Monday, July 4, 2011
Ben Laurie wrote a paper that he described on twitter as his ‘last word’ on bitcoin, which explains his view on why bitcoin is either not a decentralized system, or that if it is, how it could be a more efficient one.
The paper is linked to in the blog post here: Decentralised Currencies Are Probably Impossible (But Let’s At Least Make Them Efficient).
Laurie’s basic point is that since bitcoin’s development team uses ‘checkpoints’, which are hard-coded points in the block-chain that cannot be changed through the protocol’s usual method of establishing an authoritative chain, to make transactions that occurred at or before the checkpoint safe from a > 50% attack, bitcoin is either not decentralized, if one considers the insertion of these checkpoints as centrally coordinated, or that there is a more resource efficient means of achieving decentralized consensus in the method used to insert the checkpoints.
His conclusion is that a decentralized currency using the method of arriving at consensus that is used to agree on the inclusion of the checkpoints in bitcoin’s block chain, as its sole means of establishing an authoritative block-chain, would be far more energy efficient than the bitcoin protocol’s mining method.
I believe Laurie’s paper is missing a key element in bitcoin’s reliance on hashing power as the primary means of achieving consensus: it can survive attacks by governments.
If bitcoin relied solely on a core development team to establish the authoritative block chain, then the currency would have a Single Point of Failure, that governments could easily target if they wanted to take bitcoin down. As it is, every one in the bitcoin community knows that if governments started coming after bitcoin’s development team, the insertion of checkpoints might be disrupted, but the block chain could go on.
Checkpoints are just an added security measure, that are not essential to bitcoin’s operation and that are used as long as the option exists. It is important for the credibility of a decentralized currency that it be possible for it to function without such a relatively easy to disrupt method of establishing consensus, and bitcoin, by relying on hashing power, can.