Bitcoin White Paper – No-Cash-7970’s Review

Numerous people in the cryptocurrency community recommend reading the famous and historically significant Bitcoin white paper. After about 6 months since getting into cryptocurrencies, I finally got around to it. So in this lengthy post, I review and score the Bitcoin white paper and explain my reasoning behind the score.

## TL;DR

**Total Score: 19/25 – OK**

1. Novelty (Is there anything new being introduced?): **5/5 – Excellent**
2. Economics/Tokenomics: **3.5/5 – OK**
3. Implementation and Security: **3/5 – OK**
4. Readability (How difficult it is to read and understand?): **2.5/5 – Not Good**
5. Legitimacy (Does the project seem legitimate? Or is it a scam?): **5/5 – Excellent**

**Review Summary**: The Bitcoin white paper identified a difficult and widespread problem in the financial industry and presented a well thought-out solution that is clever, complex, and interesting. While the paper presented some great ideas, its disjointed style and the awkward use terms detract from its quality. For me, the paper may have been too short (just 9 pages), as I would have liked to see more explanations of the some of the mechanisms in Bitcoin.

## How I review and score the white paper

I try to judge the white paper by itself without considering outside information and analyze just the information contained in the paper. When reading and reviewing white papers, I try to be open-minded and set aside my personal feelings and preconception. However, don’t take the word of some nobody on Reddit as an unbiased assessment. Read the white paper yourself and form your own opinion.

I give the white paper a score from 0 to 5 in five equally-weighted categories: (1) Novelty, (2) Economics/Tokenomics, (3) Implementation and Security, (4) Readability, and (5) Legitimacy. The breakdown for each category score is: 0 = Terrible, 1 = Poor, 2 = Not Good, 3 = OK, 4 = Very Good, 5 = Excellent. The total score of the paper ranges from 0 to 25 and is calculated by adding the category scores. The breakdown for the total score is: 0 = Terrible, 5 = Poor, 10 = Not Good, 15 = OK, 20 = Very Good, 25 = Excellent.

## About Bitcoin and it’s white paper

If you’re reading this, you probably already know what Bitcoin is. But for the sake of come degree of completeness in this post, I’ll briefly describe Bitcoin.

Bitcoin is the first and most popular cryptocurrency. It was first proposed and presented in 2009 by the mysteriously unknown Satoshi Nakamoto in his white paper, named *Bitcoin: A Peer-to-Peer Electronic Cash System*. Although the paper was originally written in English, it has been translated into almost 40 different languages. The original white paper and its translations can be found at [ .

## Disclosures

So, for context and transparency, here’s a little bit of information about myself, the reviewer. I earned a Computer Science degree some years ago and have worked in software development for a few years, mostly in web development. I have very little knowledge about Economics and Finance, but I’m in the process of learning more about these subjects. As mentioned before, I have been learning about cryptocurrencies for about 6 months.

At the time of this writing, I haven’t owned any Bitcoin before and do not plan to own any Bitcoin. However, I do own some other cryptocurrencies and often hang around the Algorand community on Reddit. Before reading the white paper, I heard various things about Bitcoin here and there, but I never studied Bitcoin in depth. Honestly, based on how various people talk about Bitcoin (positively and negatively) these days, I was expecting the Bitcoin white paper to be some type of Libertarian manifesto about bringing down banks and creating a new world order or something. Fortunately, the white paper is not the manifesto I was expecting, and it wasn’t political at all.

## Review category #1: Novelty (Is there anything new being introduced?)

When the Bitcoin white paper was published in 2009, its solution for “peer-to-peer electronic cash” was novel. Before the paper was published, there were no known trust-less and decentralized mechanisms for solving the double-spend problem for digital currency. The most clever and novel thing about the solution presented in the paper is the use of a cryptographic proof-of-work to do three things at the same time: (1) prevent a user from double-spending, (2) create an incentive system that helps ensure the network nodes act honestly, and (3) regulate the production and distribution of new coins without a central authority.

**Novelty Score: 5/5 – Excellent**

## Review category #2: Economics/Tokenomics

Overall, Bitcoin’s incentivization scheme is interesting. It provides not just one way, but two ways, to incentivize “nodes” in the Bitcoin network to honestly create and validate blocks of transactions. In the design presented in the paper, the block-creation reward to nodes in the early stages of development of the network allows for the nodes to still be incentivized while transactions can be fee-less, since the fee is optional. Fee-less transactions is a nice way to increase the use of Bitcoin by attracting people who want a cheap or free way to send money and make electronic payments.

In the “Incentives” section (p. 4), the paper mentioned a “predetermined number of coins” that can enter circulation but doesn’t mention what that number is. This “predetermined number” is actually very important for the long-term future of Bitcoin. This number should not be set too low, because once the all coins enter circulation, the network “can transition entirely to transaction fees and be completely inflation free.” At this point, Bitcoin won’t just be “completely inflation free,” which can be seen as a good thing; it will be *deflationary* because coins can be held indefinitely by various people and not circulate around in the network. Deflation, like inflation, can be problematic if it gets out of control. With deflation, one coin buys more goods (including fiat currency) and services, which great for those who entered the Bitcoin network (by obtaining and owning coins) earlier and stayed. However, deflation also increases the barrier of entry into the Bitcoin network for new people because more goods or services are needed in exchange for one coin. The increased barrier of entry can cause the Bitcoin network’s growth and usage to slow down or stagnate. The Bitcoin network could even shrink as more coins are permanently inaccessible. The possibility of problematic deflation didn’t seem to be a consideration in design of the solution presented in the paper.

**Economics/Tokenomics Score: 3.5/5 – OK**

## Review category #3: Implementation and security

Because it’s just a proposal, the paper doesn’t contain any relevant computer code for implementing the Bitcoin network, and it doesn’t need to. Surprisingly, there isn’t much cryptography explained in the paper. The hashing algorithm used for the digital signatures in the transactions wasn’t even mentioned. There isn’t a whole lot of explanation of the most of cryptography involved in the proof-or-work either. This leaves the reader with more questions than answers. Where does the nonce come from? Who or what determines the “required zero bits” in the block’s proof-of-work hash?

The white paper is short, perhaps too short. There are areas that could use some more explanation. One such area is the “Networking” section (p. 3-4). Not much is explained in this section, and the section would be better if it explained how transactions are broadcasted into the network and who (or what) is broadcasting them. There was also no explanation of how nodes in the network are supposed to know that there are multiple chains of transaction blocks and which of those chains is the longest. Making sure the nodes determine the longest chain is essential to the proof-of-work mechanism. A second area that could use more explanation is the “mint based model” in the “Transactions” section (p. 2). The mint-based transaction model isn’t intuitive and is difficult to understand. It would have been more helpful if there was a more detailed explanation of the model and why the model used; although, that explanation could be a short paper by itself. A third area that could use more explanation is how “routine escrow mechanisms could easily be implemented to protect buyers” (p. 1). What is a “routine escrow mechanism” and how does it protect buyers?

I find it interesting that much of the security of the network discussed in the paper comes from the proof-of-work mechanism, which prevents double-spending and creates incentives to encourage good behavior. However, just hoping that the majority of the nodes in the network will behave as they should for rewards and not be self-destructive seems naive and not very secure to me. Although the paper did not specify what percentage of nodes makes up a “majority”, I am assuming that a “majority” is more than 50% of nodes that are online and broadcasting blocks.

I appreciate the paper’s brief discussions about some desirable features of an electronic payment system. These discussions were in the “Reclaiming Disk Space”, “Simplified Payment Verification”, “Combining and Splitting Value”, and “Privacy” sections (p. 4-6). While I would have also liked more information in those sections, they are not the most important sections in the paper, and it’s nice just see some thought and discussion on those topics.

**Implementation and Security Score: 3/5 – OK**

## Review category #4: Readability (How easy it is to read and understand?)

In appearance, the paper looks academic and is well-formatted. However, the paper suffers from some readability issues mostly caused by awkward flow, description-less diagrams, and some strange and vague word usage. The paper’s lack of readability is its biggest weakness.

Overall, the paper is awkwardly disjointed. It is a bit difficult to see how many of the sections relate to each other, especially the “Transactions” and “Timestamp Server” sections (p. 2). It didn’t help that the headings for some of the sections were not very descriptive. For example, the “Calculations” section heading (p. 6) is a rather unhelpful name and should have been named “Attacker Success Probability”, just like the name of the function written in the C code (p. 7). Also, the name “Incentive” for section #6 (p. 4) is vague. Just looking at the heading, it seemed like that section was going to discuss the incentives for people to make payments using Bitcoin, but there was no mention of how an end-user would make or receive a payment in Bitcoin. Section #6 would have been better named as “Incentives for Network Node Honesty”.

Many of the diagrams did not have a caption and were just thrown in without much explanation. This leaves the reader having to guess what the diagrams are related to and why they’re there. The purposes of some of the diagrams is easier determine than others. The worst offender is the diagram in the “Timestamp Server” section.

The strange and unclear naming of things in the paper causes confusion for the reader. For example, in the “Timestamp Server” section (p. 2), the use of the word “timestamp” seems to refer to a hash (of data that includes the time) or some data structure that contains a hash. This is strange because a timestamp usually refers to long number, like `1230796800`, or a date/time combination, like `1/1/2009, 12:00:00 AM`. A long number or date/time combination by itself cannot “\[prove\] that the data must have existed at the time” or “include the previous timestamp in its hash” (p. 2). I think the hashed data should be referred to as something like “timestamped data hash” instead of just “timestamp”. Also, using the term “timestamp server” to refer to a chain of hashed timestamped data is misleading and confusing. The term “timestamp server” implies that there is some central authority or “server” on the internet (e.g. ``) that produces timestamps for the blocks, which is not what was meant to be expressed in the paper. *SIDE NOTE: Web servers such as* `` *are referred to as “time servers”, not “timestamp servers”. You can easily see how the similar names can create confusion.*

The C code and output in the “Calculations” section (p. 7-8) was unnecessary and visually noisy, but its effect is minor at most. The small program or function used to calculate the probabilities is not relevant information for the reader. The relevant parts were the outputs of running the C code, and those outputs could have just been put in three nicely formatted tables, which would have been easier to read.

Lastly, the double spaces between sentences… With justified-aligned text… 😱 It just bothered me and was a bit distracting when reading a paragraph that had so many holes in it that it looked like SpongeBob. This is just my pet peeve, so I tried to look pass this and didn’t deduct any points from the Readability Score.

**Readability Score: 2.5/5 – Not Good**

## Review category #5: Legitimacy (Does the project seem legitimate? Or is it a scam?)

Interestingly, the white paper did not discuss much of the financial aspects of Bitcoin. The paper was clearly written by a technologist for technologists. It definitely was not written for the average person or the business-minded investor. There is absolutely no promotion of buying Bitcoin or joining the Bitcoin network. This, to me, indicates that Bitcoin was not initially created as some sort of scam, as some like to believe. Based on the way the paper was written, Satoshi Nakamoto was obviously looking for well-reasoned advice and feedback, not massive fame and fortune.

The paper did not contain any political or social commentary, which is a good thing. The paper didn’t shill Bitcoin either, which, again, is a good thing. The paper only focused on briefly describing a problem and presenting a well thought-out solution to that problem. Was the solution perfect? No. Was the paper written in the best and most understandable way possible? Definitely not. But it is easy to see that a lot of thought and effort went into developing a solution to the problem presented in the paper. The various mechanisms presented in the paper demonstrates considerable knowledge and research in Computer Science, Finance, and Economics. However, I would have liked to see more of the reasoning behind why those mechanisms were chosen and how those mechanisms enabled Bitcoin to be better than existing payment systems.

**Legitimacy Score: 5/5 – Excellent**

## Overall impression

The Bitcoin white paper presented a trust-less and rather elegant solution to the double-spend problem that plagued electronic currency systems. As great as the solution presented the paper is, it’s definitely not perfect and absolute. Although the paper didn’t go into as much detail as I would have liked, it’s clear that a lot of thought, knowledge, and effort went into writing the paper. The paper presented what was a good start to developing a complex solution to a difficult problem. However, it’s a shame that paper’s disjointed flow and awkward use of terms gets in the way of the reader understanding the solution presented in the paper. But I fully understand how difficult writing can be, especially academic writing about a complex idea. I am definitely no writing genius either. Fortunately for Nakamoto, the less-than-great explanation of his idea did not get in the way of his idea changing the world.

**Total Score: 19/25 – OK**

## Bonus: My guesses about Satoshi Nakamoto’s possible background (solely based on the white paper)

* **Nakamoto is a single person.** The incompleteness and the lack of explanation of some parts of the white paper indicates to me that a single person wrote it. If the paper was written by multiple people, I think the paper would have been longer and have more explanations.
* **He was a Computer Science graduate student.** My five reasons why:

1. The Bitcoin white paper reads like and is formatted like an academic Computer Science concept paper.
2. Most of the references used in the the Bitcoin white paper were little-known (at the time) Computer Science research papers from academic journals, which may not have been free to access in 2009, unless you are affiliated (as student, intern, researcher, etc.) with a university or research institution.
3. The computer knowledge required to write something like the Bitcoin white paper is at a graduate level and typically takes years to obtain and develop. That type of knowledge usually obtained and developed in a Computer Science degree program at a university.
4. The Bitcoin white paper looks like it was written using LaTeX, which is software common among graduate students, professors, and researchers for writing academic papers. Most people outside of academia aren’t familiar with LaTeX and don’t use it for writing papers.
5. The disjointedness and lack of explanation in the Bitcoin white paper seem to indicate that Nakamoto didn’t have much experience in publishing writings in peer-reviewed academic journals. Peer-reviews (at least the good ones) usually point out issues that impede understanding and demand more explanations of assertions and solutions presented. A person who has a lot of experience writing peer-reviewed papers tends to think of those kind of things automatically. A lack of experience writing peer-reviewed papers would rule out anyone who had a graduate degree or was well-established in academia at the time the paper was published, which leads me to believe that Nakamoto was a student at time he wrote the Bitcoin white paper. But then I could be overthinking it, and the Bitcoin white paper was meant to be more of a draft of ideas rather than something ready for an academic journal.

* **He is not from the United States and was not living in the United States at the time the paper was published.** In the United Sates in 2009, electronic payments were were basically considered to be a “resolved” issue with credit and debit cards being readily available (perhaps too available). The fact that the centralized banking system and credit/debit card processors served as intermediaries for electronic payments was considered to be a “necessary evil” in the United States, even during the financial crisis in 2008-2009. Also, at the time the paper was published, the trendy topics among computer scientists in the USA was social media and smartphones. So developing something like Bitcoin during that period time, indicates someone who was outside the USA bubble.
* **He may have worked for a financial institution (e.g. a bank) before the publication of the paper or was working at a financial institution when the paper was published.** The knowledge of Finance and Economics required to write something like the Bitcoin white paper is not common among computer scientists and is not normally encountered in Computer Science studies. Financial institutions often hire computer scientists and software engineers, and working for a financial institution would be one of the most common ways for a computer scientist or software engineer to obtain significant knowledge in Finance and Economics.
* I know people want the technology industry to be inclusive and all… And I hate to say this… But let’s face it, if my thoughts above are correct, **Nakamoto is most likely a man.** Back in 2009, there just weren’t that many women in Computer Science or Finance/Banking. However, Nakamoto being a woman still cannot be ruled out.

## Discussion

* Is there anything I missed and/or misunderstood?
* Do you agree or disagree with my review?
* What scores would you have given for this white paper?

## Up next?

If this kind of post is appreciated here, I plan to do a review of other historically significant cryptocurrency white papers such as the Ethereum white paper and the Doge “white paper”.

EDIT: Fixed weird typo caused by autocomplete.

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9 thoughts on “Bitcoin White Paper – No-Cash-7970’s Review”

  1. I’m going to take you to task about the assertion he wasn’t from the US and not living in the US (more so the former as many people believe Nakamoto was living in Europe at the time based on his message board posting times).

    To say that he wasn’t from US because the US had established a working system of credits and debits that involved a “necessary evil” is just poor thinking. Bitcoin came about after the 2008 financial crisis when basically everyone was asking “how can this system be better?” Great visionaries often are able to solve a problem everyone takes for granted. To assume Nakamoto was incapable of escaping traditional US finance dogma is an assumption I don’t want to make.

    With that said, I enjoyed reading this! Thanks for the content.

  2. If the intention was to create a universal currency, it failed miserably.


    The growth in value and volatility has pretty much insured that the main aim seems to be to hold/store it and not spend it.

    Why on earth would you spend and use a currency that was appreciating in value. Clearly you would not, unless you absolutely had to.

    …and whilst you may mock the dollar for losing value over the years, salaries have also risen over the years to counter this. But what makes the dollar a better currency is that there is no real reason to hold more than a small amount of it, a small amount of inflation is not a bad thing. You are encouraged to spend dollars now helping the economy by buying goods and creating jobs, rather than store them.

    Storing them is actually a pretty stupid thing to do, either spend them, or invest them in real assets, like property or shares in profitable enterprises.

    So, some inflation is actually good, as long as it is low and under control. Let’s face it most democratic countries have inflation under control, primarily by setting interest rates.

    I don’t see how an economy could even work without the creation of ‘extra’ money to fuel growth.

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