Satoshi Nakamoto created Bitcoin in 2008 in response to the financial crisis and bailouts, which fueled distrust in centralized financial institutions. Nakamoto drew upon concepts from cryptography and peer-to-peer networks to develop a decentralized digital currency using blockchain technology. By distributing the ledger across many users' computers and requiring consensus to validate transactions, Bitcoin solved the double-spending problem that had hindered previous attempts at digital cash. It harnessed weaknesses of digital currencies like perfect copying into strengths by copying the ledger everywhere and discarding ledgers that did not match the consensus view.

1. “Sorry to be a wet blanket. But, writing a description
of Bitcoin for general audiences is bloody hard.
There’s nothing to relate it to.”
- Satoshi Nakamoto, July 5, 2010

2. How the Constraints of
Digital Define Bitcoin
(a Bitcoin parable by James D’Angelo)
“What is Bitcoin?” Harvard April 30, 2014

3. 2008 – the story begins
it wasn’t just coincidence that
Bitcoin, as an idea, was born
in 2008 amid the turmoil of the
financial crisis
the average person focused
on the idea of money

4. bitcoin addressed similar ideas
• money creation • monetary control • quantitative easing

5. the pragmatics
there were those who
thought the bailouts were
acceptable & fed acted
appropriately

6. the activists
there were those who
didn’t. chaos, mistrust,
anger – focused on big
central organizations
that wielded financial
power...

7. the programmers
One group turned to software to
address the problems that they
perceived with money. one
person in particular...

8. Satoshi Nakamoto
anonymous, but uses male japanese pseudonym
“The central bank must be trusted
not to debase the currency, but the
history of fiat currencies is full of
breaches of that trust. Banks must
be trusted to hold our money and
transfer it electronically, but they
lend it out in waves of credit
bubbles with barely a fraction in
reserve.” - Satoshi Nakamoto, Feb 2009

9. Satoshi Nakamoto
His view: inside software
there is a solution to the
financial crisis.
His solution - turning ones
and zeros into money.
excellent writer. intimate history of finance & cryptography

10. the dream
was not new
IBM, Milton Friedman, others

11. cypherpunks (not cyberpunks)
cypherpunks advocate the widespread use of cryptography
as a route to social & political change.
inside the digital domain,
inside cryptography, they
could sidestep the
problems of money
created by politics, banks
and special interests.
Since 1980 a primary aim
was digital currency.

12. advantages of going digital
• fast (velocity of money)
• weighs nothing
• programmable
• internet ready
• international
• easy accounting
• cheap – no need for gov.
issuance/protection
• etc. etc. etc.

13. but digital was proving elusive

14. digital is great for copying

15. perfect copies of music

16. perfect copies of videos, photos & data

17. perfect copies of messages
perfect copies of
transactions, digital
tokens, messages, etc.

18. but perfect copies makes bad money
counterfeits that are indistinguishable from Real McCoys

19. the double spending problem
networks are noisy and
transmission across
networks is far from
instantaneous
a hacker can capitalize
– the problem was so
nasty that experts
deemed it impossible

20. but in 2008, the fires were rekindled

21. satoshi rifled through the new tech
inflamed & frustrated, satoshi looked elsewhere. studied
BitTorrent - released in 2001. In 2008 p2p accounted for
approximately 50% of all internet traffic

22. Napster - Trojan Horse?
launched in 1999, shut down in 2001. Napster’s failure
became an important case-study for hackers and a turning
point in the design of modern software systems.

23. Napster = centralized

24. BitTorrent’s
Solution
BitTorrent’s coup de grace was
to flip the problem of file
storage on its head. Instead of
central servers, the BitTorrent
algorithm chopped all the
media files up into tiny pieces
and scrambled them on users’
computers everywhere.
never centralize again

25. satoshi’s decision
Armed with his Napster story, he was determined to find the
centralized part of banks. But what was it?

26. the ledger
a bank’s heart is not the vault, it is the ledger

27. Turn the Bank Inside Out
Satoshi thought,
“what if I could turn a
bank inside out?
Instead of one central
party controlling the
ledger, what if every
user were recruited to
maintain a constantly
updated copy?”

28. public ledgers - not so great
Bank ledgers are the ultimate tragedy of the commons. High
incentive to game the system. Result: centralization

29. centralized = mistrust & anger

30. The decentralized ledger (blockchain)
To create his decentralized ledgers,
Satoshi paired two main
technologies. Nothing was newer
than 2001.
• Proof of Work - 1997
(solves the double spending problem)
• Elliptic Curves - 1987
(solves unique access to the ledger)

31. digital’s weaknesses as strengths
Turn the weaknesses of digital
into strengths. The strength of
the digital was perfect copies –
okay – so copy the ledger,
everywhere, instantly. In turn, he
made the uniqueness the flaw –
any ledgers with even one
comma not agreeing with the
masses would be discarded,
leaving fraudsters powerless.

32. Satoshi’s Masterstroke
Eliminate cash to make currency.

33. the blockchain is a new form of public good
not state, not private, it is ‘other’ – truly public

34. fuel for permissionless innovation
smart contracts, mesh networks, notaries, voting, government, etc.
no need to ask to use it, no fees for employing the tech, no oversight
on provable transactions, contracts, etc

35. full transparency (optional)

36. gangsters use it (optional anonymity)
a measure of any currency is amorality

37. dirty socks vs. the dollar
a strong currency is accepted by more people

38. its a baby currency
easy to steal, volatile, could disappear tomorrow
“If you don’t believe me or don’t get it, I don’t have time to try
to convince you, sorry.” Satoshi July, 2010

39. What is Money?
perhaps cash (gold, dollars) has always been just a placeholder
until we could finally decentralize the ledger.
does it need to have intrinsic value?
is mass a negative? we don’t know.
but bitcoin will help us learn.