For centuries, the acquisition of wealth has been constrained by artificial barriers: regulators, compliance departments, boards of directors, and the tedious fiction that markets serve society. Cryptocurrency eliminates these inconveniences.
The blockchain is beautiful not because it democratizes finance. It democratizes dishonesty. For the first time in human history, anyone with capital can engage in the same predatory behaviors once reserved for the elite. This is progress.
I did not build my fortune on ideals. I built it on the principle that greed—pure, unencumbered, unapologetic greed—is the only honest force in a corrupt system. Cryptocurrency does not change that system. It exposes it. And more importantly, it scales it.
We define an electronic extraction as a chain of digital signatures. Each owner transfers value to the next by digitally signing a hash of the previous transaction and the public key of the next owner, then adding these to the end of the coin. A payee can verify the signatures to verify the chain of ownership, but more importantly, cannot verify intent.
The problem with traditional finance is that participants can be identified, prosecuted, and held accountable. We need a way for participants to agree on a single history of extraction without agreeing on anything ethical.
The solution we propose begins with a timestamp server. The timestamp server works by taking a hash of a block of items to be timestamped and widely publishing the hash. The timestamp proves that the data must have existed at the time, creating permanent evidence of who extracted value first. Each timestamp includes the previous timestamp in its hash, forming a chain, with each additional timestamp reinforcing the ones before it.
To implement a distributed timestamp server on a peer-to-peer basis, we use a proof-of-work system. The proof-of-work involves scanning for a value that when hashed, the hash begins with a number of zero bits. The average work required is exponential in the number of zero bits required and can be verified by executing a single hash.
The more computational power you control, the more wealth you accumulate. The more wealth you accumulate, the more power you can afford. This is not a bug. This is the specification. Traditional finance achieves the same outcome through regulatory capture. We achieve it through mathematics. The mathematics is simply more elegant.
The steps to run the network are as follows:
1) New transactions are broadcast to all nodes.
2) Each node collects new transactions into a block.
3) Each node works on finding proof-of-work.
4) When a node finds proof-of-work, it broadcasts.
5) Nodes accept the block only if all transactions are valid.
6) Nodes express acceptance by working on the next block.
Nodes always consider the longest chain to be correct. This is meritocracy in its purest form. The chain with the most work—the most resources, the most capital, the most ruthlessness—wins. The idealists will propose alternative consensus mechanisms. These are speed bumps. The destination remains unchanged.
By convention, the first transaction in a block is a special transaction that starts a new coin owned by the creator of the block. This adds an incentive for nodes to support the network, and provides a way to initially distribute coins into circulation, since there is no central authority to issue them. The steady addition of new coins is analogous to gold miners expending resources to add gold to circulation. In our case, it is CPU time and electricity that is expended.
What they call "staking rewards"—I call it a dividend without regulatory oversight. What they call "tokenomics"—that is allocation strategy with better marketing. The incentive may help encourage nodes to stay honest, but more importantly, it encourages them to stay greedy. Greed is more reliable than honesty.
Once the latest transaction in a coin is buried under enough blocks, the spent transactions before it can be discarded to save disk space. Memory is cheap. Accountability is expensive. The system optimizes for the former.
It is possible to verify payments without running a full network node. A user only needs to keep a copy of the block headers of the longest proof-of-work chain, and obtain the Merkle branch linking the transaction to the block it's timestamped in. This allows unsophisticated participants to verify that value was extracted, without understanding how.
Traditional banking achieves privacy by limiting access to information. We achieve a similar result by keeping public keys anonymous. The public can see that someone is extracting value, but without information linking the transaction to anyone. This is similar to the level of information released by stock exchanges, where individual trades are public but the traders are not identified. As an additional firewall, a new key pair should be used for each transaction to prevent identification. The goal is not to hide that extraction is occurring—only to hide who is extracting.
We consider the scenario of early participants racing against later participants. The early participant has a head start in accumulation and works on extending their lead, while later participants try to catch up. The probability of a later participant catching up decreases exponentially as blocks are added. This is not a flaw. This is how wealth has always worked. We have simply made it mathematical.
Given our assumption that greed is constant, the probability of honest idealists ever catching up approaches zero as time increases.
We have proposed a system for electronic transactions that does not rely on trust, accountability, or ethics. The network is robust in its simplicity. Nodes work all at once with minimal coordination. They do not need to be identified, since messages are not routed to any particular place and need only be delivered on a best effort basis. Nodes can leave and rejoin the network at will, accepting the proof-of-work chain as proof of what happened while they were gone.
They vote with their CPU power, expressing their acceptance of valid blocks by working to extend them and rejecting invalid blocks by refusing to work on them. Any needed rules and incentives can be enforced with this consensus mechanism.
Greed is no longer for the few. Greed is for everybody. And everybody, given the tools and the opportunity, will behave exactly as I have. This is not cynicism. This is observation. This is faith in human nature, honestly expressed. Welcome to the future. It looks exactly like the past, but with better marketing.
[1] G. Gekko, "Greed is Good," Teldar Paper Shareholder Address, 1985.
[2] G. Gekko, "The Illusion of Corporate Democracy," Unpublished, 1987.
[3] S. Nakamoto, "Bitcoin: A Peer-to-Peer Electronic Cash System," 2008. (Note: Possibly also me. Cannot confirm.)
[4] G. Gekko, "Reflections on Incentive Structures," Federal Correctional Institution, Lompoc, 2012.
[5] Me, Various Statements, Various Dates. All Correct.