If you've read about bitcoin in the press and have some familiarity with academic research in the field of cryptography, you might reasonably come away with the following impression: Several decades' worth of research on digital cash, beginning with David Chaum, did not lead to commercial success because it required a centralized, banklike server controlling the system, and no banks wanted to sign on. Along came bitcoin, a radically different proposal for a decentralized cryptocurrency that didn't need the banks, and digital cash finally succeeded. Its inventor, the mysterious Satoshi Nakamoto, was an academic outsider, and bitcoin bears no resemblance to earlier academic proposals.They comprehensively debunk this view, showing that each of the techniques Nakamoto used had been developed over the preceding three decades of academic research, and that Nakamoto's brilliant contribution was:
the specific, complex way in which the underlying components are put together.Below the fold, details on the specific techniques.
The idea of a cryptocurrency originates in David Chaum's 1983 Blind signatures for untraceable payments. Narayanan and Clark trace it through several successors leading up to Bitcoin in 2008. The techniques Nakamoto used were:
- Public keys as pseudonymous identities, introduced in 1981's Untraceable electronic mail, return addresses, and digital pseudonyms by David Chaum.
- Fault and attack resilience through voting among peers, introduced in 1982's The Byzantine Generals Problem by Leslie Lamport, Robert Shostak and Marshall Pease.
- An integrity-protected, append-only log, introduced in 1991's How to timestamp a digital document by Stuart Haber and W. Scott Stornetta, based in turn on Merkle trees, introduced in 1980's Protocols for public key cryptosystems by Ralph Merkle.
- Proof-of-work, introduced in 1992's Pricing via Processing or Combatting Junk Mail by Cynthia Dwork and Moni Naor.
Narayanan and Clark's detailed exposition of each of the techniques and the way Bitcoin combines them makes a fascinating read. It illuminates the gap between academia and practice, and they advocate better communication:
Practitioners would benefit from being able to identify overhyped technology. Some indicators of hype: difficulty identifying the technical innovation; difficulty pinning down the meaning of supposedly technical terms, because of companies eager to attach their own products to the bandwagon; difficulty identifying the problem that is being solved; and finally, claims of technology solving social problems or creating economic/political upheaval.Amen!
In contrast, academia has difficulty selling its inventions. For example, it's unfortunate that the original proof-of-work researchers get no credit for bitcoin, possibly because the work wasn't well known outside academic circles. Activities such as releasing code and working with practitioners are not adequately rewarded in academia. In fact, the original branch of the academic proof-of-work literature continues today without acknowledging the existence of bitcoin! Engaging with the real world not only helps get credit, but will also reduce reinvention and is a source of fresh ideas.
All Togther Now by Tess Rinearson is an excellent overview in slide form of the techniques for distributed consensus.
I've been critical of the pre-publication peer review process for a long time. It is thus fitting that I make the following conjecture.
Had Satoshi Nakamoto published his magnum opus through the peer review process instead of unleashing it in the libertarian gold-bug echo chamber, it is likely that one of the reviewers would have pointed out that:
"the security of the blockchain is linear in the amount of expenditure on mining power ... In contrast, in many other contexts investments in computer security yield convex returns (e.g., traditional uses of cryptography) — analogously to how a lock on a door increases the security of a house by more than the cost of the lock."
Proof-of-work blockchains would have remained an ingenious but academic concept, and the world would have been spared an orgy of speculation and crime, and the waste of as much power as the Netherlands.
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