Nakamoto Institute

The problem is nobody wants to make a hundred purchasing decisions per day. Which is why micropayments aren't a thing despite us having had the infrastructure for decades. There's no reason PayPal can't support sub-dollar transactions now, or ever before. Nick Szabo and I disagree on probably everything else in this world, but we agree on micropayments. Nick's paper is worth a read and does a great job of explaining the issues [1]. tl;dr: around micropayments is that in reality users/customers don't actually want them. They run afoul of our fundamental human behavioral costing model. The reason ad-supported is so prevalent isn't because it's being forced on us by a shady cabal or anything, it's just the least-worst option we've compromised on. [1] https://nakamotoinstitute.org/static/docs/micropayments-and-mental-tra…

“Some people whose work I’ve drawn from for this article, from the past and present, include Carl Menger, Warren Mosler, Friedrich Hayek, Satoshi Nakamoto, Adam Back, Saifdean Ammous, Vijay Boyapati, Stephanie Kelton, Ibn Battuta, Emil Sandstedt, Robert Breedlove, Ray Dalio, Alex Gladstein, Elizabeth Stark, Barry Eichengreen, Ross Stevens, Luke Gromen, Anita Posch, Jeff Booth, and Thomas Gresham.” Quite surprising to me to not include Nick Szabo in that list. This article alone should have qualified Szabo for inclusion: https://nakamotoinstitute.org/shelling-out/

Yes, war doesn’t stop trading, but it makes it more expensive. My favourite example is the Kula ring that used 2 monetary instruments circling between islands in different directions as a proof that other islands are not in war with eachother: https://nakamotoinstitute.org/shelling-out/

The original conceptual framework for NFT-like instruments is Nick Szabo's "Secure Property Titles with Owner Authority": https://nakamotoinstitute.org/secure-property-titles/ At the very end he says: > Largely unaddressed above is the problem of divergence between actual conditions and directory rights. [...] When divergence becomes too great, a solution to address the unreality of the title registry is needed. Almost nobody selling NFTs today has even bothered to address Szabo's final "correspondence to ground" point, i.e., why anyone should think that the ownership of a particular NFT means anything!

Instead of reading this press release, please read this seminal article from 2001 rebutting it: https://nakamotoinstitute.org/trusted-third-parties/ “Amazon managed blockchain” is an amazing phrase. All three words are wrong. “Blockchain” is a distributed technology created specifically for censorship resistance. A “managed blockchain” should just be replaced with a database. Databases are faster & cheaper. Meanwhile, Amazon is a company that has engaged in censorship many times over the years. And that’s not even addressing the issues with ethereum.

Nick Szabo has an interesting take on it. Essentially when the mental cost of deciding if the article is worth paying for exceeds the actual price you'd pay you lose from the start. https://nakamotoinstitute.org/literature/micropayments-and-mental-tran…

Well we've already had the Satoshi Nakamoto Institute [0] (a copy/paste collection of every Satoshi Nakamoto forum post) become so fanatically strict in their interpretation of the "gospel" that a founder split off to set up the Nakamoto Studies Institute [1], just like the People's Front of Judea vs Judean Popular People's Front split in The Life of Brian [2]. [0] https://nakamotoinstitute.org/ [1] https://nakamotostudies.org/ [2] https://en.wikipedia.org/wiki/Monty_Python%27s_Life_of_Brian

The paper doesn't use the word 'mining' it says the following under section 5 Network step 3... "Each node works on finding a difficult proof-of-work for its block." Quite clear that nodes look for the proof-of-work solution (aka: mining). You can also see there is a whole section in the paper, section 8, that talks about verifying payments w/o running a node. http://nakamotoinstitute.org/bitcoin/

Bitcoin will conquer weaker currencies first. How could it happen any other way? Even if you're not convinced until you see it conquer USD, you should still expect to see what we're seeing now[0]... weaker currencies falling before strong ones as BTC adoption follows along an S-curve of adoption. [0] http://nakamotoinstitute.org/mempool/speculative-attack/

Excellent writeup! I came to the same conclusion a few years ago with Thiers' Law: good money drives out bad, http://nakamotoinstitute.org/mempool/speculative-attack/

i completely agree. there is nothing new to somebody a bit involved into bitcoin. there is even a website which is old and widely known (http://nakamotoinstitute.org) where all the referenced literature is listed...

> especially since no one had much experience with the implications of the memory/storage/execution model of Ethereum at the time work started on Solidity, let alone the kinds of vulnerabilities these contracts would be exposed to. Perhaps the Ethereum devs didn't have this experience, but this experience and knowledge was out there. The E programming language has been a vehicle for smart contract and security research for over 20 years. How many Ethereum and/or Solidity devs read the E research, learned the E language and played around with it? There is also decades of research on formalized smart contract languages. Nick Szabo is well known in this space, and he wrote a draft paper on a great contract language back in 2002: http://nakamotoinstitute.org/contract-language/ How many of the devs have read this paper?

> "That form of "money" has been happening for thousands of years. " > Can you give me some examples? Nick Szabo has a great history of money paper, "Shelling Out: The Origins of Money" with some examples. http://nakamotoinstitute.org/shelling-out/

The first 5000 years I can't recommend enough. As far as how abstract money and society get, I think a decent counterpoint exists in Nick Szabo's Shelling Out: http://nakamotoinstitute.org/shelling-out/ Money is useful because it allows for delayed reciprocity. Delayed reciprocity can help overcome environmental uncertainty for the individual human that next to zero other animals can benefit from. From there you get the productivity of networks.

You got it completely backwards: in Bitcoin the only thing that matters is the computing power of miners, not the number of nodes. That is precisely the problem that Satoshi Nakamoto intended to solve, preventing Sybil attacks [0]. In few words, you don't want the consensus of the network to change just because you spawn more nodes voting the way you want to, they need to expend a resource that cannot be duplicated, in Bitcoin's case computing power/electricity. The Bitcoin Whitepaper also explains this in Section 4, "Proof of Work" [4]: > The proof-of-work also solves the problem of determining representation in majority decision making. If the majority were based on one-IP-address-one-vote, it could be subverted by anyone able to allocate many IPs. Proof-of-work is essentially one-CPU-one-vote. The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it. If a majority of CPU power is controlled by honest nodes, the honest chain will grow the fastest and outpace any competing chains. [0] https://en.wikipedia.org/wiki/Sybil_attack [1] https://nakamotoinstitute.org/bitcoin/#proof-of-work Edit: changed typo, "and the number of nodes" should have been "not the number of nodes".

I was assigned a class to shadow when I flirted with being an anthropologist. (My now deceased PhD committee member griped that I "appropriate the ethnographic gaze" -- that's probably why I raise my eyebrows so much lately.) The entire class was being lectured on plagarism. They were almost entirely internation students, almost entirely from a specific country, and they almosty entirely manage to misunderstand things only to their benefit. (It was always an American, not someone from... there... I had to do things like go into my apartment and retreive a Louisville slugger because they were walking off with my neighbor's bike. (I'm not required to call the police. I can deal with you and let YOU call, get a report number, and hope a detective or whatever decides it's worth the attention of the law. Fool around and find out that even full on cryptoanarchists[1] will step away from they keyboard if you piss them off enough, and if that makes you feel threatened, don't touch physical goods that don't belong to you unless you're willing to risk dying for them.) [1] https://nakamotoinstitute.org/crypto-anarchist-manifesto/

>Nodes can handle far more than 7 transactions per second of throughput, even if you 4X the data size of that to account for propagation to multiple peers. 10 KB/s is nothing. Keeping nodes so light so that you can validate with a Raspberry Pi with a dialup connection, at the cost of preventing 100X more people from using Bitcoin, is a terrible tradeoff. That wasn’t the tradeoff. The tradeoff was that increasing transaction throughput would also increase the risk to loss of decentralization and thus effectively the systemic catastrophic failure of Bitcoin. Without decentralization it’s just technological trash. The most vocal big blockers were business guys prone to the same kind of risk-blind short-term thinking that led to the Global Financial Crisis less than a decade before - improve some easily measured metric now at the expense of introducing greater medium to long term total failure risk into the system. Part of the problem is, systemic risk is difficult to measure and quantify, whereas other metrics like ROI or TPS are easy to measure and quantify. And thus we get more of what we measure, and less of what we don’t (systemic resilience, safety factor, redundancy, etc.). Everyone has a very strong bias for optimizing measurable metrics while being blind to the unmeasurable but important, and that’s what was happening here. Thankfully the Bitcoin engineering community understood this and resisted making this tradeoff. >There is no technological bottleneck…

Bitcoin can't even handle the currency transaction needs of a large shopping mall. The bitcoin blockchain is limited to about 7 transactions a second. That's the main chain only; Lightning Network and side chains have no such limitations. There are over 36,000 lightning channels that can clear bitcoin transactions without using the main blockchain. In a shopping mall scenario, most people would already have open channels with their favorite stores, similar to how store credit cards work today. A cryptocurrency of some sort may eventually become a threat to the US dollar but bitcoin is clearly not it. If it's going to happen, bitcoin will most certainly be it. The dollar is starting to lose its place as the world's reserve currency; Russia, China, Iran and other countries are cutting side deals to use currencies other than the dollar when they can [1]. Sure, smart people will continue to buy their morning coffee with dollars but they won't be saving for a rainy day in dollars. The Fed has already printed trillions and trillions of dollars, with no end in sight; it's just a matter of time before we have either negative interest rates or noticeable inflation or both. Regardless, it's losing its buying power daily. That's why a company like MicroStrategy borrowed $550 million at 0.75% to buy more bitcoin—and that's after a $425 million purchase a couple of months ago. Mass Mutual—an insurance company—just bought $100 million in bitcoin [2]. These and other companies…

First and foremost I think it will stick around. It's too useful a tool and it would be very hard to kill. It's money for enemies, no one controls it, everyone can use it. China might currently be the only country in a position to attack Bitcoin as a protocol (not from a legal angle) but I think it's not in their best interest to do so. They are a rising empire, eventually they will have far less problems with capital flight than others that are declining, so it might make sense for them to let it go on, potentially causing a speculative attack on USD [1]. China's dominance in mining is shrinking, so at some point that won't be a problem anymore imo. If (which is a big if) a "speculative attack"-type scenario happens the hyperinflation and resulting turmoil will leave a shock and I hope [2] we could actually see new hard currencies emerge. Some of them might be BTC backed as it is a harder money even than gold (at the expense of being younger, not as lindy). If that happens in the form of federations as I mentioned or well-known centralized solutions: who knows? I'll work towards a future with many different, but freely interchangable, uncensorable, private and fully backed BTC-based "currencies". I still like gold in case we nuke ourselves into the stone age, but I try to be an optimist. Even if Bitcoin doesn't become a predominant store of value (because it gets widely banned, unlikely at this point imo) I think it will at least establish itself as a means of breaking…

Since post-Snowden, the Cypherpunk Movement somehow became active again, but many are not aware of the history of Cypherpunk. I recommend everyone who is interested in cryptography, privacy and Cypherpunk to read A Cypherpunk’s Manifesto (https://www.activism.net/cypherpunk/manifesto.html), and The Crypto Anarchist Manifesto (https://activism.net/cypherpunk/crypto-anarchy.html) for the starter, both are very short and concise. After reading the Manifesto, everyone should read Tim May’s Cyphernomicon, the most important document - the only comprehensive and the only documentation of the entire Cypherpunk movement. https://nakamotoinstitute.org/static/docs/cyphernomicon.txt Yes, it’s ten thousand lines of plaintext in a list format, and obviously not easy to read. It may be difficult to start, but it is surely an amazing collecting of ideas. You should download it to your disk, open your favorite text editor, and choose a nice color scheme, to read the entire document, line-by-line, as if you are reading some source code. In my opinion, this is the most comfortable way to read. You may need two weeks to a month to finish the reading, use the bookmark feature of your text editor to mark your progress. Another useful note is that, Tim May’s documentation is heavily leaning towards Anarcho-Capitalism, but as he said, the house of Cypherpunk has many room.

> they have intense hatred for anyone with a different opinion, even the very people who developed bitcoin. Hal Finney, the very first recipient of a Bitcoin transaction claimed, quote: "Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient." [1] And Satoshi Nakamoto stated: "Piling every proof-of-work quorum system in the world into one dataset doesn't scale." [...] "Bitcoin users might get increasingly tyrannical about limiting the size of the chain so it's easy for lots of users and small devices." [2] Did you have anyone else in mind? Perhaps Mike Hearn and Gavin Andresen? It's a matter of historical record that these two believe gigablocks will assuredly cause Bitcoin P2P nodes to become confined to datacenters. Their gigablocker quotes follow: Gavin Andresen: "there will be big companies spending lots of engineering dollars on their own highly optimized versions of bitcoin. I bet there will be alternative, secure-and-trusted, very-high-speed network connections between major bitcoin transaction processors. Maybe it will just be bitcoin transactions flying across the existing Visa/MasterCard/etc networks" [3] Mike Hearn: "probably 2 or 3 racks of machines" [4] Gavin Andresen: "No, it's completely distributed at the moment. That will begin to change as we scale up. I don't want to…

I don't think bitcoin has much utility as a means to transfer value, over the existing solutions. It might be a superior means to store value. The theory is that is as the amount of dollars (or any fiat currency) constantly increases, anyone holding large quantities of dollars will want to exchange them for something with a more fixed supply. Usually this is stocks. Oil futures, property, and gold are also used as stores of value. (In countries with weak currencies, people also hoard dollars as a comparatively stronger source of value). So the purely monetarist argument says if there are only 21m bitcoins, and an ever-growing amount of dollars, one would expect that the dollar price of bitcoin will only be stable at 0 or infinity. E.g., either the network crashes and bitcoin becomes worthless, or the dollar collapses and bitcoin reigns supreme. http://nakamotoinstitute.org/mempool/im-hoarding-bitcoins-and-no-you-c… - see here for more on this theory as regards bitcoin. The counter to this argument is that a. despite seeming logical, money supply inflation doesn't always seem to occur in reality. E.g., quantitive easing hasn't noticeably increased consumer prices. b. Bitcoin is volatile, which means it isn't actually a safe store of value. One persuasive argument I heard (from goldbugs) is that bitcoin, having a fixed supply, has no mechanism to stabilise the price, and so booms and busts become self-reinforcing. With gold, on the other hand, the amount mined…

The arrogance here is unfortunate. First, you start out with a remark reminiscent of a high school bully. Do you really need a co-conspirator to share in your attempt to ridicule someone? Also, you're pretty uninformed about the history of Bitcoin. Satoshi did start with a spec, or at least a white paper (yes, the lack of a proper spec for Bitcoin has been a major problem). Satoshi presented the white paper to the cryptography e-mail list several months before releasing the software. He got some feedback at that time, and then he got significant feedback when upon his initial release, which he integrated into the protocol. This list included many of the top cryptographers in the cryptocurrency space, including Hal Finney and Adam Back. You can find all these discussions, and the original release at: http://nakamotoinstitute.org/ Finally, with the exception of the transaction malleability issue, the failures in exchanges have had nothing to do with cryptography, but rather with basic secure software development practices and architectures.

I'm almost 100% certain he's the creator of Bitcoin. I didn't need to see his technical chops to suspect it -- all I needed was to read his article from 2002 which discusses the whole concept and key ideas that Bitcoin is currently based on: https://nakamotoinstitute.org/library/shelling-out/

Isn’t that better than advertising? Of course, there’s the cognitive burden of micro payments (https://nakamotoinstitute.org/library/the-mental-accounting-barrier-to… so not sure it will catch on. But for agents it might.

Your thesis is 10+ year old: https://nakamotoinstitute.org/mempool/speculative-attack/ Always good to find back well known results by first principles!

This is the analogy used in the first description of a smart contract in 1997 https://nakamotoinstitute.org/library/the-idea-of-smart-contracts/

Bitcoiners have been saying this whole time not to keep your crypto with a 3rd party and this is exactly why. Satoshis original message about Bitcoin mentions explicitly you don't need any trusted third party. A whole lot of people think they can make money outsmarting the original concepts of Bitcoin and they get scammed in new ways each cycle. https://nakamotoinstitute.org/trusted-third-parties/

Here's an interesting article from 2003 about microtransactions that argues the main issue is actually mental burden of paying for hundreds of tiny things every day, ie. "mental transaction costs". https://web.archive.org/web/20031202032448/http://www.shirky.com/writi… The concept seems to first appear in Nick Szabo's paper in 1999: https://nakamotoinstitute.org/static/docs/micropayments-and-mental-tra… Things like Brave's Basic Attention Token seem to solve this problem in the sense that it's completely automatic based on the amount of time spent on each site. But then you have to use Brave, and you have to use BAT... In my case, most of the money would go to YouTube, Reddit and HN. (I think Brave actually has a way to send the money to individual creators on a site rather than to the site itself. But I haven't used it personally.)

Would you mind sharing what protocols you are working on that can benefit from a "lightweight cryptography"? My impression from learning cryptography in the last 8 years is that cryptographic protocols are either exponentially secure, or any tiny weaknesses can be amplified into a complete break. The only example of secure "intrapolynomial cryptography" [1] is Proof-of-Work, but it also requires work to be expended continuously. Not exactly a scheme for "underpowered devices". [1] https://nakamotoinstitute.org/intrapolynomial-cryptography/