Szabo sketches the architecture Bitcoin will build — and candidly identifies every unsolved problem

DEC 29 1998 · 12:00

Video: Nick Szabo on Cypherpunks, Money and Bitcoin Type: primitive · Tags: nick-szabo, bit-gold, proof-of-work, bitcoin-precursor, 1998, 2005, byzantine-fault-tolerance, satoshi-speculation Bit Gold was the architectural sketch. Bitcoin was the executable. Szabo first conceived Bit Gold in 1998 — the same year as b-money, a coincidence that suggests the problem space was ripe — and refined it across several years before publishing the canonical write-up on his blog Unenumerated on 27 December 2005. The scheme proposed that participants solve cryptographic puzzles of known difficulty; each solution would be timestamped by a Byzantine fault-tolerant network, chained to its predecessors, and registered to a public key. The proof-of-work, the chain, the public-key ownership: the structural elements of Bitcoin are all present. What distinguishes Bit Gold from Bitcoin is not the absence of ideas but the presence of candor. Szabo identified, explicitly and in the original text, the open problems he had not solved: how to set a difficulty level that produces stable value over time as hardware improves; how to prevent Sybil attacks on the timestamping quorum; how to make the tokens fungible given that earlier solutions were computationally cheaper to produce than later ones. Bitcoin addressed these through the specific mechanism of the block reward and the difficulty adjustment — an incentive structure that Szabo had outlined as a requirement without specifying as a solution. Speculation that Szabo is Satoshi has circulated since at least 2013, and it has the virtue of explaining why Satoshi did not cite Bit Gold in the whitepaper — you do not cite yourself anonymously. Szabo has consistently denied it. Satoshi, on BitcoinTalk in 2010, acknowledged the debt directly: 'Bitcoin is an implementation of Wei Dai's b-money proposal… and Nick Szabo's Bitgold proposal.' That the debtor and the creditor may have been the same person is among the more satisfying unsolved problems in the history of money. Facts • Conceived 1998; public description posted to Unenumerated blog, 27 December 2005 • Mechanism: proof-of-work puzzle → timestamp by Byzantine-agreement quorum → property registry chain • Szabo explicitly identified unsolved problems: difficulty adjustment, Sybil resistance, fungibility • Satoshi Nakamoto on BitcoinTalk (2010) acknowledged Bitcoin as implementation of b-money and Bit Gold proposals • Speculation that Szabo is Satoshi has circulated since 2013; Szabo has consistently denied it Primary Documents • Bit gold — Unenumerated, 27 Dec 2005 — https://unenumerated.blogspot.com/2005/12/bit-gold.html • Bit Gold reprint — Satoshi Nakamoto Institute — https://nakamotoinstitute.org/library/bit-gold/