Sixteen years ago, Satoshi Nakamoto published the groundbreaking paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” introducing the world to the concept of Bitcoin, which has since become mainstream. Unlike B-money, which Satoshi referenced in the paper but never launched due to the unresolved double-spending issue, Bitcoin successfully addressed these challenges. In this article, I urge all crypto and web3 stakeholders, enthusiasts, entrepreneurs, and creators to reflect on Satoshi’s original vision and assess its progress, particularly in the context of Africa.
The Events Leading to 2008
It is not strange to find people connecting the launch of bitcoin to the financial crisis of 2008, when the big banks failed due to the housing crisis. I do not however think, that the 2008 financial crisis played a key role in the invention of bitcoin. As referenced in the white paper, ‘B-money’ was proposed by Wei Dai as early as 1998, this marked the period of the dot-com boom, and the early days of the World Wide Web. I believe that just like every other thinker, imagining the best way to address prevailing problems with existing challenges of transaction cost, middleman, etc. The B-money idea was birthed or conceived. And Satoshi was one of the persons/group who was also thinking about a fix to our payment system, and the demand for the change was fuelled by dot-com bubble and latter intensified by the burst.
Historically, the financial crisis began around 2007, and ended sometime in 2008/2009. But the major concerns noted in the white paper are problems existing before 2007. It is this nostalgic look at the bitcoin white paper that I hope can tell us more about the original plan Satoshi had and the vision he saw for the financial landscape. There is no doubt that since the years the paper was first published, a lot of changes has occurred in the global financial landscape, including the birth of a $3 Trillion cryptocurrency market.
Below are my extract from the bitcoin white paper and my reconciliation to current day, and the ‘now and future’ of Africa.
The Complete desolation of the middle-man
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution” – Satoshi
The concept of the middleman having to facilitate, sort, support, mediate, resolve dispute, channel, connect… in the financial world is the foundational challenge that this new electronic cash system (bitcoin) sort to address. and with the rise of World Wide Web, the technology required to stage such a war was already made available. The only missing piece was the cash system itself. Earlier models and suggestions of such a system had the double-spending flaw, where it was impossible to prevent bad actors from signing a single transaction twice for different payments. With this new peer-to-peer timestamp network this problem could be solved and thus, the middle man can be obliterated!
Who is a middleman?
A middleman is a go-between or an intermediary between a process. This process could be a transaction, such as; the purchase of tea from a tea shop, the purchase of a house, remitting money to loved ones, etc. The role of the middleman often is to connect two parties, sometimes it could go beyond connecting to facilitating the transaction. This service rendered is paid for. Outside receiving payment, and facilitating processes, the middleman is conferred with trust to ensure the smooth execution of the process, and also to mediate, and resolve any dispute that may arise from the process. This is very important where both parties cannot trust themselves. For ages the banks, and its likes, known as the financial institutions has played the role of middleman for every penny sent, and received worldwide. This permits and creates several issues…
The Issues with the middleman system
Whilst the middleman works most of the time, allowing transactions, to be possible for years, there have always been tradeoffs and vulnerabilities.
The centralisation of power: With the power and trust conferred on the middleman, there is a centralisation issue because the entire fate of the process is reliant in the centre of process by which everything is facilitated, sorted, stored, recalled, executed, deployed, delivered… which is the middleman. This means, if the middleman is compromised, attacked, or suffers from failure, the entire system falters with it. Thus, this is bought a vulnerable situation and a dependent situation, giving the middleman too much power!
Single Point of Failure: As mentioned above, the role the middleman plays opens the system to a single point of failure. If the middleman is compromised in anyway, the entire system is compromised, and there is no further check to avoid this.
The middleman problem is a widespread problem from large networks such as payment networks, to banks, to the government. And in regions where those who are conferred with the trust, and power to act chose to be bad actors, the consequences can be dire. The severity and consequences is worse in regions like Africa where the system has been compromised for years, and the middlemen have lesser incentives to be good actors.
Data Can Be Security
“The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power”. – Satoshi
The importance of the longest chain in the bitcoin system, popularly referred to as the blockchain, serves as chronological proof of events deterring all forms of double spending, and also serves as a proof that power was used to attain the chain of data. This implies that data is not just useful for insight, and fact checking, but data mathematically crafted can be used as security. This is not merely cryptography but usage of cryptography beyond ascertaining validity, to evidence of work done.
Simplicity is Important
“The network itself requires minimal structure”. – Satoshi
According to Occam’s razor, when in search for a solution, the simplest constructed solution is the best one, despite other viable solutions. In our expansion of the original plan, we must always bear in mind that simplicity was a core necessity in the structure of the network. As entrepreneurs building for Africa, it is pertinent not to multiply entities beyond their necessities. Our goal must be to strive for overall simplicity in the network, and our products must reflect this simplicity.
Freedom is Non-negotiable
“nodes can leave and rejoin the network at will” – Satoshi
Deep-rooted in the most disruptive technology since the advent of the internet and World Wide Web is ethics, flexibility, freedom, and will. The original purpose of the bitcoin electronic cash system is to provide freedom to peers and eliminate the middleman. A system that is built to provide this solution must in itself exhibit these core values.
While there is an inherent reason for freedom between participators to ensure we do not recreate the same problem we are trying to solve. I believe the consequences are beyond technical constrains, and point to a deeper meaning and guide to the original plan of Satoshi, Freedom!
As web3 entrepreneurs building for Africa, we must bear in mind the ethical boundaries, the freedom of users, the will of participators. We must build and serve ethically.
Trust-less Systems are Better
“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model”. – Satoshi
There lies a certain level of weakness in a system where trust is required for smooth operations and contractual execution of terms. It is thus recommended for us to build and propagate the web3 with a trust-less system.
Irreversibility is a Feature
“Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes”. – Satoshi
While it’s quite important and invaluable to have the ability to undo our errors and mistakes, to be able to dispute a transaction sent to the wrong receiver, and other scenarios. There is also a down-side of a merchant giving value to a customer and later having the transaction reversed. Thus, there should be non-reversible transactions, for non-reversible processes!
Casual Transactions Count
“The cost of mediation increases transaction costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions, and there is a broader cost in the loss of ability to make non-reversible payments for nonreversible services”. – Satoshi
For a payment system that serves the need of the people. The cost of sending electronic cash should be cheap enough to permit casual transactions. A system whose cost of sending a causal transaction is in itself not casual, prevents millions of transactions from happening, thus shutting the door on millions of people.
Transactions Should Be Based on Mathematics not Trust
“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party. Transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers”. – Satoshi
Instead of us to rely on the middleman, which causes several issues, and may expose the seller to loss due to reversible payments. We must build payment systems that solely rely on the computational ability of the system to verify, initiate, and confirm a transaction. With this approach, we can create a financial system without a middleman, allowing for a purely peer-to-peer payment between parties who are interested in transacting under a trust-less system. To protect the buyer escrow services can be implemented to protect the buyer and ensure value paid for, is given.
The Vision for Africa
The setup of the blockchain technology (distributed timestamp server), has its invocation for the purpose of solving the double spend problem, which then enables a payment system with zero trust, anonymity, and transparency of transactions. These core features help us to create and not just a safer financial landscape, but a safer and better world. The blockchain technology is merely a distributed immutable ledger book. This opens up several possibilities outside revolutionising the financial landscape.
In the western world where the government structure has gained a bit more trust, and success in keeping players in check, the blockchain technology still offers a brighter and more stable environment. In Africa, where the governments have lost great trust from the people, and the financial landscape are in its early stages. The rapid deployment, adoption, and advancement of this trust-less system will prove invaluable across all sectors.
Our goal must be to build on trust-less systems, eliminate and diminish the power of the middleman with every phase of our advancement. Ensure simplicity is in our products, and innovations, and always keep an eye on the original plan; Freedom!