Recently , there was a tweet posted by Calvin Ayre, billionaire investor on the Bitcoin Cash protocol, about the ‘Nakamoto Consensus’.
This article will first dissect what Satoshi’s opinions on Bitcoin’s consensus algorithm were by revisiting some of his formal e-mails and statements on the protocol. Then, the article will pivot to Calvin Ayre and explain through some of the rudimentary consequences (both positive and negative) that could result from the ‘hashing war’ that he has declared on the blockchain.
Part One — Understanding Satoshi’s View on Consensus Algorithms
Background to the Saga (Calvin Ayre & Bitcoin Cash)
In order to understand Satoshi’s view on consensus algorithms, many quote the same portion of the Bitcoin whitepaper that Calvin Ayre did in his most recent tweet about the ‘Nakamoto Consensus’.
Below is a direct link to the tweet that Calvin published:
this is just retarded. Nakamoto Consensus will be proven to work and Dev’s will be forced to just watch…which is why they are trying to fool miners now. I will show them 🙂 https://t.co/6jrhho0dD2
Calvin, like many others before him, isolated this specific portion of the Bitcoin whitepaper to make his argument:
Specifically, the excerpt from the whitepaper that Calvin has isolated states,
“They vote with their CPU power, expressing their acceptance of valid blocks by working on extending them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism.”
Calvin Ayre argues the definition of Nakamoto Consensus to the extent that he believes his efforts in a ‘hash war’ will lead to the reorganization of any competing chain iterations that do not adopt his preferred rule change on the protocol.
He has formally announced multiple times that his plan is to simply leverage his resources to mine blocks that adhere to his preferred version of the protocol. He has declared ‘war’ on the network under the principle that anyone that wishes to stop his proposed vision of forcing Bitcoin Cash to adopt a certain direction must directly compete with him in what he calls ‘hash wars’.
Given the apparently high stakes of the situation, it is important to first gain a better understanding of the ‘Nakamoto Consensus’
Satoshi’s Emails to the Metzdowd Email List
Perhaps the most overlooked portion of the entire ‘debate’ about Satoshi’s true intentions with regards to the consensus mechanism is the e-mails that he sent in response to those that had prompted him for more information about the Bitcoin protocol after he shared the whitepaper with them through the Metzdowd mailing list in 2008.
The full archive of these e-mails can be found here:
In specific, the following e-mail response chain yields the most information and insight into Satoshi’s disposition on consensus algorithms (Proof of Works specifically, obviously):
Hal Finney wrote:> it is mentioned that if a broadcast transaction does not reach all nodes,> it is OK, as it will get into the block chain before long.
Incidentally, the conversation in question is between Satoshi Nakamoto and, what would later become an integral part of Bitcoin’s development, Hal Finney.
In the e-mail, Hal Finney asks,
“ Or for example, what if a node is keeping two or more chains around as it waits to see which grows fastest, and a block comes in for chain A which would include a double-spend of a coin that is in chain B? Is that
checked for or not? (This might happen if someone double-spent and two different sets of nodes heard about the two different transactions with the same coin.)”
Satoshi’s response is direct and to the point,
“ That does not need to be checked for. The transaction in whichever branch ends up getting ahead becomes the valid one, the other is invalid. If someone tries to double spend like that, one and only one spend will always become valid, the others invalid.
Receivers of transactions will normally need to hold transactions for perhaps an hour or more to allow time for this kind of possibility to be resolved. They can still re-spend the coins immediately, but they should wait before taking an action such as shipping goods.”
While this does not get directly to the core of his views on the consensus algorithm itself (we’re getting there, relax), it reflects Satoshi’s general disposition for how things will/should be handled on the protocol.
Rather than inserting any specific human-based method of discernment, Satoshi is determined to allow the natural order of events take place on the protocol.
He does this by conveying that the only thing that matters is which transaction that the nodes received first on the network in the case of an attempted double spend. In stating this, he makes it known that he is not interested in attempting to mitigate the nefarious actions of individuals outside of the chain.
Thus, in a nutshell, Satoshi did not create Bitcoin to mitigate the ‘evil actions’ of any and all outside individuals, but rather to adhere to one simple, yet powerful idea:
A trustless, decentralized protocol.
That last portion of what Satoshi wrote is important to analyze as well.
He specifically stated,
“ Receivers of transactions will normally need to hold transactions for perhaps an hour or more to allow time for this kind of possibility to be resolved. They can still re-spend the coins immediately, but they should wait before taking an action such as shipping goods.”
At first glance, this statement appears to be antithetical to the very nature of what we just established Satoshi was trying to build:
A trustless, decentralized protocol.
The reason why this this statement appears to contradict this tenet is because Satoshi is implicitly suggesting that one must inherently ‘trust’ an individual transacting with them through the blockchain if they are using it at face value and that, in turn, the truster could get ‘burned’ by the person they’re trusting if that trusted individual attempts to defraud them by double-spending that money.
Thus, as Satoshi suggests, one should wait a period of time in order to ensure that they are not acting upon a version of the blockchain that will eventually be superseded by another.
The question here though is:
Does this mean that Bitcoin inherently involves “trust”?
The answer is no.
Simply put: Because the protocol did not ‘malfunction’.
Understanding the Core Philosophy of Bitcoin
As stated above, Satoshi did not design Bitcoin to mitigate ‘bad actors’. He designed Bitcoin to create a system in which monetary value could be transferred from one party to another in a censorship-resistant manner that would essentially guarantee that the money being transferred was legitimate.
However, in order to understand Bitcoin, we have to look a bit deeper than that fundamental principle.
The way that Satoshi was able to ensure that the protocol was legitimate was by creating a host of agnostic rules that could not be cheated.
Thus, even if the chain was successfully attacked by another individual, they would have to technically follow the rules in order to do so. The only way to circumvent this would be by breaking the encryption on the protocol itself and directly stealing funds and, to our knowledge, no one has come anywhere close to doing so with the SHA-256 encryption (double-SHA technically) or the elliptic curve cryptographic signatures that are used to generate public addresses on the network.
So How is it Trustless if We Must Trust That it Has Not Been Compromised?
The answer to the question posed in the above subheading is that Bitcoin is designed not to be ‘compromised’.
If one is defrauded through the Bitcoin protocol, then that is due to the actions of the individuals using it, not because of manipulation of the protocol itself.
What makes this different than being defrauded by a bank (a trust-based, centralized system), is that there is no singular individual that one must rely on to keep a balance of things going on.
For example, when someone visits their bank or ATM, they are essentially asking the bank’s permission to withdraw their money. The bank could technically, for whatever reason, decide to refuse to dispense that individual’s money to them. There is a scenario in which the bank simply may not have the customer’s funds because they have become insolvent.
This very situation has happened in different countries around the world throughout time since the advent of modern financial systems. So, it is not an impossibility.
Thus, in the modern financial system, you must trust that the bank is going to allow you to access your funds when you go to retrieve them. You must trust that the bank is going to allow you to transact with another individual if you wish to do so. You must trust that the bank is going to debit your account the correct amount and that there will be no clerical error of some sort that will fail to credit you properly. You must trust that the bank will not acquiesce to a corrupt government or regime that is seeking to seize the funds of the bank at a given point in time.
These are all the points of trust that Bitcoin removes.
There is no trust involved in the protocol. If your transaction has been validated, then you have been credited with the funds. As long as the protocol reflects that the funds are in the possession of the public key associated with your private key, then you can spend them whenever you want and transact them to whoever you want at will.
You will never have to worry about using your public key to transact with another individual and hearing back from the protocol that the government decided to ‘freeze’ your wallet. The bitcoins are forever under the ownership of whoever possesses the private key for those funds.
Thus, if someone did ‘attack’ the chain and somehow successfully create a longer chain that was recognized by the network, the network did not fail — that person just outright stole from you. You were not defrauded. You legitimately received your bitcoins. You were just stolen from afterward.
“What Do You Mean?”
Consider the hypothetical of a >51% attack to be akin to someone paying you cash for an item that you’re selling, then clubbing you over the head and taking that money back from you.
Would you consider that situation to be indicative of the ‘trust’ one must have in the cash money?
Whatever money that this individual took from you is still legitimate. It’s just money that was stolen from you.
Bitcoin may perhaps be even more secure than physical money in this scenario though, because the cost of leveraging such an attack and then successfully maintaining it is more than likely prohibitively expensive for any actor on the network.
Even if one did possess >51% of the hashing power, chances are, they would not be able to re-do all of the necessary proof of work required in order to succeed the ‘longest chain’ and the ‘longest chain’ is a misnomer, because the total work done on the chain is what is used to validate which chain is longer.
In either case, the point should be clear by now. Satoshi believed that the protocol is the rule of law.
In the next segment of this article (pt. 2), we will explore Calvin Ayre’s proposal of implementing his preferred rule changes by redirecting >51% worth of hashing power and resources onto the network.