Given that backdrop, Ben blogged about bitcoin:
"A friend alerted to me to a sudden wave of excitement about Bitcoin.
I have to ask: why? What has changed in the last 10 years to make this work when it didn’t in, say, 1999, when many other related systems (including one of my own) were causing similar excitement? Or in the 20 years since the wave before that, in 1990?
As far as I can see, nothing.
Also, for what its worth, if you are going to deploy electronic coins, why on earth make them expensive to create? That’s just burning money – the idea is to make something unforgeable as cheaply as possible. This is why all modern currencies are fiat currencies instead of being made out of gold.
Bitcoins are designed to be expensive to make: they rely on proof-of-work. It is far more sensible to use signatures over random numbers as a basis, as asymmetric encryption gives us the required unforgeability without any need to involve work. This is how Chaum’s original system worked. And the only real improvement since then has been Brands' selective disclosure work."
Ben, I usually like your work and I also go back the 10 or 20 years in digital bearer certificates. But what has changed from the Chaumian (or even Brands) days is that distributed p2p architecture has flourished. It has flourished not only for efficiency but for ultimate survival. It would be irresponsible and naïve to think that a centralised issuing mint (required to prevent double-spend) can avoid shut-down if that were the goal of the authorities. Historically, bitcoin is really a peer-to-peer implementation of Wei Dai's b-money proposal and Nick Szabo's Bit gold proposal.
However, the more important consideration for digital bearer cash is that true, auditable reserves (metals or otherwise) themselves create a single point of failure through confiscation. Bitcoin has no reserves and it has value precisely because it has purchasing power. It is a fully nonpolitical unit of value with transactional non-repudiation and two-way convertibility.
Bitcoin’s author commenced a fairly lengthy (and robust) exchange on the cryptography mailing list thread prior to the January 2009 software release. It covers multiple exchanges on a broad range of topics and it is required reading for cryptographers. Regarding the prevention of double-spending, the network implements a peer-to-peer distributed timestamp server utilizing chained proofs of work which then provides the confirmations to the client. This transactional block-chain has permitted decentralisation without compromising integrity and that in itself is a major change from the prior practice of reissuing digital tokens at a centralised mint.
I’m really surprised that a friend had to ‘alert’ you to bitcoin. Realizing that all money is a mass illusion in some way or another, I would prefer to trust in cryptography than to trust in God and I thought you would as well.
Completing the day was Adam Cohen's nonsensical answer on Quora to "Is the cryptocurrency Bitcoin a good idea?", which was elegantly refuted by Sean Lynch and Brandon Smietana. This was followed by Victor Grishchenko's critical piece on bitcoin, which is slowly being negated on the Bitcoin Forum.For further reading:
"Underappreciated (ii)", Nick Szabo, November 21, 2006
"RPOW - Reusable Proofs of Work", Hal Finney, August 15, 2004