a big deal in computer science because it meant that computers could prove they had done something. This system was called ‘proof of work’. A computer could say, ‘I have the correct answer to this sum, therefore I must be the one that did all the work to arrive at it.’

From this background Bitcoin emerged as a way of using proof of work to create an electronic cash system. Like all the best ideas, it is simple to describe but was deceptively difficult to pull off.

Let’s break down Satoshi’s sentence and look at each bit to fully understand the significance of what was achieved in his proposal.

‘I’ve been working ...’

Who was Satoshi Nakamoto?

No one knows for sure.

After Satoshi first posted to the cryptography mailing list hosted by Metzger, Dowdeswell & Co., the Bitcoin white paper began being shared online by cryptographers and computer scientists. Some of these individuals emailed Satoshi offering to help with the development of the Bitcoin system.

This group of early Bitcoin developers had many interactions with Satoshi over the years following the publication of the Bitcoin white paper and until Satoshi went quiet in 2011, never to be heard from again.

One of the first people to respond to the message was a cryptographer by the name of Hal Finney who was also the first person ever to receive Bitcoin from Satoshi in February of 2009. Hal sadly passed away in 2014 from complications related to amyotrophic lateral sclerosis, and his body was cryonically preserved in the hopes that he can one day be cured and brought back to life.

We don’t know much about Satoshi and some have suggested that he was really Hal Finney. We’ll probably never know for sure.

Some people did claim to speak to Satoshi telephonically and reported that he had a young-sounding male voice. Others don’t believe Satoshi could’ve been a single person, given the quality of code in the original version of the Bitcoin software that he wrote that would have been difficult for a single person to produce, and the fact that he often referred to himself in the plural, for example in the Bitcoin white paper:

We have proposed a system for electronic transactions without relying on trust.

Satoshi may be a lady-person, or many people working together – but the name is traditionally only used for men in its native Japan.

An Australian computer scientist by the name of Craig Steven Wright claimed to be Satoshi Nakamoto in 2016, but has failed to produce any proof since then, despite promising that he would and throwing tempers on Twitter whenever confronted about it.

To prove that you’re Satoshi Nakamoto would be straightforward. All you’d have to do is publicly access some of the Bitcoin that Satoshi owns – kind of like logging into your Facebook account to prove to the world that it’s yours. Not a single bit of Satoshi’s Bitcoin has ever been accessed. Craig said that he would do so in public but then later withdrew this promise.

It’s estimated that Satoshi’s addresses hold 980 000 Bitcoins, with a value hovering around $10 billion at the beginning of 2018. The fact that he has never accessed it suggests that he’s committed to storing as much value as possible on the Bitcoin blockchain, or perhaps that he is so rich without Bitcoin that he doesn’t care. Another obvious option is that he is dead, although one would presume that he would’ve left keys to family or friends if that was the case. It’s unlikely that he has lost access to his wallets due to negligence.

The one thing we do know for sure about Satoshi is that he wasn’t stupid.

My personal encounters in the Bitcoin community have produced strong suggestions that Satoshi Nakamoto was Dave Kleiman, a computer forensic expert who passed away in 2013 from complications related to a Staphylococcus infection. Kleiman was also a good friend of Craig Wright. While this is another strong possibility, and would explain why Satoshi often wrote in the plural – suggesting that it could’ve been Kleiman and Wright working together – this has no more hard evidence than any of the other suggestions made.

Another name often cited as a possibility is Nick Szabo, a cryptographer and computer scientist who has published many articles online with writing that does resemble Satoshi’s. This could just be a coincidence, however, and there is no more evidence to suggest that he is Satoshi Nakamoto than for any of the other dudes mentioned here.

There are, of course, also people whose names are literally Satoshi Nakamoto, one of whom lived just blocks away from Hal Finney in California. None of these leads have produced much evidence either.

If you’re looking for intrigue, the story of Satoshi Nakamoto has a lot to offer, including conspiracy theories ranging from Satoshi being the Chinese government trying to bring an end to the reign of the US dollar, to Satoshi being an artificial intelligence.

Suffice to say that none of these assertions hold water.

It doesn’t matter who Satoshi Nakamoto is or was. It’s better for Bitcoin if the true identity of its inventor remains a mystery. Too much emphasis is placed on individuals in their relation to the success of things and this has had dire consequences for many companies, creative work and projects.

We are wired to perceive individuals as operating in isolation. Many Apple shareholders had doubts as to the future of the company when its founder Steve Jobs passed away, despite the thousands of brilliant Apple employees who collectively continued to work on its products.

In 2017 a rumour spread online that Vitalik Buterin, the founder of another cryptocurrency called Ethereum, had died in a car accident. This immediately impacted the price of the currency despite hundreds of open source dev...