The Bitcoin Standard: The Decentralized Alternative to Central Banking

by Saifedean Ammous

All computer networks rely for their security on making some computers impenetrable to attackers and using these as the definitive record. Bitcoin, on the other hand, takes an entirely different approach to computer security: it does not bother to secure any of its computers individually, and operates under the working assumption that all computer nodes are hostile attackers. Instead of establishing trust in any network member, Bitcoin verifies everything they do. That process of verification, through proof‐of‐work, is what consumes large amounts of processing power, and it has proven very effective because it makes Bitcoin security dependent on brute processing power, and as such, invulnerable to problems of access or credentials. If everyone is assumed dishonest, everyone must pay a large cost to commit transactions to the common record, and everyone will lose these costs if their fraud is detected. The economic incentives make dishonesty extremely expensive and highly unlikely to succeed.