3 keys to understand the validity of the Bitcoin White Paper 16 years after its publication
Today marks 16 years since pseudonymous Bitcoin creator Satoshi Nakamoto shared the White Paper of Bitcoin BTC on a cyberpunk mailing list.
“I have been working on a new electronic money system that is entirely peer-to-peer, with no trusted third parties,” Satoshi said in an October 31, 2008 email where he shared the paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” ». There, he theoretically defined a global payment method without intermediaries.
The document, only 9 pages long, was the precursor to a system that forever transformed the way money is conceived. The foundations were thus laid for an ecosystem made up of combined pieces never seen to date and a proposal was outlined for the creation of digital money, independent of the traditional banking entities that had been dominating the traditional financial system. The management proposed by Nakamoto It would be completely revolutionaryin the face of the economy that was known until then.
This is one of the most important events in the history of the digital currency ecosystem, especially due to the implications that the launch of the proposal had, most of which remain in full force despite the time that has passed. Let’s review this new anniversary 3 associated keys with the content of White Paper that raise more important questions to the traditional system.
Under the premise of operating as digital money, the payment system proposed by Nakamoto differed from the processes traditionally carried out by banking entities, pointing out that third parties were not necessary to mediate the operation and turning each person into full custodian of their funds.
The idea is to make direct transfers through a decentralized network, avoiding double spending, using a currency whose value comes from trust in the system and its programmed scarcity. It was then proposed a completely decentralized payment systemopposed to the bank-based economic model that generated the international financial crisis of 2007 and 2008.
That is why, given how manipulable the traditional financial system can be by central banks and due to the unlimited issuance of capital, in the first paragraph of the White Paper it reads:
Internet commerce has come to rely almost exclusively on financial institutions acting as trusted third parties to process electronic payments. Although the system works quite well for most transactions, it still suffers from the weaknesses inherent to the trust-based model.
Two months later, the official launch of Bitcoin took place, and since then the digital currency has been making its way even among people outside the world of programming, creating the foundations for a world and globalized ecosystem that already capitalizes more than two billion dollars.
In this way, not only is it possible to “store” bitcoin coins without the need for a financial institution or a trusted third party, but now a person can be their own bank. Seen this way, bitcoiners should not fear “financial corralitos”, confiscations, theft of safe deposit boxes, and many other things that continue to happen to fiat money if it is stored in a bank. This, if users truly act as their own banks, without giving up custody of their private keys.
It is no longer necessary to trust the banks
As the money management proposed by Bitcoin becomes more attractive, different from that used by financial institutions to perpetuate centralized control of moneyone of the most significant changes that the White Paper has to do with trusta term that was highlighted in the document.
“What is needed is an electronic payment system based on cryptographic proof rather than trust, allowing any two interested parties to transact directly between themselves without the need for a trusted third party,” Nakamoto says. An approach with which he highlighted one of the important problems to be solved: the need to trust the authorities to control the money supply and to guard people’s money.
The solution came thanks to the decentralized vision of the new system, which not only makes it easier for people to manage their money independently, but also ensures that funds are not spent twice. Now, having this possibility at hand, it has become more common question the trust required by the traditional system and that on many occasions has been defrauded by bankruptcies, financial collapses and mismanagement.
Despite this, financial institutions establish an environment where customers must submit to absurd restrictions, such as not wearing a hat or being on the phone, while they They operate with almost blind trust in their own system. This highlights a double standard: clients are considered potential criminals, while the same institution that claims to take care of their money may have excessively risky practices. Who watches the banks?
Nakamoto’s proposal, based on a dispersed and verified trust network, responds to the need for a system that is not only secure, but also reestablishes a relationship of trust between the parties without the intervention of a third party.
He White Paper has the antithesis of KYC
He White Paper of Bitcoin establishes that the digital currency works as a payment system peer to peer. In analogy with cash, this means that when a bill passes from hand to hand, it is impossible for a person to know with certainty who its respective owners have been at the different times of circulation.
Therefore, although all operations on the Bitcoin network are recorded in its decentralized database backed by nodes, these transactions They are only associated with wallets in which the assets are storedwhich are expressed in an alphanumeric code. Therefore, no operation involves personal data of the operators.
This does not mean that they are not traceable, since currently security organizations and agencies have tools to follow up on Bitcoin transactions, whenever there is a presumption that these would be linked to illicit acts. However, the most important thing that Nakamoto proposed is the possibility that people They are not forced to provide the State with their data or information about their holdings.
In this sense, the White Paper of Bitcoin mentions that “mediation costs increase transaction costs and limit the minimum practical transaction size”, which reveals an almost unnecessary trust in intermediaries.
The document thus opposes the Know Your Customerthe know your customer or KYC policy that has become a standard in the traditional financial field and that comes from banks, in their eagerness to prevent fraud and money laundering. In themselves they impose Comprehensive procedures to verify the identity of your clients.
KYC, then, could be considered as a form of institutional distrust. To open an account, a customer must provide personal information, giving their trust to an entity that, ironically, demonstrates distrust by demanding such guarantees. This dynamic has intensified for companies related to Bitcoin, where decentralization promises to eliminate the figure of the middleman.
The narrative of White Paper It is presented as a bold vision of a future in which individuals can act without the supervision of centralized authorities.
However, the manifestation of KYC in the cryptocurrency space poses a crucial dilemma: how is trust built in a system that, paradoxically, seems to replicate the dynamics of distrust of the traditional financial system? In this sense, the task remains pending: maintain privacy and reevaluate what it means to trust and be reliable in a world where technology and the economy are more intertwined than ever.
Privacy is the main promise
Privacy is one of the main advantages and contributions of Bitcoin that only disappears if custody of the private keys is transferred to another person or entity and the personal data required by centralized exchanges is delivered. Hence always self-custody is recommended as a way to preserve this characteristic, which is part of the philosophy that has given life to the digital currency.
However, there is an increase in the use of KYC by exchanges and other cryptocurrency-related services, which raises an essential question: have we really left behind the need to trust an institution?
There are many users who, out of convenience or ignorance, trade with BTC on exchanges, and keep them there, without withdrawing them to a self-custody wallet. Others voluntarily transfer BTC and their data to a platform that gives them some interest in depositing coins on it.
But by acting this way, the maxim of “being your own bank” proposed by the White Paper is canceled.
For all this, anyone interested in maintaining a high level of financial privacy should take precautions to prevent their identity from being associated with a certain address. Nakamoto, aware of this, wrote a tip current and fully applicable to date:
(…) a new pair of keys should be used for each transaction, in order to avoid being linked to the same owner. Some entailment remains inevitable with multi-entry transactions, which necessarily reveal that their entries were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner.