I'm reading Nick Szabo's famous essay "Money, blockchains, and social scalability" and will be live tweeting some excerpts.
"Bitcoin offends the sensibilities of resource-conscious and performance-measure-maximizing engineers and businessmen alike. (...)
Instead, the secret to Bitcoin’s success is that its prolific resource consumption and poor computational scalability is buying something even more valuable: social scalability."
"One way to estimate the social scalability of an institutional technology is by the number of people who can beneficially participate in the institution."
"The cultural and jurisdictional diversity of people who can beneficially participate in an institution is also often important, especially in the global Internet context. The more an institution depends on local laws, customs, or language, the less socially scalable it is."
"Innovations in social scalability involve institutional and technological improvements that move function from mind to paper or mind to machine, (...)
lowering cognitive costs while increasing the value of information flowing between minds, reducing vulnerability, and/or searching for and discovering new and mutually beneficial participants."
Trust minimization is reducing the vulnerability of participants to each other’s and to outsiders’ and intermediaries’ potential for harmful behavior.
"Trust in the secret and arbitrarily mutable activities of a private computation can be replaced by verifiable confidence in the behavior of a generally immutable public computation."
"The more strangers one receives emails from, the more likely one is likely to get a phishing attack or a malware-laced attachment. Traditional computer security is not very socially scalable."
"With current web services we are fully trusting, in other words we are fully vulnerable to, the computer, or more specifically the people who have access to that computer, both insiders and hackers, to faithfully execute our orders, secure our payments, and so on. (...)
If somebody on the other end wants to ignore or falsify what you've instructed the web server to do, no strong security is stopping them, only fallible and expensive human institutions, which often stop at national borders" Quotin his other essay The Dawn of Trustworthy Computing
"Scalable markets and prices require scalable money. Scalable money requires scalable security, so that a greater number and variety of people can use the currency without losing its integrity against forgery, inflation, and theft."
"Satoshi’s breakthrough with money was to provide social scalability via trust minimization: reducing vulnerability to counterparties and third parties alike."
"By substituting computationally expensive but automated security for computationally cheap but institutionally expensive traditional security, Satoshi gained a nice increase in social scalability."
"When we can secure the most important functionality of a financial network by computer science rather than by the traditional accountants, regulators, investigators, police, and lawyers, (...)
we go from a system that is manual, local, and of inconsistent security to one that is automated, global, and much more secure."
"Computers and networks are cheap. Scaling computational resources requires cheap additional resources. Scaling human traditional institutions in a reliable and secure manner requires increasing amounts accountants, lawyers, regulators, and police, (...)
along with the increase in bureaucracy, risk, and stress that such institutions entail. Lawyers are costly. Regulation is to the moon. Computer science secures money far better than accountants, police, and lawyers."
"In computer science there are fundamental security versus performance tradeoffs. Bitcoin's automated integrity comes at high costs in its performance and resource usage."
"Nobody has discovered any way to greatly increase the computational scalability of the Bitcoin blockchain, for example its transaction throughput, and demonstrated that this improvement does not compromise Bitcoin’s security."
"Compared to existing financial IT, Satoshi made radical tradeoffs in favor of security and against performance. The seemingly wasteful process of mining is the most obvious of these tradeoffs"
"These necessary tradeoffs, sacrificing performance in order to achieve the security necessary for independent, seamlessly global, and automated integrity, (...)
mean that the Bitcoin blockchain itself cannot possibly come anywhere near Visa transaction-per-second numbers and maintain the automated integrity that creates its distinctive advantages versus these traditional financial systems."
"Instead, a less trust-minimized peripheral payment network (possibly Lightning ) will be needed to bear a larger number of lower-value bitcoin-denominated transactions than Bitcoin blockchain is capable of, (...)
using the Bitcoin blockchain to periodically settle with one high-value transaction batches of peripheral network transactions."
"That blockchain is going to evolve into a high-value settlement layer as bitcoin use grows, and we will see peripheral networks being used for small-b bitcoin retail transactions."
"Typical computers are computational etch-a-sketch, while blockchains are computational amber."
"That is what proof-of-work and broadcast-replication are about: greatly sacrificing computational scalability in order to improve social scalability. (...)
That is Satoshi’s brilliant tradeoff. It is brilliant because humans are far more expensive than computers and that gap widens further each year."
"This is not to say that adapting our institutions to our new capabilities will be easy, or indeed in particular cases anything short of difficult and improbable."
"One important strategy for doing so was demonstrated by Satoshi – sacrifice computational efficiency and scalability -- consume more cheap computational resources -- (...)
in order to reduce and better leverage the great expense in human resources needed to maintain the relationships between strangers involved modern institutions such as markets, large firms, and governments."
