A Visit with the Bitcoin Foundation’s Top Scientist
Gavin Andresen, the lead scientist for the Bitcoin Foundation (and one of its only two staff members) sat down with a few of us at the UMass Amherst Knowledge Commons meeting on Wednesday. Having read so much hype and misinformation about Bitcoin over the past few months, I was excited to have a chance to talk to someone directly connected with this brilliant experiment in algorithmic institution-building. Bitcoin is, of course, the digital currency that has been in the news a lot recently because of its surging value among traders – and its dramatic crash.
For months the dollar value of a Bitcoin fluctuated between $20 and $50….but in mid-March the conversation rate soared to around $250 before crashing last week to $140 and then $40 yesterday. (Today it was back up to $95.) This kind of stuff is catnip to the mainstream press, which otherwise doesn’t know much or care much about Bitcoin.
Andresen, a self-described geek in his forties with a pleasant manner and trim haircut, strolled into the small conference room in his black rugby shirt and jeans. Six of us proceeded to have a wide-ranging, fascinating chat about the functional aspects of Bitcoin, the political and social values embedded in its design, and some of the operational challenges of making Bitcoin a new kind of universal currency.
For those of you who want a quick primer on Bitcoin, I suggest the New Yorker profile by Joshua Davis in the October 10, 2011, issue; a terrific recent critique by Denis Roio (aka Jaromil), a Dutch hacker who is working to code new sorts of digital money; or the Wikipedia entry on Bitcoin.
Bitcoin is of special interest to me for its remarkable success at solving a serious collective action problem – how to create a digital money so secure and authenticated so that no one can steal its value and ruin it as a stable, trusted currency?
The problem that Bitcoin solves as a matter of algorithmic and cryptographic design is the “Byzantine General’s problem,” which has been described as “the problem of reaching a consensus among distributed units if some of them give misleading answers.” As one reference describes it, the problem has been compared to the problem of various generals deciding on a common plan of attack: “Some traitorous generals may lie about whether they will support a particular plan and what other generals told them. Exchanging only messages, what decisionmaking algorithm should the generals use to reach a consensus? What percentage of liars can the algorithm tolerate and still correctly determine a consensus?”
Bitcoin solves this classic problem of achieving coordinated action without reliable communication or excessive (or any) defections. Much of this success stems from the startlingly solid cryptography of the system. The other safeguard, Andresen explained, has been Bitcoin’s “get big quick” strategy. If enough Bitcoins can be put into circulation quickly, then it becomes much harder for any faction to corner the market in Bitcoins or to compromise their integrity. This is important because the viability of any currency depends upon the ability of the issuer to prevent counterfeiting or theft -- a kind of free riding on the social trust that any community invests in its currency.
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