Deryk Makgill

Szabo is Not Satoshi

Illustration by Satoshi Doodles

 

After the popularity of my essay on Satoshi and micropayments, I had the idea of continuing down the historical rabbit hole for a while and looking further at some questions about Bitcoin’s history that I’ve found interesting for years.

This next essay in the series is about the question of Nick Szabo’s involvement in the creation of Bitcoin. I find the question interesting not strictly as a question of who Satoshi actually is, but more because the implications that might follow from the answer.

Szabo is a widely respected individual in Bitcoin and much of his writings, particularly on the origins of money, have been used as justification for the small blocks + Lightning Network approach to scaling Bitcoin. Although people rarely say it outright, there’s a subculture in Bitcoin that really wants to believe he is Satoshi because it lends more credibility to their position, despite the fact that he has denied it.

Though they might say the thoughts of Satoshi are irrelevant when they appear to clash with their view of scaling Bitcoin, there’s little doubt they would readily use the “Szabo is Satoshi therefore we’re right” argument if they ever got definitive proof that he was indeed Satoshi.

So the question of whether or not Szabo is Satoshi I think carries a good deal of practical weight for the future of Bitcoin, even if nobody will admit it now.

Unfortunately for this camp, the evidence we have suggests he’s very likely not Satoshi and in fact had no involvement whatsoever in the creation of Bitcoin. For my own part, I do not believe he is after putting this all together.

Before we review the evidence, let me just note that I’m not making an argument for small or larger blocks here. I hope this essay can be interesting and informative to anyone who wants to better understand the history of Bitcoin.

Bitgold by Szabo

 

First, Satoshi probably didn’t know about BitGold (or the other cypherpunk writings). In my work archiving all the known emails from Satoshi, I came across his communications with Wei Dai, the author of b-money, the first reference in the Bitcoin White Paper.

Satoshi was referred to Wei Dai after reaching out to Adam Back. As Adam wrote in a forum post:

…I believe it was me who got Wei Dai’s b-money reference added to Satoshi’s bitcoin paper when he emailed me about hashcash back in 2008.

Although Satoshi would go on to reference Wei Dai’s b-money in the Bitcoin White Paper, it seems clear he invented Bitcoin independently of b-money and did not know about it until later, whereas Szabo himself was already familiar with Wei Dai and b-money and would not have needed Adam Back to tell him about it.

Dai himself questions b-money’s influence on Bitcoin:

…my understanding is that the creator of Bitcoin, who goes by the name Satoshi Nakamoto, didn’t even read my article before reinventing the idea himself. He learned about it afterward and credited me in his paper. So my connection with the project is quite limited.

And although Satoshi would later reference BitGold and b-money in a forum post,

Bitcoin is an implementation of Wei Dai’s b-money proposal […] on Cypherpunks […] in 1998 and Nick Szabo’s Bitgold proposal

Satoshi was only crediting BitGold after the fact, just like Wei Dai believed he was crediting b-money after having already created Bitcoin. It is not evidence Satoshi was familiar with BitGold before creating Bitcoin, only that he learned about it at some point in the future.

Indeed, Wei himself corroborates this when he said in an interview in the Sunday Times

In Satoshi’s early emails to me he was apparently unaware of Nick Szabo’s ideas…

To which the reporter adds the following:

Wei forwards me the relevant emails, and it’s true: Satoshi had been ignorant of Szabo’s bit-gold plan until Wei mentioned it.

Of course, Wei could simply be wrong or Satoshi could have deliberately played ignorant, but looking at the second piece of evidence suggests even more clearly that Szabo is not Satoshi, namely that Szabo’s view of Bitcoin is the complete opposite of Satoshi’s view of Bitcoin.

reply to Satoshi from James A. Donald

 

To understand this, we need to go back to the roots of the Bitcoin scaling conflict, which began in November 2008 only hours after Satoshi announced Bitcoin on the Cryptography Mailing List.

Not many people know that the very first reply to Satoshi came from someone named “James A. Donald” who criticized Bitcoin for not being able to scale.

We very, very much need such a system, but the way I understand your proposal, it does not seem to scale to the required size.

Satoshi’s reply to this email is informative about his view of how Bitcoin could scale:

Long before the network gets anywhere near as large as that, it would be safe for users to use Simplified Payment Verification (section 8) to check for double spending, which only requires having the chain of block headers, or about 12KB per day. Only people trying to create new coins would need to run network nodes. At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node…

The bandwidth might not be as prohibitive as you think.

So Satoshi was clear from the moment Bitcoin was announced that he believed Bitcoin could scale as electronic cash on-chain. Whether he was right or wrong, that was his position.

Donald would go on in later emails to disagree with this and argue that Bitcoin would need a layer of account money built on top of it, a sort of early argument for off-chain scaling.

we will need a layer of account money on top of the bitcoins, supporting transactions of a hundred thousandth the size of the smallest coin, and to support anonymity, chaumian money on top of the account money.Let us call a bitcoin bank a bink. The bitcoins stand in the same relation to account money as gold stood in the days of the gold standard…So a relatively small amount of bitcoins infrequently transacted can support a somewhat larger amount of account money frequently transacted.

Whether this argument is correct or not, it isn’t Satoshi’s vision. In fact, it much better aligns with Szabo’s views. Compare Donald’s vision for Bitcoin to Szabo’s vision of Bitcoin and the picture becomes clear:

They are almost identical. In fact, looking at these emails alone, we could more easily conclude that Szabo is James A. Donald than he is Satoshi Nakamoto. The vision for Bitcoin that Satoshi had simply doesn’t match that of Donald or Szabo and the only means by which we can salvage the Szabo = Satoshi claim is if this was all some elaborate ruse by Satoshi to argue for a position he didn’t actually believe.

This seems unlikely, especially given the last piece of evidence. Szabo’s apparent methodology and skillset is the opposite of Satoshi’s.

In the same Cryptography Mailing List thread, Satoshi would write the following:

I actually did this kind of backwards. I had to write all the code before I could convince myself that I could solve every problem, then I wrote the paper.

This is the exact opposite of the process by which Szabo apparently attempted to make BitGold a reality around the same time, in which a paper is first developed and then someone tries to put it into practice.

[bit gold] would greatly benefit from a demonstration, an experimental market (with e.g. a trusted third party substituted for the complex security that would be needed for a real system). Anybody want to help me code one up?

Part of the reason I think Satoshi was successful while so many before him failed was precisely because he took a practical approach to solving the problems, not a theoretical, academic one. Satoshi’s methodology is totally different than the cypherpunk movement which Szabo has contributed so much too.

And we also shouldn’t miss the fact that Satoshi wrote the code while Szabo was asking for help writing the BitGold code. Satoshi himself would write in an email:

I’m better with code than with words though.

Taken together, I think we should meet any claim to Szabo had something to do with the creation of Bitcoin with skepticism. He has denied being Satoshi, people who communicated with Satoshi have claimed he did not know about BitGold, b-money, or much of the rest of the cypherpunk literature, his vision of scaling Bitcoin runs contrary to the vision outlined by Satoshi, and his methodology is the total opposite.

As for how Bitcoin should scale, well that is a question being played out in real-time now with BCH and BTC. Like Satoshi, I prefer practical testing to theoretical arguments, and we should all be very excited to watch it happen.

Like this essay? You can support my Bitcoin writing here. And please see my followup essay.

Back to daily blogging

Some notes from Ayn Rand’s writing

 

I’ve taken a few months off writing daily and although I just recently published a book and feel like I’m a better writer now than I was at the start of 2018, I can feel my writing muscles atrophying a bit and want to commit to writing daily again.

Writing is a very strange thing to me. It’s one of the few activities I at once never grow tired of and yet am never quite satisfied with. Whether I like something I wrote in the past depends greatly on the particular day I’m looking at it, and whether I feel like I’m a competent writer or an amateur likewise changes a good deal from moment to moment. I think sometimes this constant pull back and forth is perhaps the reason I’ve struggled to write daily these past few months. Much better to only experience it once or twice a week than daily!

But in the end of the day, the only things that matter are the things you did do and the things you didn’t do but should have done. And when I think about my writing and incredible things it has brought my life, it’s easy to realize that any dissatisfaction can only go down to a certain point.

If it’s not perfect, well, at least it’s done. And at least I’ll have a record of all the imperfections I brought into the world over the years. Perhaps there will even be a few lasting pieces in there too. Almost anyone could hit a baseball well once in a while if they took enough swings.

There’s a story about quantity over quality in David Bayles and Ted Orland’s book, Art & Fear: 

The ceramics teacher announced on opening day that he was dividing the class into two groups. All those on the left side of the studio, he said, would be graded solely on the quantity of work they produced, all those on the right solely on its quality. His procedure was simple: on the final day of class he would bring in his bathroom scales and weigh the work of the “quantity” group: fifty pound of pots rated an “A”, forty pounds a “B”, and so on. Those being graded on “quality”, however, needed to produce only one pot — albeit a perfect one — to get an “A”. Well, came grading time and a curious fact emerged: the works of highest quality were all produced by the group being graded for quantity. It seems that while the “quantity” group was busily churning out piles of work – and learning from their mistakes — the “quality” group had sat theorizing about perfection, and in the end had little more to show for their efforts than grandiose theories and a pile of dead clay.

This is something we recognize in fitness easily — it’s better to do 50 pushups a day if the other option is obsessing over fitness plans and getting nothing done — yet with writing, and frankly any so-called “creative activity” (I hate that we have this weird distinction between creative and non-creative) we don’t apply that same standard.

I met a high school student at a conference I spoke at a while back who told me she wants to be a writer but she won’t publish anything until she considers herself to be “good” at writing. I reminded her that this was like a fat person abstaining from going to the gym until they’ve lost weight. It’s a comically stupid plan and I hope she got the point and has started publishing now because she will never become a great writer unless she produces a lot of junk first.

And I too want to be a great writer. The list of books I want to write grows longer and longer and I want to do it right by my standards and for my readers. The only thing I’ve known that helps me make progress towards getting there is daily blogging, and so let us begin again starting today.

Now a word on what you can expect as a reader of this blog…I’m unsure. Of course, I’ll continue writing about Bitcoin (BCH and BTC), my hatred for credentialism, charlatanism and college, thoughts on writing, personal notes and updates, but perhaps a lot more as well.

Satoshi on Micropayments

From the Bitcoin White Paper

 

It’s fashionable in Bitcoin these days to argue that Satoshi Nakamoto did not care about low transaction fees as an essential feature of Bitcoin.

The argument goes that Satoshi didn’t care about fees because other cypherpunks like Nick Szabo and Hal Finney didn’t care and that therefore anyone who claims otherwise is wrong. And so today we have the modern culture in BTC that unironically tells people to “just use Visa” if they want low fees.

Evidence aside that Satoshi was not part of cypherpunk culture at all and that Bitcoin was an independent invention from the concepts outlined in papers like b-money and bit gold, this kind of appeal to authority relies on its listeners never actually reading Satoshi’s writings for themselves.

The fact is that, whatever side of the BCH/BTC line you fall on, Satoshi did indeed care about micropayments. And whether he was wrong or right, we shouldn’t rewrite history to serve an agenda.

In the interest of helping people have a proper understanding of the ideas behind the creation of Bitcoin, let’s look at all the times Satoshi mentioned low fees or micropayments, the first of which is an often neglected passage in the introduction to the Bitcoin White Paper:

The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for non-reversible services. With the possibility of reversal, the need for trust spreads.

– The Bitcoin White Paper

Here Satoshi makes clear that payments above 1 cent USD are a clear part of Bitcoin’s utility:

It could get started in a narrow niche like reward points, donation tokens, currency for a game or micropayments for adult sites. Initially it can be used in proof-of-work applications for services that could almost be free but not quite…Once it gets bootstrapped, there are so many applications if you could effortlessly pay a few cents to a website as easily as dropping coins in a vending machine.

– The Bitcoin List

The root problem with conventional currency is all the trust that’s required to make it work…Their massive overhead costs make micropayments impossible.

– The P2P Foundation

For micropayments, you can safely accept the payment immediately. The size of the payment is too small for the effort to steal it. Micropayments are almost always for intellectual property, where there’s no physical loss to the merchant. Anyone trying to steal a micropayment would probably not be a paying customer anyway, and if they want to steal intellectual property they can use the file sharing networks.

– Satoshi to Mike Hearn

Your approach to micropayments sounds right…The end goal though should get to something like you describe, where it’s similar to using your cell phone without really having to think about the per minute charges.

– Satoshi to Mike Hearn

This last passage is interesting because it clarifies that when Satoshi is talking about “micropayments” he’s talking about smaller transactions than are capable with the existing payment system. It is often used to say he changed his stance, but it’s clear that he always meant for fees to be low enough for most day to day spending.

Arbitrarily small payments below 1 cent USD could be done with payment channels.

Bitcoin isn’t currently practical for very small micropayments. Not for things like pay per search or per page view without an aggregating mechanism, not things needing to pay less than 0.01. The dust spam limit is a first try at intentionally trying to prevent overly small micropayments like that. Bitcoin is practical for smaller transactions than are practical with existing payment methods. Small enough to include what you might call the top of the micropayment range. But it doesn’t claim to be practical for arbitrarily small micropayments.

– BitcoinTalk

Of course, the thoughts of Satoshi alone are not an argument, but understanding one of Bitcoin’s key early value propositions and the reasoning for it should be one tool we use in informing the kinds of decisions made in the Bitcoin protocol in the future.

For most of its history, Bitcoin functioned as Satoshi hoped it would. It did indeed have low fees that made it very useful as cash. Whether it can continue to have those is a separate question that we’re seeing play out in realtime with BTC and BCH, but denying that history outright is dangerous and puts us at odds with the Lindy Effect.

There has been unfortunately far too much propaganda and misinformation from so-called thought-leaders who either haven’t read Satoshi himself or who know what he said and are pushing a false narrative in spite of it. Micropayments and low fees were part of Bitcoin whether certain people like it or not.

Like this essay? You can support my Bitcoin writing here.

TOSCon Talk: Building a Career You Love

From The Objective Standard’s TOSCon 2018

 

I spoke at the first ever TOSCon this summer in Richmond about building a career and life you love.

The talk takes a bit more of a philosophical perspective than I have done with others in the past — I got the chance to work in one of my favorite novels, The Fountainhead, and to remind people that the selfless, passive way of pursuing your career is a bad in theory and disastrous in practice.

Watch the full talk below. It’s one of the few recordings of an event of mine, which is funny because I’ve spoken around the world more times than I can count.

Can’t see the video? Watch here.

Close your damn computer and read

Some books I’ve read recently or want to read soon

 

I have a fear that one day I’ll receive a report for the amount of hours I’ve spent browsing the web aimlessly while I should have been reading a good book.

When I was a kid — it feels weird to write that — I pulled a similar report from my World of Warcraft account and the amount of time I’d spent logged in was so absolutely unbelievable I desperately wanted to believe it was an error.

The realization was in fact so painful to me I suspect it made me forget the exact hour count, as I can’t for the life of me remember it. Even scarier is that I know the time I’ve spent aimlessly browsing the web over the years far exceeds the days and days I logged playing WoW.

The time just flies by and suddenly minutes turn to hours which turn to days which turns to months all the things you wanted to do were left undone. You need a constant reminder to do otherwise.

In Ancient Rome, for example, it is said that during a Triumph, a general would have an Auriga whispering in his ears “Memento homo” (remember you are (only) a man) to avoid that the excess of celebration could lead the celebrated commander to lose his sense of proportions.

Likewise, Herodotus tells us the Persian King Darius had a slave whisper “remember the Athenians” in his ears at dinner so that he never forgot his anger for their route of his forces at the Battle of Marathon.

Of course, it would be weird in today’s age to hire a person to whisper in your ear, but think I’m going to place reminders on my phone, computer, and workspaces that regularly tell me “close your damn computer and read.”

If you consciously cut just 30 minutes from your screen time every day to just read 25 pages from a book, you could read nearly 10,000 pages a year.

That’s 182.5 hours a year of reading books, or 7.6 full days. Wouldn’t that be a nice report to pull on your habits one day?

Close your damn computer and read.

Currently reading:

Bitcoin is Cash, Not a Club

He has brought you the truth and you condemn him? The arrogance!

There are two types of people involved with Bitcoin today.

There are those who want Bitcoin to be digital cash for themselves and whole world and those who want it to be a club for agoraphobic “cypherpunks” and an excuse to sneer at and mock the unenlightened.

To the former, Bitcoin is a tool to enable more wealth and freedom for themselves and to individuals everywhere. There are no requirements and no demands made. They welcome anyone and everyone who wants to try out Bitcoin, on whatever terms they wish, from whatever mindset they have, from any level of knowledge and expertise, it doesn’t matter.

To the latter, Bitcoin is a symbol of their self-granted superiority, a cudgel to be used against outsiders, a holier-than-thou badge that tells newcomers “go away unless you bend the knee to our way of thinking.” It’s a blank check on rudeness. It’s a way to signal knowledge to a small closed group of peers and acolytes. A circle jerk.

The former does things like help businesses set up BitPay for their websites. They send small amounts of Bitcoin to friends. They show grandma how to set up a wallet on holidays. They don’t care whether someone goes through the same initiation ritual they did or whether they deeply understand every part of the technology, only that they are excited and can grasp how to use it for their own lives.

The latter tells people, like I heard on the CoinsBank Cruise, to go away if they haven’t read the sacred texts (Szabo, et all). They say things like “Bitcoin isn’t for people who earn less than $2 a day” or laugh at people for wanting to buy a cup of coffee with their Bitcoin. When they see a store use BitPay, they boycott and slander because BitPay doesn’t meet their standards for “commitment to Bitcoin.” They might want adoption in theory, but only in a way that preserves the hierarchies and rules of their club. They’re used to feeling special and desperatley don’t want to lose that feeling as more people get excited about Bitcoin. How dare you use Bitcoin in a way I don’t approve of!? How dare you think it’s for daily use?! Read Szabo or shut up, they say. They are like the priests who tried to prevent the Bible’s translation because they knew they would lose their authority if it ever spread to everyday people.

And this latter group of Bitcoiners know their time has come. They are scared that the world is moving on without them. The truth is, they are not particularly important to Bitcoin and never have been. They’ve been able to maintain a delusion for a long time because Bitcoin was so small. They imagined themselves, as Daniel Krawisz says, to be kings of narnia, but now they’re learning a hard lesson:

Bitcoin is not a friend group. It’s not a club. It’s not a community. It’s not a way to signal knowledge superiority. It’s not a right of passage or a hobby or a science project. It doesn’t care who you are or how much you know or don’t know.

It is peer to peer digital cash and the people who know that are going to push it forward whether they like it or not.