Skip to main contentSkip to navigationSkip to navigation
The cryptocurrency’s rise pushed regulators to consider taking action in 2014.
The cryptocurrency’s rise pushed regulators to consider taking action in 2014. Photograph: Karen Bleier/AFP/Getty Images
The cryptocurrency’s rise pushed regulators to consider taking action in 2014. Photograph: Karen Bleier/AFP/Getty Images

The White Paper by Satoshi Nakamoto review – the future of cryptocurrency

This article is more than 4 years old

Bitcoin was radical and utopian, a way to avoid both government and big business. What happened?

Eight years ago, Visa, Mastercard and PayPal, which together make up more than 97% of the global market for payment services, cut off funding to WikiLeaks (you could still donate to the Ku Klux Klan, the English Defence League or Americans for Truth about Homosexuality). The blockade, backed by Republican senators, was political: WikiLeaks had published Chelsea Manning’s material documenting US military drone strikes and civilian killings in Iraq; stopping inflowing cash silenced Julian Assange’s outfit, albeit temporarily.

What could be done? Perhaps it was time for a cryptocurrency to stride from the proverbial phone booth, underpants over its tights, and save the day? After all, bitcoin’s philosophy was that it would cut out the middleman, whether state functionary or corporate lackey, and realise a radical future in which, for instance, Afghan women, prohibited from opening bank accounts, might work and get paid in bitcoin.

Certainly, in December 2010 there was much enthusiasm from cypherpunks for WikiLeaks to link to bitcoin on their website for donations. In a fascinating thread on bitcointalk.org reproduced in this book, Mike Gogulski wrote: “Screw big business. Google, Microsoft and Wal-Mart can all eat flaming death as far as I’m concerned … where systems like bitcoin can be helpful is in making both government and big business irrelevant and obsolete.”

Why aren’t we living in that radical future in 2019? One reason is bitcoin’s enemies made sure it never arrived. The Indian government, for instance, refused to recognise bitcoin as legal tender. Facebook refused cryptocurrency ads while developing its own. Earlier this month, it launched the cryptocurrency Libra, opening the possibility that Mark Zuckerberg’s techno-oligarchy is not just more valuable and powerful than many nation states but will be able to print its own money too.

What remains is nostalgia for the recent past, when the takedown of the powers that be seemed possible. On the same 2010 thread, another cypherpunk added: “bring it on. Let’s encourage Wikileaks to use Bitcoins.” But it didn’t happen. Satoshi Nakamoto, the mysterious, pseudonymous, probably not Japanese but possibly British, perhaps even multiple bitcoin inventor, nixed the idea: “No, don’t ‘bring it on’ … I make this appeal to WikiLeaks not to try to use Bitcoin. Bitcoin is a small beta community in its infancy … the heat you would bring would likely destroy us at this stage.”

Bitcoin has since disappointed radicals who hoped it might spark revolution. Ten years ago the first bitcoin transaction took place. Since then, fortunes have been amassed (in December 2017 Nakamoto was worth over $19bn, making him/her/they possibly the 44th richest person in the world, if he/she/they is a person), and fortunes have been lost since early 2018, when bitcoin’s bubble burst.

Jaya Klara Brekke: ‘I want to make your eyes shine in bright-eyed wonder’

That failure is not just down to Bitcoin’s enemies, but internal too. Power over the Bitcoin network has concentrated in the hands of those few whose computer power and maths skills are sufficient to mine for bitcoins (mining involves using costly software to solve maths problems and miners help keep the Bitcoin network secure by approving transactions). Just as the Sex Pistols got co-opted by the business they postured as seeking to destory, and just as the vision of a decentralised, uncensored, free internet foundered with its commercialisation, so Bitcoin has been taken over by those whom economist Nouriel Roubini calls “charlatans and swindlers”. What’s worth salvaging is not so much bitcoin, but Nakamoto’s vision for it. Like FBI agent Fox Mulder in The X-Files only more so, Nakamoto trusts no one and that philosophy has underpinned his/her/their invention. In bitcoin, cryptographic proof replaces the uncertain trust of humans in institutions.

The tricky notion of the blockchain is key to that: what it amounts to is that verified but unconfirmed transactions are aggregated into a block that is spread across the network of users and added to a stack of other blocks. This blockchain is held, at least in theory, by every user, in a “distributed ledger” that obviates the need for a central third party authority.

The purpose of this little book is to explain how the blockchain works and why it still inspires. It consists of Nakamoto’s breakthrough 2008 paper Bitcoin: A Peer-to-Peer Electronic Cash System, a guide to it by blockchain aficionado Jaya Klara Brekke, along with appendices, an introduction by James Bridle and informative essays parallelling bitcoin with the cryptographic work at Bletchley Park that helped the allies defeat the Nazis. “I want to make your eyes shine in bright-eyed wonder as you reread the Bitcoin white paper, just as mine did,” Brekke writes. That’s the peril and pleasure of the book: her guide mixes the off-putting ardour of a doorstep God botherer with excitement over the elegance and unrealised potential of Nakamoto’s idea.

Bitcoin may be in the recycling bin of radical initiatives, and Nakamoto unheard of since 2014, but the blockchain idea of a self-sustaining framework for the development of consensus is still worth developing – and not just to change how we spend. In our serially disappointed age, the blockchain suggests a way better than mere cynicism about state and privacy-violating corporations, albeit one that doesn’t seem ready to take over the world any time soon.

The White Paper is published by Ignota (£12.99). To order a copy go to guardianbookshop.com or call 0330 333 6846. Free UK p&p over £15, online orders only. Phone orders min p&p of £1.99.

Most viewed

Most viewed