3. MECANISMO OPERATIVO
3.2 Fondo Regional Ambiental
The double-spending problem was the major stumbling block; for a long time, it was perceived to be an unsur-mountable obstacle in the development of decentralized digital currencies. To illustrate its nature, we will begin with a simple thought experiment.
Suppose you had a technology that would allow you to perfectly copy money, say an ingenious photocopying machine that could quickly and easily duplicate banknotes.
In Chapter 2, we mentioned counterfeiting traditional money—here we are talking about creating copies that would be absolutely indistinguishable from the originals.
If you were the only person with access to such technol-ogy, you might enjoy it for a while (we note that using it would, of course, be illegal—which is why we’re keeping
this discussion limited to a thought experiment). If instead t this copying technology were widespread, nobody would care to work to earn money. Why bother with a job if you could simply copy the money you need? As long as you have a unit of money to start with, you can double and triple your money and so on, simply by copying it and multiplying the original as much as you wish. At the same time, nobody would want to sell anything to another person—why part with an object or a service if what you are getting in return is something you could have repli-cated yourself in the first place?
In other words, money would cease to function, and the economy would grind to a halt, unless it switched to a dif-ff ferent, more difficult to copy, currency. This simple exam-ple illustrates that something that is easy to copy would not make very good money.
All this brings us to digital currency. Digital currency is essentially a string of zeros and ones, perhaps encoded on a magnetic strip, on a chip, or stored somewhere in the cloud. Regardless of where it sits, this piece of data is imminently copyable. We can reproduce it exactly, in as many copies as we wish, without harming the original. If money were simply electronic impulses, it seems we would be perilously close to the thought experiment above.
For a digital currency to serve as money, it needs to solve this problem of double spending. Perhaps the easi-est solution is to keep a ledger, an account that would list each unit of the digital currency (perhaps by its serial number) and keep track who owns that unit at any given time. After a transaction, the ledger would be updated by changing the ownership of the currency unit from the buyer to the seller.
Keeping such a ledger is a good idea, but we have not yet solved the problem completely. After all, a ledger in
the digital world is just a piece of data, and one can copy it as easily as before. For example, a dishonest buyer may copy the ledger prior to a transaction. While the ledger would be updated in any transaction, the dishonest buyer would try to revert to its prior version that still lists him as the owner of a unit of currency he has just spent. So, it seems we have merely replaced the problem of copying the digital currency with the problem of maintaining the integrity of the ledger.
Things would be different if we could designate a trusted third party that would be in charge of the ledger. The digi-tal currency would then be centralized in a sense that the trusted party would be the only entity with the right to alter the ledger, and the third party would diligently and truthfully record all transactions in the ledger. All transac-tions would need to be reported to that trusted party, and sellers would consult it to verify that a prospective buyer has enough funds to complete a transaction.
Digital currencies managed in such a centralized fashion would and in fact do work. This is what banks do when they keep our deposit accounts or credit card accounts.
All platform-based currencies we discussed in the previ-ous chapter are also organized this way. Whether we talk about Amazon Coins or Facebook Credits, there is always an institution in the background that keeps track of all accounts and that stands ready to update the records when-ever a transaction occurs. This institution has information about everybody’s holdings and about all transactions that take place. This is very different from the anonymity of cash transactions.
Is it possible to design a decentralized digital currency—
one that could operate as money with no centralized entity to keep track of the transactions? Initially, the consensus among computer scientists was that this would be difficult
or perhaps just impossible—in fact, the e-cash problem was a long-standing challenge in computer science since the early 1980s. The solution to this puzzle was finally proposed in 2008 in a paper published by Satoshi Naka-moto, “Bitcoin: A Peer-to-peer Electronic Cash System.”
The impact of Nakamoto’s paper has been immense.
The solution he (or she, or they—we do not know who is behind the pseudonym) proposed, known as the Bitcoin protocol, was the first well-working solution to the prob-lem of decentralized digital currency. More precisely, it was the first fully functional decentralized solution to the problem of double spending discussed above. As such, it is an important contribution to cryptography and to com-puter science in general. Moreover, as we will see later in this chapter, multiple hundreds of decentralized digi-tal currencies have been proposed. While they differ on a number of dimensions, many of them share the reliance on the same general technology as Bitcoin does. All these currencies, including Bitcoin, are commonly referred to as cryptocurrencies, to reflect the idea that the soundness of the system depends only on the algorithm and crypto-graphic tools it uses.