Who is Nick Szabo, The Mysterious Blockchain Titan

Nick Szabo is a living legend in both the cryptocurrency and cryptography worlds. Although he’s not a household name, and if you’re new to the crypto games, you probably would have never heard of him.  However, Nick Szabo has godlike status amongst the sincere crypto enthusiasts.

The man’s extensive range of interest, extending from the origins of money, economic and legal history to cryptography and blockchain technology makes him a natural polymath and a one-of-a-kind man.

Both a computer scientist and a legal scholar, he married his two central interests and, in 1996, gave birth to the concept of “smart contracts.” Many years later, “smart contracts” became the central “feature” of the Ethereum blockchain protocol and gave rise to a whole new way of commerce on the Internet.

Having said that, Nick Szabo remains a puzzling character. His blog, Unenumerated is a temple of his thoughts and ideas. However, with more than a hundred entries starting from 2005 up until now, one cannot find any personal information about Nick on his blog, or anywhere else for that matter.

Just so you don’t get the wrong idea, he is not anonymous by any means. He has given many public lectures, worked as a consultant on several projects, regularly uses Twitter to share his ideas, but that is all we got. He was never a professor at George Washington University (as widely reported and believed), we do not know his age, where he lives or whether he prefers coffee over tea.

We do not know anything except his thoughts on the world of technology and finance. And maybe it’s for the best. The world has buried and neglected countless of genius ideas because of some personal misconducts of the originators.

You should never judge a book by its cover, or judge an idea by its originator.

As C.G. Jung concluded, people don’t have ideas, ideas have people.

Nick Szabo’s Body of Work

As a pioneer in the world of cryptocurrency, Nick Szabo’s body of work is extensive. One article couldn’t possibly digest all the concepts presented on his blog. However, we can distinguish two of them as the most impactful ideas on society: Bit gold and Smart contracts.

Bit Gold

bit gold

 

Nick is probably best known in the cryptocurrency circles by his paper on Bit Gold. This paper is believed by many to be the inception of Bitcoin. In the paper, Szabo clearly identifies the problem of the dependence of modern financial systems on a third trusted party and envisions an alternative.

“It would be very nice if there were a protocol whereby unforgeable costly bits could be created online with minimal dependence on trusted third parties, and then securely stored, transferred, and assayed with similar minimal trust. Bit gold.”

Based on the words of Mr Szabo, third trusted parties (TTP) are security holes. When a protocol relies on TTP, it has to patch the holes in security that the mere centralization creates, and that can be very costly. The protocol then needs to integrate the costs of security into the costs of operating and that ultimately leads to additional expenses to the end users of the protocol.

Besides security and expenses, Third Trusted Parties, as the name suggests, need to be trusted, which is a problem in itself and needs to be eliminated wherever possible.

Here’s more to add to that:

The name “Bit Gold” stands for the two key characteristics of the online payment system it represents; “Bit” for the bits being sent and received, and “Gold” for the fact that the systems resemble the qualities of precious metals, serves more as a commodity and doesn’t rely on a TTP.

Does all of this sound familiar? Yup.

He essentially described the idea of Bitcoin.

In his Bit Gold paper, Szabo lays the grounds for his (then) hypothetical protocol:

“Here are the main steps of the bit gold system that I envision:

1. A public string of bits, the “challenge string,” is created (see step 5).

2. Alice on her computer generates the proof of work string from the challenge bits using a benchmark function.

3. The proof of work is securely timestamped. This should work in a distributed fashion, with several different timestamp services so that no particular timestamp service need be substantially relied on.

4. Alice adds the challenge string and the timestamped proof of work string to a distributed property title registry for bit gold. Here, too, no single server is substantially relied on to properly operate the registry.

5. The last-created string of bit gold provides the challenge bits for the next-created string.

6. To verify that Alice is the owner of a particular string of bit gold, Bob checks the unforgeable chain of title in the bit gold title registry.

7. To assay the value of a string of bit gold, Bob checks and verifies the challenge bits, the proof of work string, and the timestamp.

Note that Alice’s control over her bit gold does not depend on her sole possession of the bits, but rather on her lead position in the unforgeable chain of title (chain of digital signatures) in the title registry.

All of this can be automated by software. The main limits to the security of the scheme are how well trust can be distributed in steps (3) and (4), and the problem of machine architecture which will be discussed below.”

In summary, looking at Szabo’s Bit Gold proposal, we can see the birth of an idea that will later change the world. Bitcoin didn’t come out of the blue; it was self admittedly designed and inspired by several different technologies, and one of them was Bit Gold. Satoshi didn’t directly refer to Bit Gold in his Bitcoin whitepaper, but the similarities and influences are obvious.

Of course, there are notable technical differences. For example, Bitcoin’s consensus algorithm counts the hashing power as votes for achieving consensus, rather than counting the network addresses like Bit Gold does.

In addition to this, Bitcoin is more fungible than its predecessor due to the difficulty adjustment system on the proof-of-work algorithm.

Nevertheless, the philosophy behind both of the ideas is one and the same: removing TTPs, solving the problem of inflation, and creating an online currency system that can be trusted, securely transferred and stored.

Smart contracts

Today when you read the news on the latest developments in the cryptocurrency industry, you can frequently stumble upon articles about new ICOs, their potential to change the way in which certain elements of an industry works, new ICO scams, frauds, ICO tokens reaching mind-blowing growth in prices in ridiculously short timeframes and what not.

All of this was enabled by an invention called “Smart contract” that was first conceived by Nick Szabo and 20 years later implemented in the Ethereum protocol. Nick Szabo’s article “Smart Contracts: Building Blocks for Digital Free Markets” was published in 1996 and in it, he described the idea of establishing a contractual agreement between strangers on the internet using self-executing code.

The “contract” is the foundation of a free market economy. In fact, an argument can be made that it’s the sole foundation of society. Rousseau’s social contract theory is based on this idea and Western culture is built on it.

Since the first civilizations, contracts have evolved and adapted to society’s needs, and they continue to do so today. Nick Szabo’s idea of smart contracts is nothing but an extension of this natural cycle in the age past industrial revolution — the new Digital Age.

In his 1996 article he states: “The basic idea of smart contracts is that many kinds of contractual clauses (such as liens, bonding, delineation of property rights, etc.) can be embedded in the hardware and software we deal with, in such a way as to make breach of contract expensive (if desired, sometimes prohibitively so) for the breacher.”

He then proceeds to make the analogy of “the vending machine” as a real-world example of an embodied smart contract. If you think about it for a moment, it’s a genius example. The vending machine is the simplest form of a self-executing contract. If you put the right coin in, and press the right buttons, you get a can of soda.

If you make a mistake during the process, or the machine is not able to deliver your soda, it spits back the coin you gave it. It’s essentially a self-executing “If this > then that” contractual agreement, and yet, we usually never think about it this way when we use it.

So what’s so good about these so-called “smart contracts” you ask?

In his visionary work, Nick Szabo distills four basic objectives of contract design:

Observability – the ability of the principals to observe each others’ performance of the contract

Verifiability – the ability of a principal to prove to an arbitrator that a contract has been performed or breached, or the ability of the arbitrator to find this out by other means.

Privity – the principle that knowledge and control over the contents and performance of a contract should be distributed among parties only as much as is necessary for the performance of that contract.

Enforceability – measured in the likelihood of a contract’s ability to be enforced.

Whether the contractual agreement has been designed efficiently or not can be roughly judged by its execution of the four basic objectives.

Nick Szabo argues that smart contracts enable both parties to observe each other’s performance of the contract, easily verify whether the agreed upon terms have been met, disclose only the details necessary for the completion of the contract and, lastly, reduce the costs of enforcing the contract because of the innate quality of smart contracts to be self-executing when all criteria are met.

Smart contacts make all this vastly easier and more efficient, that is if they’re designed correctly.

“Szaboshi Nickamoto”

nick szabo is satoshi nakamoto

Do you notice something special in the name? It seems to look like an anagram for me. Maybe, this will give you an idea.

On the 31 October 2008 a whitepaper named “Bitcoin: A Peer-to-Peer Electronic Cash System” appeared on a cryptography mailing list, authored under the pseudonym, Satoshi Nakamoto. In January 2009 the genesis block was minted into existence by Satoshi Nakamoto and embedded in it was the message “The Times 03/Jan/2009 Chancellor on brink of the second bailout for banks.”

Nine years later, at present, Bitcoin has a market cap value of $300 billion. Many things have changed since, but one thing remains the same, the entity that created it, resides unknown.

The price of one bitcoin is roughly 17,000 dollars… After doing your own math, you can probably see why there is all the fuss in the media about who this man is.

Many conspiracies are surrounding Satoshi, and many researchers who claim they have found him, but none of them are conclusive. So what has Nick Szabo has to do with all of this?

Well, prior to the release of Bitcoin, there were a few digital cash solutions that most likely were an inspiration or an influence to Satoshi. Adam Back’s hashcash, Wei Dai’s b-money, Hal Finney’s reusable POW, and finally Nick Szabo’s Bit Gold. All of them individually are suspected by different conspiracy theorists to be Satoshi himself. Some even propose that Bitcoin’s whitepaper was a product of the joint effort of all of the above.

However, the focus of this article is Nick Szabo, so let’s take into consideration some of the arguments and see if it’s possible to make the connection.

The Bitcoin – Bit Gold connection

After reading Nick Szabo’s Bit Gold white paper, it becomes clear that Bitcoin, as a philosophy, or as a technological concept was already conceived in Szabo’s head four years before the release of Bitcoin.

In April 2008, Szabo apparently decided to manifest his idea into reality and wrote the following on his blog:

“Bit Gold would greatly benefit from a demonstration, an experimental market (with e.g. a trusted third party substituted for the complex security that would be needed for a real system). Anybody want to help me code one up?”

Seven months later, Bitcoin was released and interestingly enough Szabo changed the date of his Bit Gold post from April 2008 to December 2008 making it appear as if it was posted after Satoshi’s white paper. Making things even more suspicious is the fact that Satoshi never referenced Szabo’s work in the whitepaper, which is unimaginable considering the similarities between the two.

Shortly, in 2010 Bitcoin broke the one cent barrier and rose over 20 cents per coin and yet Nick didn’t even mention Bitcoin that year as if it didn’t even exist. Fishy, eh?

Some internet scavengers also noticed some very peculiar things in the sequence of events, namely, while Satoshi was still actively working on the Bitcoin protocol in 2010, Szabo didn’t even mention Bitcoin on his blog. When Satoshi steps down at the end of 2010, suddenly Szabo starts talking about cryptocurrency again.

Also, let’s not forget that Nick “never released” that “Bit gold project” in reality, even though he was asking for help just months before the announcement of Bitcoin. It looks like things are starting to add up…

The Hal Finey connection

It’s widely known that Nick Szabo knew Hal Finney since 1993 and they communicated and exchanged ideas more than once. Hal was an early Bitcoin user; in fact, he received the first bitcoin transaction from Satoshi Nakamoto.

In addition to that, Hal lived in the same small town for ten years just a few blocks away from Dorian Satoshi Nakamoto, the guy that was initially accused by some reporters to be the creator of Bitcoin.

An author writing an article for NY Times called “Decoding the Enigma of Satoshi Nakamoto and the Birth of Bitcoin” wrote the following:

“Just hours after Newsweek’s story hit the Web, I received an email from an old cryptography community acquaintance of Finney’s who has asked to remain anonymous. The email was titled “What are the odds?”

It pointed out that Hal Finney had lived for almost a decade in Temple City, the same 36,000 person town where Newsweek found Dorian Nakamoto. Finney’s address was only a few blocks away from the Nakamoto’s family home.”

He then proceeds to explain that as his research got deeper and deeper, he got more and more convinced that in fact, Nick Szabo is the name behind the pseudonym Satoshi Nakamoto, and distinctly lays the reasons why he got this impression in great detail.

If you’re still not convinced, we saved the best for last.

Aston University Forensic Linguistics

If you’re not familiar with the case of Theodore John Kaczynski also known as Unabomber, this is probably the first time you’ll hear about a field called “forensic linguistics.” Forensic linguistics is a branch of applied linguistics, and it is the application of linguistic knowledge, methods, and insights to written material with the aim of extrapolating as much information possible from it. Although it sounds like some voodoo gibberish, it’s actually a legitimate field of science that has helped police departments catch criminals numerous times.

A group of forensic linguistics experts from Aston University conducted a study nicknamed “Project Bitcoin” that looked at the linguistic similarities between the Satoshi’s Bitcoin whitepaper and the writings of eleven individuals that were commonly accused of being the possible creator of Bitcoin by conspiracy theorists. The study was conducted by 40 final-year students led by Dr Jack Grieve.

After the study was finished, this is what he proclaimed:

“The number of linguistic similarities between Szabo’s writing and the Bitcoin paper is uncanny, none of the other possible authors was anywhere near as good of a match. We are pretty confident that out of the list of people regularly referred to as possibilities, Nick Szabo is the main author of the paper, though we can’t rule out the possibility that others contributed. Our study adds to the weight of evidence pointing towards Nick Szabo. The case looks pretty clear-cut. Szabo is an expert in law, finance, cryptography and computer science. He created ‘bit gold’, a precursor to Bitcoin, and was looking for collaborators in 2008. Did Nick Szabo create Bitcoin? We’re not sure, but we think he probably wrote the paper so it’s certainly worth a closer look.”

This last piece of evidence is the most conclusive piece of evidence supporting the thesis claiming that Nick Szabo is Satoshi Nakamoto.

When we consolidate all of the arguments already mentioned, it all adds up to a pretty strong case.

However, the real identity of Satoshi Nakamoto remains a mystery. Whether it’s Szabo, or Hal, or both of them, or some other person altogether, we’ll probably never know.

The Titan Reigns Supreme

Nick Szabo’s personal life may be an enigma, but his body of work puts him at the very top of most prominent persons in the blockchain industry. His blog continues to be one of the most well thought out blogs about cryptocurrency, distributed ledger technology, law, history of law and commerce, and of course, cryptography.

Moreover, he’s one of the most reputable experts in computer science out there and continues to lecture and spread his vast knowledge to the world. His opinions on anything related to cryptocurrencies are well respected and influential to this day.

Nick Szabo’s legacy will live on, forever.

Are you a fan of Nick Szabo now? What do you think about Satoshi’s true identity?

Header image by Gavin Fiorina, Other images: 1, 2