Eleven years since the creation of Bitcoin, its security model is still not agreed upon. Our guest today goes by the Twitter pseudonym Hasu (@hasufl), an independent cryptocurrency researcher who publishes work on the subject of non-sovereign money and has taken a recent interest in Bitcoin’s security model. We kick off our conversation with a recognition of the power of pseudonymity in the digital realm and the implications of our ability to access an abundance of information in a post-internet world. We then take a deep dive into the world of Bitcoin, unpacking its security model. We begin with an explanation of Satoshi Nakamato’s explicit design goals to achieve the properties of an apolitical monetary system. We introduce an intuitive way of thinking about proof of work, highlighting Bitcoin’s innovative ability to coordinate trust, and facilitate the transfer of value without relying on a centralized authority. We explain why Bitcoin needs mining and how the network incentivizes miners. We place particular emphasis on the economic incentives required to secure Bitcoin and a potential shift in these incentives over time. We finish with an outline of countermeasures against a potentially weakening security model, in hopes to further encourage conversation.

Key Points From This Episode:

The transition from information scarcity to information abundance since the internet.

Democratic values provided by the internet and its culture of pseudonyms.

Satoshi’s design goals and Bitcoin’s security principles

Why Bitcoin needs mining

Timestamping with Nakamoto consensus

Miners’ influence on the network: what miners can and can’t do

How to think about proof-of-work

What secures Bitcoin: a combination of cryptography and economic incentives

Acknowledging a shift in Bitcoin’s security model from block rewards to transaction fees

Countermeasures to Bitcoin’s changing security model

Tweetables:

“Money and finance are spaces that have historically had huge barriers to entry and largely been protected from disruption. Cryptocurrency is able to exist outside of the curfew of government regulation.” — @hasufl

“The market value of rewards is tied to the health of the network. As a result, the entire balance sheet of miners is tied to the health of the network. If users lose faith, miners lose their investment.” — @hasufl

“If there ends up being a problem, and we are in a hurry to fix things, then it’s way easier to make a mistake, adopt an imperfect solution, or implement something without full community buy-in.” — @hasufl