Blockchain Revolution

Breakthrough: Satoshi required participants to use public key infrastructure

(PKI) for establishing a secure platform. PKI is an advanced form of “asymmetric” cryptography, where users get two keys that don’t perform the same function: one is for encryption and one for decryption. Hence, they are asymmetric. The bitcoin blockchain is now the largest civilian deployment of PKI in the world, and second overall to the U.S. Department of Defense common access system.²⁷

Pioneered in the 1970s,²⁸ asymmetric cryptography gained some traction in the 1990s in the form of e-mail encryption freeware such as Pretty Good Privacy. PGP is pretty secure, and pretty much a hassle to use because everyone in your network needs to be using it, and you have to keep track of your two keys and everyone’s public keys. There’s no password-reset function. If you forget yours, you have to start all over. According to the Virtru Corporation, “the use of email encryption is on the rise. Still, only 50 percent of emails are encrypted in transit, and end-to-end email encryption is rarer still.”²⁹ Some people use digital certificates, pieces of code that protect messages without the encrypt-decrypt operations, but users must apply (and pay an annual fee) for their individual certificates, and the most common e-mail services—Google, Outlook, and Yahoo!—don’t support them.

“Past schemes failed because they lacked incentive, and people never appreciated privacy as incentive enough to secure those systems,”³⁰ Andreas Antonopoulos said. The bitcoin blockchain solves nearly all these problems by providing the incentive for wide adoption of PKI for all transactions of value, not only through the use of bitcoin but also in the shared bitcoin protocols. We needn’t worry about weak firewalls, thieving employees, or insurance hackers. If we’re both using bitcoin, if we can store and exchange bitcoin securely, then we can store and exchange highly confidential information and digital assets securely on the blockchain.

Here’s how it works. Digital currency isn’t stored in a file per se. It’s represented

by transactions indicated by a cryptographic hash. Users hold the cryptokeys to their own money and transact directly with one another. With this security comes the responsibility of keeping one’s private keys private.

Security standards matter. The bitcoin blockchain runs on the very well-known and established SHA-256 published by the U.S. National Institute of Standards and Technology and accepted as a U.S. Federal Information Processing Standard. The difficulty of the many repetitions of this mathematical calculation required to find a block solution forces the computational device to consume substantial electricity in order to solve a puzzle and earn new bitcoin. Other algorithms such as proof of stake burn much less energy.

Remember what Austin Hill said at the start of this chapter about never using the newest and greatest in algorithms. Hill, who works with cryptographer Adam Back at Blockstream, expressed concern over cryptocurrencies that don’t use proof of work. “I don’t think proof of stake ultimately works. To me, it’s a system where the rich get richer, where people who have tokens get to decide what the consensus is, whereas proof of work ultimately is a system rooted in physics. I really like that because it’s very similar to the system for gold.”³¹

Finally, the longest chain is generally the safest chain. The security of Satoshi’s blockchain benefits greatly from its relative maturity and its established base of bitcoin users and miners. Hacking it would require more computing power than attacking short chains. Hill said, “Whenever one of these new networks start up with an all new chain, there’s a bunch of people who direct their latent computer power, all the computers and CPUs that they took offline from mining bitcoin, they point at these new networks to manipulate them and to essentially attack the networks.”³²