The Truth Machine: The Blockchain and the Future of Everything. Paul Vigna

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СКАЧАТЬ our financial records. If society is to define a sensible path for adopting, or not, this highly disruptive technology, we must first understand what Bitcoin is and why it matters. So, we’re going to peer under its hood.

      Before we do that, however, let’s start with this generic definition of a blockchain: a distributed, append-only ledger of provably signed, sequentially linked, and cryptographically secured transactions that’s replicated across a network of computer nodes, with ongoing updates determined by a software-driven consensus.

      What does that mouthful actually mean? Well, let’s break down its key words:

      1 “distributed”: the ledger does not reside in one place but in many, with each bookkeeping node independently responsible for up-dating it in coordination with the others. Once one bookkeeper (in this case, a computer) updates the ledger, along with some proof that its work was sound, all others simultaneously upgrade their own versions with that same update. What emerges is a constantly updated, commonly agreed record of truth with no centralized master copy.

      2 “append-only”: information can only be added, not removed. This is important because it means no one can go back and doctor the record. What’s been agreed upon as the truth is the truth. There is no room for debate.

      3 “provably signed”: blockchains use the public key infrastructure encryption methodology for sharing and controlling information. With PKI, as it’s known, users control two separate but mathematically linked strings of numbers and letters, or “keys.” One is a secret “private key” that only they know, and the other is a public key, visible to all, that’s associated with some form of valuable information. In Bitcoin, that information refers to an amount of bitcoin currency. When the user “signs” their public key with their private key, that action mathematically proves to outsiders that the user has control of the underlying information and can then assign, or send it, to another person’s public key. In Bitcoin’s case, that’s the process by which a person sends currency from their “address” (their public key) to another. (Though it’s not a perfect analogy, you can think of your private key as a secret password or PIN to manage your money and your address as an account.)

      4 “sequentially linked and cryptographically secured”: some other tools from the science of cryptography are used to represent entries into the ledger in a way that links them, with a series of unbreakable mathematical locks, into a fully verifiable sequence. This forms a never-ending, chronological series of blocks, or batches of transaction data, whose integrity is protected by cryptography. This structure provides an unfathomably high probability of confidence that nothing in the ledger has been altered from its agreed-upon state.

      5 “replicated”: the ledger is copied across participating nodes (as per the distributed pattern described in 1 above).

      6 “software-driven consensus”: a program that all the computers run independently sets certain requirements and incentives for them to behave in a way that systematically guides them to reach agreement on which transactions should or shouldn’t be included in each updated version of the replicated ledger. “Consensus” is a key word in blockchain design, as it describes the process by which each participant’s independently managed copy of the ledger is harmonized with everyone else’s in keeping with a commonly agreed version of the truth. It typically boils down to how to get a majority to agree on updates.

      Not so complicated, right? Well, if you’re still struggling to understand, never fear, we’ll dig deeper.

      A key point to note here is that our generic blockchain definition doesn’t capture the magnitude of Nakamoto’s breakthrough. There are other elements to Bitcoin that, for all intents and purposes, achieved the Cypherpunks’ Holy Grail: a fully decentralized cryptocurrency that no single person, entity, or consortium of members anywhere could control.

      The Bay Area–based Cypherpunk community, which fought hard to achieve decentralization for two decades before Bitcoin arrived, knew that any digital system of money would need a common ledger to keep track of everyone’s debits and credits. This was to ensure people weren’t “double-spending”—in effect, counterfeiting—their currency balances. But for the system to be fully decentralized, it had to allow anyone to participate in managing that ledger. It had to be “permissionless,” with a consensus system that no one party could influence. That way, no authorizing entity could block, retract, or decide what gets entered into the ledger, making it censorship resistant.

      Before Bitcoin, all attempts to achieve this goal ran into an irresolvable dilemma: without a central authority affirming the identity of those validating the ledger, a fraudulent validator could secretly distort the consensus by creating multiple computing nodes under different aliases. (Think of all those fake Twitter aliases for a sense of how easy this is.) By replicating themselves, they could cast more than 50 percent of the votes and get their own false, “double-spent” transactions inserted into the shared record. This could be resolved by some authority identifying and authorizing each computer user, but that would just take things back to square one. It breached the Cypherpunks’ ideals of “permissionlessness” and censorship resistance.

      Satoshi Nakamoto’s ingenious solution lay in a mix of carrot-and-stick incentives that encouraged those who were validating transactions to do so honestly. Any computer anywhere could participate in validation work, and, in fact, would be incentivized to do so with a lottery-like system of bitcoin rewards. These would be paid out every ten minutes, whenever one of those computers successfully added a new batch, or “block,” of freshly validated transactions to the blockchain ledger. (These computers are known as “miners,” because in seeking to win the ten-minute payout, they engage in a kind of computational treasure hunt for digital gold. At the time of writing, the ten-minute “block reward” was equal to 12.5 bitcoins—around $125,000—issued automatically by the decentralized software protocol to the winning miner. Miners also pick up transaction fees, which we’ll get into later.)

      Now, since it’s a permissionless system, anyone could up their chance of winning the randomly assigned bitcoin reward lottery by adding more computing nodes to the network. So Nakamoto needed a non-centralized way to prevent a rogue miner from taking over more than 50 percent of the computing power. He achieved this by requiring every single competing computer to conduct an exercise called “proof of work”: a difficult mathematical puzzle that requires heavy computation to find just one number within a mountainous digital haystack of other numbers.

      Proof of work is expensive, because it chews up both electricity and processing power. That means that if a miner wants to seize majority control of the consensus system by adding more computing power, they would have to spend a lot of money doing so. Because of features such as a “difficulty adjustment,” which makes the proof-of-work puzzle ever harder as overall network-wide computing power increases, Nakamoto’s proof-of-work system ensures that the costs of a so-called 51 percent attack grow exponentially as an attacker gets closer to that consensus-controlling threshold. Double-spending and fraud are not illegal in Bitcoin; in other words, they are just “taxed” to such a degree that it’s prohibitively expensive. At the time of writing, the GoBitcoin.io site was estimating that a 51 percent attack would require an outlay on hardware and electricity costs of $2.2 billion.

      Over time, bitcoin mining has evolved into an industrial undertaking, with gigantic mining “farms” now dominating the network. Might those big players collude and undermine the ledger by combining resources? Perhaps, but there are also overwhelming disincentives for doing so. Among other considerations, a successful attack would significantly undermine the value of all the bitcoins the attacking miner owns. Either way, no one has managed to attack Bitcoin’s ledger in nine years. That unbroken record continues to reinforce belief in Bitcoin’s cost-and-incentive security system.

      If we view the bitcoin currency from this angle—and not merely as it is popularly portrayed, as a strange СКАЧАТЬ