Adam Back: The Question Was Whether Bitcoin Would Bootstrap
Posted on 03-22-2020.
While waiting for the world to get back to normal, it may be useful to take a moment and turn away from all the turmoil and uncertainty. In this particular case, we offer you to look back at certain fundamental values and properties of Bitcoin.
48show’s Max Keidun talked with Adam Back, a famous cryptographer, the creator of Hashcash referenced in Bitcoin whitepaper, and a prominent member of the crypto-community, about the early days of crypto, the ideas behind the Proof-of-Work, and the importance of Bitcoin as a concept and a running system.
How does it feel to be one of the founding fathers of crypto?
It's a funny evolution of events for sure. I mean, for many years people like Hal Finney, Nick Szabo, me, and others were spending a lot of our free time trying to solve the basic problem. I think there was a lot of energy to develop and deploy things like that.
At the time that I was contacted by Satoshi in 2008, I looked at the suggested solution in more detail and the main question was whether it would bootstrap. With DigiCash there was an experiment to try and force it to bootstrap. They didn't yet have the banking relationship but they made a BS server and they promised to issue no more than a million units. Some of the enthusiastic and technical-minded people among cypherpunks thought that they would try to rely on this scarcity and sell things for these electronic cash tokens with no value and see if they could create value. The experiment had been run to try and bootstrap from no existing value system, to just bootstrap something based on scarcity
Of course, DigiCash ultimately failed, but this time there was a distributed system. It was quite plausible to me that that might be possible. It was a question mark as to would it bootstrap.
Obviously, it did, but it took some years before there were first exchanges and people were basically buying novelty trinkets, the 10,000 Bitcoin pizza, and all this stuff. So, people were just playing with it, which actually gave it sort of a collector's value and eventually a more dependable value, more liquid exchanges, and slightly lower volatility over time.
Can you explain the concept of Proof-of-Work in simple terms?
There are some types of mathematical problems, which are complicated to find a solution to, but the solution is found it’s easy to verify. As a simplified version, imagine somebody asking you to find a square root of 225. You’d have to think about, figure out if it’s an integer or a fraction. It will take a while without a calculator. But when you’ve found the solution, it’s quite quick to multiply the number by itself and see the result.
Proof-of-Work is the job to find such a solution and the form it takes is similar to flipping a coin, but with a lot of coins at once. Let’s say, you’re going to take 70 coins and flip them. If they all land on tails, you’ve mined a block. That’s a lot of coins and it’s very unlikely that they all land on tails, but that’s the approximate number of coins you’d have to land on tails to get a Bitcoin block. That happens every ten minutes. It is a hundred billion trillion guesses per second.
It’s also probabilistic, meaning that you have no shortcuts. The only way to find such coins is to try again and again. Eventually, somebody gets lucky. That’s why the period for a block is ten minutes on average, but it actually varies wildly.
What is Bitcoin for Adam Back?
Actually, it's kind of interesting that different people value it for different reasons. I think, one way to look at it is in terms of the most important properties that are not available in non-Bitcoin areas, in conventional finance, and banking.
The fact that it's permissionless is quite important. There’s a thought experiment: imagine if Bitcoin was unavailable to you because it was down for maintenance this week, which of course doesn't happen, but it’s a thought experiment. So, what would your thought process be if you were about to make a transaction or a payment? Would you without a second thought reach for a debit card or take some euros from your pocket? If you’ve been completely unconcerned, then that probably isn't a very sticky or important Bitcoin use case. Whereas, in other cases, you would think ”I have to wait till it comes back up,” because you can’t or don't want to make this transaction in a different way.
There's certainly a wide range of use cases in which banks largely cannot compete, which is a kind of permanent exclusive area that Bitcoin can satisfy with permissionless use. Being a universally and globally accessible store of value is a secondary benefit. It’s an uncorrelated asset and its supply is apolitical.
Watch the full interview on the ForkLog LIVE YouTube channel.
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