Nostr Reveals How Bitcoin Was Underestimated By Everyone
Contrary to popular opinion, the endgame of network states - coming together geographically and securing hard political power - will not be a hurdle at all. The greatest challenge is already upon us
From an engineering point of view, a human is a machine with trillions of moving parts, which are in turn made up of millions of moving parts. As the philosopher Daniel Dennett likes to say, we’re “robots made of robots made of robots”. We are able to make machines where the only moving parts are electrons, ingeniously coaxed into running virtual machines, billions of which are connected to form the internet; essentially a vast engine that runs human culture.
I’m sorry about this high-brow framing, but it’s kinda important. This perspective is what helped me see a deeper truth about how Bitcoin and Nostr actually work, and what sets them apart as inventions. Right from the beginning I had a feeling that Nostr was somehow similar to Bitcoin, and I’ve seen others comment on it too. There seems to be an agreement that the common denominator is “minimalism”, “flexibility” or “simplicity”. But what does this minimalism consist of - especially with respect to Bitcoin - and why does it work so well? I don’t think even Satoshi really appreciated this dimension.
And it’s not so weird. Technological breakthroughs are always underestimated, even by those who make them happen. Gutenberg cannot possibly have imagined that his invention (which was actually not the printing press, but a hand mold for fast and cheap casting of metal letters) would cause the destruction of medieval culture. According to legend, Newton invented calculus in the process of working out his theory of gravity, not even bothering to include it in his Principia.
Similarly, the Bitcoin whitepaper discusses a system for digital cash without mentioning this system’s uniqueness in terms of software engineering. Normal computer programs are built to receive inputs, manipulate them according to code written by a programmer, and spit out an output. Since Bitcoin is entirely dependent on the rational actions of people to do what it was designed for, it is accurate to say that human brains are a core component of the Bitcoin machine. (Of course, the same can be said of social media, but I’ll get to that)
Saifedean Ammous once commented that Satoshi Nakamoto seems to have been unfamiliar with economics, and speculated that he had nevertheless happened upon a software implementation of economic principles by sheer force of brilliant engineering (I've tried and failed to find that clip, sorry). This indicates that the Bitcoin network not only depends on human minds but more specifically the efficient coordination and flexibility offered by free markets.
The way I see it, Bitcoin has two security mechanisms, each of which relies on the unhackable software of human minds.
To deal with external threats, costly proof of work relies on a brutal incentive structure that requires miners to invest in expensive machinery and receive rewards whose value is largely a derivative of the network’s health. Ultimately, the linchpin of PoW is that miners respond to these incentives in a way that is economically rational, and use their creativity to counteract all threats. In other words, the creative program running on the miners’ wetware is a crucial component of the bitcoin machine.
To deal with threats from within, there is an inverted version of the same incentive structure. To safeguard the software itself, and counteract the self-interest of miners, a network of cheap nodes enact a political system where all citizens vote with their feet. Bitcoin developers enact the unenviable role of would-be legislators under perfect anarchy, where the only way to get a law adopted is by convincing people. Human distrust and risk aversion secure the network from the inside.
I didn’t see this until I started learning about Nostr. As I read Fiatjaf’s arguments for why the protocol had to be one way and not another, or why some tradeoff or other made sense, I realized that the Bitcoin vibes here were stronger than in any altcoin whitepaper. However, Nostr isn’t a cryptocurrency and therefore bereft of every feature that supposedly makes Bitcoin so great. No blockchain, validation mechanism, currency, or peer-to-peer, trustless settlement mechanism.
But then it clicked. Both Bitcoin and Nostr depend on self-interested human minds. Unlike the uninhabited Chinese mega-cities of normal social media, planned to suit the imagined needs of the “average user” by a central authority, whose vision has no room for the uncertainty of future human wants, these open protocols are made to grow organically through humans responding creatively to incentives.
I find the city an appropriate metaphor, since the best way I can describe Bitcoin is as a simulation of a beleaguered city-state. Anyone can become a citizen, invest in it or contribute to its defense, but any rewards thereof are entirely predicated on the city walls holding and the citizens resisting political games. They have everything to win, and everything to lose; high stakes doesn’t even begin to describe it.
(This picture reveals what truly separates bitcoin from crypto at large, and failure to grasp it leaves people confused about why altcoins shouldn’t be valuable and exciting too. But the city walls of Solana, Cardano or Ethereum are paper, they have walled gardens for their nobility, and citizens don’t care much; they’ll happily take their stake elsewhere if the city falls)
Meanwhile, Nostr doesn’t come with an incentive structure. Nor does it have specialized hardware for security, sport its own asset or an operational imperative. Outsiders can even attack it in noticeable ways without any major investments. The Nostr network’s robustness comes from its flexibility and the bare-bones simplicity of the protocol itself. Instead of Bitcoin’s iron fortress, attackers will face an endless game of whack-a-mole, but whose game-theoretic calculus is similarly discouraging: A higher cost than that incurred by the defenders, for no tangible benefit.
Looking at the technicalities and counting lines of code, one may conclude that Bitcoin is a much more advanced protocol than Nostr, but that is a parochial error.
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