transactions, or block,
added to the blockchain.
• The computer that has
its block added to the
blockchain is also
granted a bundle of new
Bitcoins.
• Computers on the
network start compiling
a new list of
unconfirmed recent
transactions, trying to
win the next bundle of
Bitcoins.
The
result
of
this
complicated
process
was
something
that
was
deceptively simple but never
previously
possible:
a
financial network that could
create and move money
without a central authority.
No bank, no credit card
company, no regulators. The
system was designed so that
no one other than the holder
of a private key could spend
or take the money associated
with a particular Bitcoin
address. What’s more, each
user of the system could be
confident
that,
at
every
moment in time, there would
be
only
one
public,
unalterable record of what
everyone
in
the
system
owned. To believe in this, the
users didn’t have to trust
Satoshi, as the users of
DigiCash had to trust David
Chaum, or users of the dollar
had to trust the Federal
Reserve. They just had to
trust their own computers
running the Bitcoin software,
and the code Satoshi wrote,
which was open source, and
therefore
available
for
everyone to review. If the
users didn’t like something
about the rules set down by
Satoshi’s software, they could
change the rules. People who
joined the Bitcoin network
were, quite literally, both
customers and owners of both
the bank and the mint.
But so far, at least, all
Satoshi
had
done
was
describe this grand scheme.
DESPITE ALL THE advances
described in the Bitcoin
paper, a week after it was
posted, when Hal Finney
chimed in for the first time,
there
were
only
two
responses
on
the
cryptography mailing list.
Both
were
decidedly
negative. One noted computer
security expert, John Levine,
said that the system would be
easily
overwhelmed
by
malicious hackers who could
spread a version of the
blockchain that was different
from the one being used by
everyone else.
“The good guys have
vastly
less
computational
firepower than the bad guys,”
Levine wrote on November 2.
“I also have my doubts about
other issues, but this one is
the killer.”
Levine’s concern was a
valid one. The Bitcoin system
Satoshi described relied on
computers reaching decisions
by majority rule. Early on,
when
there
were
fewer
computers on the network, it
would be easier to become
the majority and take over.
But Satoshi’s hope was that
there wouldn’t be much of an
incentive to take over the
system early on, when the
network was small. Later on,
if there was an incentive to
attack the network, that
would hopefully be because
the network had attracted
enough members to make it
hard to overwhelm.
Another longtime veteran
of the Cypherpunk debates,
James Donald, said that “we
very, very much need a
system,” but the way he read
the paper, the database of
transactions, the blockchain,
would quickly become too
big for users to download.
In
the
weeks
that
followed, Hal was essentially
Satoshi’s only defender. On
the cryptography list, Hal
wrote that he wasn’t terribly
worried about the attackers
that Levine talked about. But
Hal admitted that he wasn’t
sure how the whole thing
would work in practice, and
expressed a desire to see
actual computer code, rather
than
just
a
conceptual
description.
“This does seem to be a
very promising and original
idea, and I am looking
forward to seeing how the
concept is further developed,”
Hal wrote to the group.
Hal’s defense of the
program led Satoshi to send
him an early, beta version for
testing. In test runs in
November and December
they worked out some of the
early kinks. Not long after
that, in January 2009, Satoshi
sent the complete code to the
list. The final software made
some interesting tweaks to
the system described in the
original paper. It determined
that new coins would be
assigned approximately every
ten minutes, with the hash
function lottery getting harder
if computers were generating
coins more frequently than
that.
The
software
also
mandated that the winner of
each block would get fifty
coins for the first four years,
twenty-five coins for the next
four years, and half as much
again every four years until
21
million
coins
were
released into the world, at
which
point
new
coin
generation would stop.
On the first day, when
Hal downloaded the software,
the network was already up
and running. For the next few
days, not much activity was
being added to the blockchain
other than a computer on the
network (usually belonging to
Satoshi) winning fifty coins
every ten minutes or so. But
on Sunday evening the first
transaction took place when
Satoshi sent Hal ten coins to
make sure that this part of the
system
was
working
smoothly. To complete the
transaction, Satoshi signed
off with the private key
associated with the address
where the coins were stored.
This
transaction
was
broadcast to the network—
essentially
just
Hal
and
Satoshi at this point—and
was
registered
in
the
blockchain a few minutes
later
when
Satoshi’s
computers won the next
round of the hash function
lottery. At that point, anyone
who downloaded the software
would download the entire
blockchain up to the point,
which included a record of
the ten coins that Hal had
received from Satoshi, as well
as the fifty coins that Hal had
won on Saturday.
In the first weeks, other
early adopters were slow to
buy in. Satoshi was using his
own computers to help power
the network. Satoshi was also
doing everything possible to
sell
the
technology,
responding quickly to anyone
showing the slightest interest.
When a programmer in Texas
wrote to Satoshi late one
night, expressing his own
familiarity with electronic