The Law of Consensus: Bitcoin
To understand why Bitcoin works, you need to understand the importance of consensus
Like many great engineers, Satoshi takes inspiration from nature when he designed Bitcoin.
Like an airplane’s wing or a camera’s lens, Bitcoin’s consensus protocol is an artistic interpretation of an instinct that happens in nature — specifically in human societies.
This is a thesis on the philosophical importance of this consensus mechanism in the protocol. Read about how Bitcoin technically achieves this here.
Tribal
As a gregarious primate, a human being, you depend on the tribe-unit. Therefore, taking consensus is an important part of your life — In fact, you are constantly taking consensus.
Though you may not be consciously aware of it, when you see enough people doing something, you’ll suddenly feel like you want to do it too. At the very least, you’ll investigate this novel activity.
Of course, you’ll concoct your own reasons — you’ll list benefits, you’ll develop deep philosophical reasonings, you’ll latch onto mottos and catch phrases— but at the end of the day, the call to action was sparked from seeing the specific actions of specific people.
Did they have a good experience with the services they employed? Did they find success in their endeavors?
For example, if enough people give a good Yelp review, you’ll feel like you know what you’re getting into and won’t hesitate to visit. While seeking the services of mechanics, plumbers, electricians, hair dressers, and whatever service you find yourself in need of, you’ll first ask for recommendations from your social circle.
In the realms of sales and marketing, social proof is what seals the deal for many prospective customers.
Throughout your professional life, you use consensus to determine who the authorities are. If people in your respective field trust a particular individual, you’ll find yourself listening to every word.
It’s always a good idea to use consensus to know which business to embark on. If your business fails, one of the reasons might be that you didn’t achieve proper consensus first.
By observing the actions of smart money, you’ll greatly increase your chance of success in business endeavors. The best bet is to follow the money.
Your brain is wired to use consensus to vet a career, business venture, or relationship. You can say it’s great engineering.
Bitcoin and Security through Consensus
As an investor, you trust the Bitcoin network because it achieves consensus to find a block of data that contains the true present state of your funds (you can read about how it technically does this here).
As a technology that interfaces with human beings, Bitcoin helps us differentiate between legitimacy and fraud by achieving a finality among it’s network and all it’s nodes. Since billions of dollars of hardware and thousands of nodes give you the thumbs up, this appeases all of our monkey-brains, and we agree to use the monetary platform.
In our monetary history, we’ve trusted the finality of Gold for it’s intrinsic physical properties, specifically it’s scarcity.
Simply put, upon universal knowledge, or in other words, consensus of this scarcity-property, human beings can trade Gold without worrying about the value being diluted.
Instead of searching for a great Yelp review to find this specific state of bitcoins in the network, Bitcoin nodes, who are participants in the network, constantly search for a block with the most proof-of-work, implying the legitimacy of the information contained in it.
Why?
All in the hopes that once it finds this block, it can “vote” for the next block by compiling the next batch of legitimate transactions and connecting the previous block onto it by the mining process. So instead of voting on a review site, they vote by expending massive amounts of electricity.
It’s a simple game, with a clear objective. A wonderful innovation in game-theory and computer science.
Like you and I, at the end of the day, these nodes just want validation from their peers and the rewards that come from it. They achieve this by finding or creating the next block with the most proof-of-work.
You either follow the rules or you play another game
From a macro view, the entire objective of the game is determining the true state of your funds.
Participants looking to manipulate the network would need billions of dollars of hardware and electricity to recreate the whole historic proof-of-work that went into the network and eventually produced the most current block.
Put simply, if a past transaction is to be manipulated, all of the proof-of-work that went into the block that contains it, and all of the subsequence blocks has to be recreated.
In order to catch up and achieve consensus among it’s peers, it needs to achieve this before any of the current billions of dollars of hardware and electricity reach consensus to figure out which next block has more proof-of-work.
Because of this, altering the history of the Bitcoin network is virtually impossible.
It’s like entering a race after giving your opponent a hundred years head start. Also, while you were waiting he’s been exponentially increasing his speed, adding on technology like rocket boosters.
Cheating is not incentivized
This is an undertaking that would take trillions of dollars, and really, all they would be able to do is invalidate some old transactions by doing a refund.
Remember, anything out of the ordinary is still rejected by the other nodes that are choosing to play by the Bitcoin consensus rules. At the end of the day, the only function of the network is just constantly recording and updating transactions and balances.
Anything out of the ordinary, like extra bitcoins or insufficient funds is still rejected by all the nodes, having reached consensus or not.
It’s only after the verifications that the added feature of the consensus protocol ensures permanent settlement of the past, and guaranteed legitimacy of the present.
Conclusion
Every day, you gauge your trust in individuals, services, or products through validation from peers. Naturally, while taking on the entire monetary system, the Bitcoin network takes this to an extreme level.
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