Bitcoin: What is taken away from the design

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A study of the design choices behind Bitcoin reinforces the age old design wisdom — what makes a design robust and scalable are the things you take away from it. You remove bits and concepts from an initial draft until you are left with the absolute minimum that needs to be implemented, from which you cannot remove anything any more. Let us take a look at those aspects of fiat currency systems that we are all accustomed to - the ones which were removed from Bitcoin system when Satoshi Nakamoto designed it.

First of all, Satoshi took away all influence and authority a government can potentially have on Bitcoin. Governments are as powerless as you and me, when it comes to influencing or enforcing any aspect related to Bitcoin. They have zero impact on the way Bitcoin is used. They can’t freeze anybody’s Bitcoin accounts, they can’t block transactions, they can’t prevent somebody from getting or giving Bitcoin. This step means that Bitcoin is truly global and is border-less. No government holidays or national rules apply to Bitcoin.

Then comes the role of banks in traditional currency systems. Typically, it is a central bank in each country that takes decisions such as the amount of currency that has to be minted, controls to be applied over the currency flow, adjustments about inflation/deflation etc. In Satoshi’s Bitcoin design, banks have as much influence or participation as the governments — absolutely nothing. When you transfer Bitcoins to somebody else’s account, no matter where she is on earth, no bank ever comes into the picture in the entire process. Bank holidays, rules and regulations aren’t applicable to Bitcoin.

Taking it one step further, Satoshi didn’t allow his Bitcoin to be linked to any other traditional currency. Neither is Bitcoin dependent on any national currency, nor is it linked to or supported by any national currency. The only connection between Bitcoin and traditional currencies is that, (like all other goods and services) you can buy Bitcoin in exchange of traditional currencies, and when you sell Bitcoin, you can opt to receive the payment in a traditional currency. Apart from that, the fluctuations of traditional currencies do not affect Bitcoin in anyway.

The next concept that is taken away in Bitcoin design is the concept of ‘central agencies’ and ‘central servers’. The entire design is decentralized and is network and node based. Bitcoins aren’t minted by central servers, aren’t stored on central servers, aren’t verified by central servers and aren’t transmitted through central servers. In fact, there isn’t even a central time server to enforce chronology and the order of events. The design of the system bestowed all of the above responsibilities on the nodes and they share that responsibility among them. Each node can do any one or all of the above steps and every node has an equal say in doing all of the above. Yet another brilliant move thorough which you take away the risks of concentrated hacker attacks, a set of people hijacking the system for their own gains, the perils of double spending or the compromises you have to accept when you want to avoid double spending by using a centralized validation solution and the whole aspect of dealing with ‘trust’ or the lack of it when you introduce a central system.

Finally, a not so intuitive idea that is taken away from Bitcoin design is the physical aspect of money itself. Figuratively speaking, there is no real Bitcoin anywhere. There is nothing real to back a Bitcoin. You can’t point to a file and say — here is my Bitcoin. Bitcoin exists as Bitcoin transactions. The lack of a real (or even virtual) Bitcoin entity takes away a lot of complications around storing it safely and establishing ownership. It also makes the transfer process conceptually simple and computationally manageable without having a central agency.

What you take away from your design makes it stronger :)