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CASEBITCOIN making the case for bitcoin every day
Bitcoin Marketcap
$1.86T
Gold Marketcap
$16.15T
BTC Settlement Volume (24hr)
$12.90B
BTC Inflation Rate (next 1yr)
1.17%
CASEBITCOIN making the case for bitcoin every day
29 Dec 2005 | | Price when published: (n/a)
Szabo's "Bit gold" is one of many pre-cursor ideas to Bitcoin. There are some remarkable similarities to Bitcoin (and Szabo is considered a "Satoshi candidate" by many), but the Bit gold idea still did not solve some of the key problems necessary for a decentralized digital money. Specifically, Bit gold makes reference to "proof of work functions", but highlights the problem of controlling the issuance of digital money and its dependence on compute performance. Szabo notes that other digital money proposals, such as Hal Finney's Reusable Proof of Work (RPOW), also suffer from this problem. It is often noted that a key breakthrough in Bitcoin was that it solves the "double spending problem", but solving the initial coin creation and distribution problem was also a critical shortcoming of prior decentralized digital money attempts.
About three years after Szabo published Bit gold, Satoshi Nakamoto published the Bitcoin whitepaper, which brought together various prior ideas, plus some novel game-theoretic approaches, providing the first workable solution to this problem in the context of truly decentralized digital money.
Precious metals and collectibles have an unforgeable scarcity due to the costliness of their creation. This once provided money the value of which was largely independent of any trusted third party. Precious metals have problems, however. It's too costly to assay metals repeatedly for common transactions. Thus a trusted third party (usually associated with a tax collector who accepted the coins as payment) was invoked to stamp a standard amount of the metal into a coin. Transporting large values of metal can be a rather insecure affair, as the British found when transporting gold across a U-boat infested Atlantic to Canada during World War I to support their gold standard. What's worse, you can't pay online with metal.
Thus, it would be very nice if there were a protocol whereby unforgeably costly bits could be created online with minimal dependence on trusted third parties, and then securely stored, transferred, and assayed with similar minimal trust. Bit gold.
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