Insights | Feb 26, 2024

Image: Unsplash/Pierre Borthiry Peiobty

Bitcoin’s Foundational Principles: Insights from Satoshi Nakamoto’s Emails

Thanks to the ongoing UK trial between COPA and Craig Wright, a slew of never seen before emails between Satoshi Nakamoto and early collaborator Martii ‘Sirius’ Malmi have surfaced regarding Bitcoin’s foundational principles which can be likened to a set of “Bitcoin’s 10 Commandments.”

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These principles, derived from the insights shared in the emails, highlight the core values and technical philosophies that guided Bitcoin’s creation and early development that still have profound implications for the yet to be determined future for the world’s most dominant cryptocurrency, Bitcoin.

1. Decentralization is Paramount

Bitcoin was designed to operate without a central authority, ensuring no single entity could control the network.

“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” – Satoshi Nakamoto

Decentralization remains a core value in the cryptocurrency space, not just for Bitcoin but also for newer blockchain projects. It’s seen as essential for ensuring security, privacy, and resistance to censorship.

2. Privacy Through Anonymity

Bitcoin was designed to allow participants to keep their transactions private, though not necessarily anonymous.

“Participants can be anonymous. New coins are made from Hashcash style proof-of-work.” – Satoshi Nakamoto

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The principle of privacy has evolved with the introduction of more sophisticated tracking and analysis tools. Privacy-focused cryptocurrencies and second-layer solutions like the Lightning Network aim to enhance this aspect.

3. Security Above All

The security of the network and its transactions was a primary concern, with mechanisms like proof-of-work to secure the blockchain.

“We have proposed a system for electronic transactions without relying on trust.” – Satoshi Nakamoto

Security remains paramount, with ongoing efforts to bolster Bitcoin’s defenses against attacks and to secure other cryptocurrencies through innovations in consensus mechanisms and cryptographic techniques.

4. Fixed Supply to Combat Inflation

A fixed supply of 21 million coins was set to prevent inflation and mimic the scarcity of precious metals.

“The steady addition of a constant amount of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.” – Satoshi Nakamoto

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The fixed supply is now a fundamental economic principle of Bitcoin, influencing other cryptocurrencies to adopt similar models to create scarcity and value.

5. Efficiency and Scalability

Bitcoin was designed to be an efficient, scalable system, with discussions on block size and transaction speed for future growth.

“The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes.” – Satoshi Nakamoto

Scalability remains a challenge, addressed by solutions like the Lightning Network and ongoing debates about block size and transaction throughput.

6. Open Source for Transparency

Bitcoin’s code was open source, encouraging transparency, collaboration, and trust in the system.

“Open-source software is all about giving the power to the user, not the software developer.” – Satoshi Nakamoto

The open-source nature of Bitcoin has inspired countless other projects, emphasizing transparency and community-driven development in the crypto ecosystem.

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7. Simplicity in Design

Despite its complex underpinnings, Bitcoin was intended to offer a simple user experience, making digital currency accessible to all.

“It’s very attractive to the libertarian viewpoint if we can explain it properly. I’m better with code than with words though.” – Satoshi Nakamoto

The drive for simplicity continues, with user-friendly wallets, exchanges, and services making cryptocurrencies more accessible to a broader audience.

8. Self-Sovereignty

Bitcoin empowers users to have full control over their money, without the need for intermediaries like banks.

“With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.” – Satoshi Nakamoto

The principle of self-sovereignty is central to the cryptocurrency movement, with developments in decentralized finance (DeFi) and smart contracts expanding this concept.

9. Innovation Through Collaboration

The development of Bitcoin was a collaborative effort, with Satoshi inviting contributions and improvements from the community.

“I am trying to help. The project needs more developers to help and to continue improving.” – Satoshi Nakamoto

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Collaboration remains crucial, with open-source projects and community-driven development shaping the future of blockchain technology and its applications.

10. Adaptability for Longevity

Bitcoin was designed to adapt and evolve, with mechanisms like the difficulty adjustment for mining and the potential for protocol upgrades.

“The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime.” – Satoshi Nakamoto

The adaptability of Bitcoin and other cryptocurrencies is evident in the ongoing discussions about upgrades (e.g., Taproot), demonstrating the balance between maintaining core principles and evolving to meet new challenges.

Conclusion

These “commandments” or principles have guided Bitcoin from its inception to its current status as a leading digital currency. While the landscape has evolved, with new technologies and challenges emerging, these foundational ideas continue to influence the development of Bitcoin and the broader cryptocurrency ecosystem, shaping their trajectory into the future.

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada’s Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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