§3.2 — The Bitcoin paper consists of twelve short sections, including an introduction and conclusion. It is compressed to a minimal summary at this point, although discussed in pieces throughout the book, and rehearsed at slightly greater length in the first appendix. The emphasis here is critical, oriented – as is the paper itself – to the dissolution of the DSP, and thus the construction of a plane of transactional immanence, from which all transcendent elements (or “trusted third parties”) have been evacuated. The transcendental argument of the Bitcoin paper runs as follows:
§3.21 — The “trust based model” is expensive, socially frictional, and vulnerable to fraud. To overcome these problems, Bitcoin proposes the substitution of “cryptographic proof” for “trust” (which is to be obsolesced by irreversible crypto-commitments). The elimination of trust-based mediations reduces transaction costs. The system remains resilient in the absence of oversight, so long as a predominance of applied “CPU power” is controlled by “honest nodes”.
§3.22 — An “electronic coin” is defined “as a chain of digital signatures”, which is equivalent to “a chain of ownership” (this is described later, in the conclusion, as the “usual framework” for crypto-currency construction). The elimination of the need for a “trusted third party” (or “mint”) requires that transactions be “publicly announced” within a system that enables “participants to agree on a single history of the order in which they were received”.
§3.23 — Bitcoin’s synthetic history draws upon established procedures for digital time validation, using a timestamp server to chain its hashed blocks in succession. “Each timestamp includes the previous timestamp in its hash,” constructing an artificial history as a robust series of envelopments – or ordered swallowings – “with each additional timestamp reinforcing the ones before it.”
§3.24 — The timestamped blocks are secured against tampering by proof-of-work locked hashes.* Such irreversibility is at once a deployment of cryptographic asymmetry, a consummation of contractual integrity, and a realization of (time-like) successive order. Notably, it is isomorphic with a thermodynamic – or statistical mechanical – gradient.
§3.25 — The network reproduces itself through a six-step block creation cycle. Since nodes “always consider the longest chain to be the correct one”, synthetic history, as an ordinal-quantitative variable, functions as a (selective) ontological criterion. Accepted blocks provide the building material for the subsequent cycle of network reproduction.
§3.26 — Bitcoin builds incentives into its infrastructure. Nodes are automatically compensated for the work they perform maintaining the network through the issuance of new coins. The system thus attains techonomic closure. The horizonal finitude of the Bitcoin money supply necessitates an eventual transition to payments based on transaction fees. Well-organized incentives also fulfill a security function, by motivating potential attackers to support rather than subvert the network.
§3.27 — Blocks can be compressed to economize on memory demand by pruning Merkle Trees. Moore’s Law is invoked as a realistic projection of exponential decline in digital memory price over time, moderating the requirement for information parsimony.
§3.28 — Further economy is offered by a payment verification short-cut (involving a modest sacrifice of security in exchange for added convenience).
§3.29 — Bitcoin transactions contain multiple inputs and outputs, to facilitate the integration and disintegration of coins during transfers.
§3.291 — Bitcoin radically adjusts the structure of transaction privacy. Rather than drawing a curtain of obscurity between a transaction and the world, in the traditional fashion, it nakedly exposes the transaction to public scrutiny. The new line of concealment is drawn between the transactional agents and their off-line identities, at the precise boundary of the commercium, therefore, and no longer within it. Secure masks are proposed as the new basis of privacy protection, coinciding with the anonymity of public keys.
§3.292 — The prospect of a successful attack upon the blockchain diminishes exponentially with the addition of “honest” blocks. An attacker therefore has a window of opportunity, which closes at a rate based on the block-processing capacity of the network.
§3.293 — The conclusion, summarizing the entire argument, is a masterpiece of lucid intelligence. (It is reproduced in its entirety in Appendix-1.)
* Adam Back’s Hashcash system (1997) provides the model. The use of a proof-of-work test – earning a Hashcash stamp – to eliminate spam by pre-emptive vetting of costless messages, contributes a solution of equal efficacy against DoS (denial-of-service) attacks. See subsequent discussion in this chapter.