In order to eliminate the pioneering cryptocurrency, it is necessary to eliminate each of the thousands of nodes distributed worldwide. Attackers trying to modify one block must find a valid hash to invalidate its hash before attempting to alter the next one.
People must return to free market money that no central bank or government can manipulate or destroy. Although it must also be digital to allow cross-border value transfers, it has to be scarce to prevent excessive issuance.
Since gold is a physical asset, its international expansion has made peer-to-peer exchange increasingly impractical. The initial solution was to centralize it through banknotes and digital contracts, allowing banks to become intermediaries of non-P2P money transfers.
The physical nature of gold led to the introduction of gold-backed money and government-issued fiat money. Besides costing nothing to produce, it is not scarce and allows governments to avoid market forces.
Bitcoin Emerges as the Solution to the Centralization of Money
Satoshi Nakamoto created a currency with no central authority by using a distributed ledger and disappearing from the public. In order to eliminate Bitcoin, it is necessary to eradicate each of the thousands of nodes scattered worldwide.
Creating the blockchain solved the double-spending problem due to the lack of a central authority in part. Transactions are in blocks grouped like the pages of a book, each including the hash of the previous one.
The blockchain prevents changing the order of transactions without anyone noticing, as it would affect the hash in the following blocks. In other words, the data in block 750,000 would be invalid if those in block two were wrong.
The Ledger Becomes Inalterable Thanks to the Blockchain
The proof-of-work (PoW) protocol is the second part of the solution to double-spending due to decentralization. Since reordering blocks is easy and almost costless, Satoshi Nakamoto used PoW to make those hashes costly to produce.
To add that costliness, Nakamoto added a rule to the Bitcoin protocol, placing restrictions on which hash results were valid. Random brute force attempts by a computer, which require spending money on electricity, is how it works.
Attackers trying to modify block one must also find a valid hash and enter it into block two to invalidate its hash. They must change the second block correctly before attempting to modify block three. Rewriting Bitcoin from block one would require repeating the cumulative energy expended on Bitcoin worldwide.
The Proof-of-Work Protocol Makes the Blockchain Inalterable
The PoW protocol also aims to solve the problems when a distributed computer network needs to know the current state of affairs. Since they cannot trust any message to report it, the chain of Bitcoin blocks with the most cumulative work is the valid one.
That eliminates any requirement to trust an authority regarding which version is valid in case of discrepancy. Therefore, it relies on everyone agreeing that most work is equivalent to the correct chain.
When creating Bitcoin, Nakamoto also considered the problem of fair issuance and how to maximize adoption with it. To make it possible, he staggered the release of new coins, allowing later adopters to access newly issued coins.
Worldwide coordinated authoritarianism would be the only way to keep the pioneering cryptocurrency from growing. Of course, bitcoin emerged as the solution to global financial totalitarianism.
By Alexander Salazar
