t h e b o ok of satoshi The Collected Writings of Bitcoin Creator Satoshi Nakamoto phil cha mpagne foreword by jeff berwick t h e b o o k o f Satoshi t h e b o o k o f Satoshi <<<< > >>> The Collected Writings of Bitcoin Creator Satoshi Nakamoto Phil Champagne E53 PUBLISHING LLC Copyright © 2014 by Phil Champagne, All rights reserved. The part of this book’s content that comes from Internet forum is in the public domain. I give full rights to anyone to copy and distribute electronic copies of this book, either in part or in full. Published in the United States of America by e53 Publishing LLC ISBN 978-0-9960613-0-8 Hardcover ISBN 978-0-9960613-1-5 Softcover e53 Publishing LLC e53publishing.com Cover illustration by Lisa Weichel Editing by Mary Graybeal Cover and text design and composition by John Reinhardt Book Design This book is also available in eBook format. To get a free copy, please go to: BookOfSatoshi.com Contents About the Cover Picture xi Acknowledgments xiii Who This Book Is Intended For xv Foreword xvii 1. Introduction 1 2. How and Why Bitcoin works 9 3. The First Post on Crypto Mailing List 33 4. Scalability Concerns 35 5. The 51% Attack 39 6. About Centrally Controlled Networks Versus Peer-to-Peer Networks 43 7. Satoshi on the Initial Inflation Rate of 35% 45 8. About Transactions 49 9. On the Orphan Blocks 55 v THE BOOK OF SATOSHI 10. About Synchronization of Transactions 57 11. Satoshi Discusses Transaction Fees 61 12. On Confirmation and Block Time 63 13. The Byzantine General’s Problem 67 14. On Block Time, an Automated Test, and the Libertarian Viewpoint 71 15. More on Double Spend, Proof-of-Work, and Transaction Fees 75 16. On Elliptic Curve Cryptography, Denial of Service Attacks, and Confirmation 81 17. More on the Transaction Pool, Networking Broadcast, and Coding Details 85 18. First Release of Bitcoin 89 19. On the Purpose For Which Bitcoin Could Be Used First 93 20. “Proof-of-Work” Tokens and Spammers 97 21. Bitcoin Announced on P2P Foundation 99 22. On Decentralization as Key to Success 103 23. On the Subject of Money Supply 105 24. Release of Bitcoin v0.1.3 107 25. On Timestamping Documents 109 vi Contents 26. Bitcointalk Forum Welcome Message 111 27. On Bitcoin Maturation 113 28. How Anonymous are Bitcoins? 117 29. A Few Questions Answered by Satoshi 121 30. On “Natural Deflation” 127 31. Bitcoin Version 0.2 is Here! 131 32. Recommendation on Ways to Do a Payment For an Order 133 33. On the Proof-of-Work Difficulty 135 34. On the Bitcoin Limit and Profitability of Nodes 139 35. On the Possibility of Bitcoin Address Collisions 143 36. QR Code 145 37. Bitcoin Icon/Logo 147 38. GPL License Versus MIT License 151 39. On Money Transfer Regulations 153 40. On the Possibility of a Cryptographic Weakness 155 41. On a Variety of Transaction Types 159 42. First Bitcoin Faucet 163 43. Bitcoin 0.3 Released! 167 44. On the Segmentation or “Internet Kill Switch” 169 vii THE BOOK OF SATOSHI 45. On Cornering the Market 175 46. On Scalability and Lightweight Clients 177 47. On Fast Transaction Problems 179 48. Wikipedia Article Entry on Bitcoin 183 49. On the Possibility of Stealing Coins 187 50. Major Flaw Discovered 203 51. On Flood Attack Prevention 205 52. Drainage of Bitcoin Faucet 213 53. Transaction to IP Address Rather than Bitcoin Address 217 54. On Escrow and Multi-Signature Transactions 219 55. On Bitcoin Mining as a Waste of Resources 233 56. On an Alternate Type of Block Chain with Just Hash Records 241 57. On the Higher Cost of Mining 267 58. On the Development of an Alert System 271 59. On the Definition of Money and Bitcoin 277 60. On the Requirement of a Transaction Fee 285 61. On Sites with CAPTCHA and Paypal Requirements 289 62. On Short Messages in the Block Chain 293 viii Contents 63. On Handling a Transaction Spam Flood Attack 297 64. On Pool Mining Technicalities 301 65. On WikiLeaks Using Bitcoin 309 66. On a Distributed Domain Name Server 313 67. On a PC World Article on Bitcoin and WikiLeaks Kicking the Hornet’s Nest 325 68. Satoshi’s Last Forum Post: Release of Bitcoin 0.3.19 327 69. Emails to Dustin Trammell 329 70. Last Private Correspondence 341 71. Bitcoin and Me (Hal Finney) 343 72. Conclusion 347 Bitcoin: A Peer-toPeer Electronic Cash System 351 Terms & Definitions 367 Index 371 ix About the Cover Picture CREDIT FOR THE IMAGE on the front cover goes to Lisa Weichel (user id lisa_aw on flickr.com). The photo was taken at Cueva de las Manos (Cave of Hands) in the province of Santa Cruz in Argentina. Cueva de las Manos is a series of caves famous for the various paint- ings of human hands covering its walls. The paintings, the earliest of which date from around 13,000 years and the latest from about 9,000 years ago, were left there by multiple generations. I selected it as this book’s cover image because it seems to me to embody many of the concepts underlying Bitcoin—many individuals participating and cooperating to attain, over time, a common goal and yet maintaining their own individuality and uniqueness. Bitcoin dif- fers from the cave paintings of Cueva de las Manos in scale, however. Although these paintings were produced by multiple generations of individuals over several thousands of years, the number of these artists can’t compare in size to the millions who now and will in the future use Bitcoin. Moreover, Bitcoin’s users are geographically dispersed, collaborating over a decentralized system. Finally, whereas Cueva de las Manos was the work of one or more distinct tribes of humans, Bit- coin, open to anyone to use and adapt, transcends nationality and has the potential to become a true world currency. xi