Satoshi Nakamoto Nominated for Nobel Prize

Bhagwan Chowdhry, a professor of finance at UCLA, has nominated Satoshi Nakamoto, the creator of Bitcoin, for a Nobel prize in economics. It’s an excellent choice. Nakamoto made a fundamental breakthrough that combined cryptography and a distributed database to create the first decentralized cryptocurrency. Moreover, Nakamoto implemented his theoretical breakthrough to create a working cryptocurrency with real benefits to potentially billions of consumers.

Chowdry writes:

The invention of bitcoin — a digital currency — is nothing short of revolutionary….It offers many advantages over both physical and paper currencies. It is secure, relying on almost unbreakable cryptographic code, can be divided into millions of smaller sub-units, and can be transferred securely and nearly instantaneously from one person to any other person in the world with access to internet bypassing governments, central banks and financial intermediaries such as Visa, Mastercard, Paypal or commercial banks eliminating time delays and transactions costs.

But beyond demonstrating the possibility of creating a reliable digital currency, Satoshi Nakamoto’s Bitcoin Protocol has spawned exciting innovations in the FinTech space by showing how many financial contracts — not just currencies — can be digitized, securely verified and stored, and transferred instantaneously from one party to another.

…Not only will Satoshi Nakamoto’s contribution change the way we think about money, it is likely to upend the role central banks play in conducting monetary policy, destroy high-cost money transfer services such as Western Union, eliminate the 2-4% transactions tax imposed by intermediaries such as Visa, MasterCard and Paypal, eliminate the time-consuming and expensive notary and escrow services and indeed transform the landscape of legal contracts completely. Many industries such as Banking, Finance, Law will see a big upheaval. The consumers will be big beneficiaries and indeed the poor and marginal sections of the society will reap the benefits of financial and social inclusion in the coming decades. I can barely think of another innovation in Economic and Finance in the last several decades whose influence surpasses the welfare increases that will be engendered by Satoshi Nakamoto’s brilliant, path-breaking invention. That is why I am nominating him for the Nobel Prize in Economics.

Since no one knows who Nakamoto is it might seem difficult to award him a prize but Chowdry notes that bitcoin itself provides a solution:

The Nobel committee can easily buy bitcoins for the award money from any reputed online Bitcoin exchange and transfer it to him instantaneously. A very early bitcoin transaction suggests that the bitcoin address 1HLoD9E4SDFFPDiYfNYnkBLQ85Y51J3Zb1 likely belongs to him. Of course, he could easily and verifiably let the committee know which address he wants the money to be transferred to.


I am Satoshi Nakamoto!

Wait... This isn't a trick to arrest him is it? My brother is Satoshi Nakamoto!

Careful. If Nakamoto works for Keyser Söze you probably don't want to cross him.

But Nobel prizes have gone to worse candidates. It would be interesting because this one would not have been trying. I doubt the chances of an economics prize crossed his mind.

Ha! Keyser Soze doesn't scare us. He's not so tough. Me and my mates call him Keyser So-so, don't we boys. Boys? Guys? Excuse me, I have to go investigate why all my henchmen have suddenly gone suspiciously quiet. I suspect they're embarrassed about spilling all this red cordial that is leaking under the door I'm about to open.

Counterfeit prize goes to pseudonymous person. What a fine idea. Though I suppose Al Gore might back into the limelight and demand the money.

I find the idea logically inconsistent by itself. The defenders of bitcoin argue that the power of bitcoin relies on the decentralized procedure underlying its production and circulation. Then if "somebody" is to be awarded the Nobel Prize it should be the "internet". Satoshi Nakamoto is the first to say : "this line of code is money", and has found a sufficient number of people to believe it. Just like years ago some people were fool enough to believe the guy showing them a piece of paper saying "this is money".

A large community might (arguably) sustain bitcoin's existence in a distributed fashion and did (certaionly) work together to build it. But Nobel Prizes are given for making important -- preferablly fundemental -- breakthroughs in the realm of ideas and that just what Satoshi Nakamoto has done. This will be true even after the Chowdry's rosier predictions are proved wrong.

"if “somebody” is to be awarded the Nobel Prize it should be the “internet”." I had just made that very point.

It is only inconsistent if you believe the "line of code" is not itself a worthy innovation. While I am not a computer scientist, all accounts I have read indicate that Bitcoin is genuinely a material advance in the field of computer science and makes a distributed currency possible where it was not before.

Economics is basically the study of the behavior of masses of people. Creating a new behavior for masses of people seems pretty revolutionary to me. Though I guess by the measure Steve Jobs should've gotten it for the iPhone.

The committee letter specifically asks that the nominator not reveal to the public the names of those being nominated. Seems like a good way of demonstrating that he is not fit to nominate someone for the Prize.

Let's be charitable - both the real ones and the PR one both involve names before the word 'Prize' - either 'Nobel' or the wordier 'Sveriges Riksbank' (and the PR one makes sure to associate itself with a dead man's prizes' name due to the wide reach of international fame connected to the original ones).

Technically, he didn't reveal the name of the person being nominated.

The blockchain is somewhat of a breakthrough in computer science, so the Turing Award might be more appropriate than the Nobel Peace Prize. That said, the Turing is usually awarded for fundamental theoretical breakthroughs, while this is a very practical innovation.

Some people are wondering if this is a ploy to arrest him. Might I ask on what charge? I know he has made governments nervous, but what laws has he broken specifically?

If I am Satoshi Nakamoto, and I'm not saying I am, then importing Vietminese Bex into Australia is one activity that authorities may wish to discuss with me. Or him. Bex is a white powder with pain killing properties. How was I supposed to know that there are other white powders with pain killing properties that technically are not legal to transport from one country to another? But, on the bright side, a friend has informed me that Vietminese Bex is not as illegal if it is only for personal use, so I'm going to go and use all I have left personally right now. Along with some coke. And then I'm going to have a nice lie down. I may be some time.

He's up for the prize in economics, not the peace prize.

Right, thanks for pointing out the mistake. Wish there were an "edit" option!

If they awarded posthumous Nobel Memorial Prizes, I'd nominate John Law

"it is likely to upend the role central banks play in conducting monetary policy"

Can anyone give an illustration of how this prediction could come into play?

Chowdhry may pose it as a prediction but this is like saying that "it's going to snow in Moscow in January" is a prediction.

In essence, a given central bank controls the money supply and interest rates of their currency against other central banks doing the same. None of them, however, has any grounding in reality - that is, the finite world - merely against one another. Bitcoin, being mathematically deterministic and cryptographically secured, provides for a foundation against which all other currencies may determine their value.

If anything, Bitcoin makes the job of being a central banker a hell of a lot easier.

P.S. for Alex: As far as I can tell, Chowdhry only made a suggestion for a nomination, not a nomination.

Bitcoin is no great innovation. It is a clever and ingenious solution to a problem that only a small number of libertarians care about.

It is not cheap to operate either . Much of Visa and MasterCard fees end up as rebates to customers, the rest are largely customer service costs and marketing.

Bitcoin network costs don't even include customer service.

"It is a clever and ingenious solution to a problem that only a small number of libertarians care about."

You sound bitter.

Next time you buy something with a card ask how much it costs the vendor.

As people enjoy pointing out here, the fees cost the vendor nothing - just like fines for criminal corporate behavior, the cost is completely passed on to the customer. Though strangely, a massive corporate fine tends to actually affect shareholder value, while a mandatory fee on all purchases (merchants taking credit cards are contractually not allowed to discount purchases by cash users) means that those not using a credit card pay more.

Luckily, in America, and thanks to the tireless (and well paid) work of any number of interests, massive corporate fines barely exist, in apparent part to help prevent consumers from ending up having to pay the costs of the fine. And with a remarkable overlap, the same people who don't believe in fines ultimately being paid by consumers are fully on board with the idea that a customer paying cash should pay the same as a customer using a credit card, without the merchant being able to price their waresand services to reflect the merchant's costs.

Not all drug dealers are libertarians.

The best part of Bitcoin doesn't have all that much to do with Economics - it's probably not the crypto-currency but is the distributed trusted ledger part. And it is really practical not theoretical. Still, it's a really good idea and the guy deserves some prize. Peace prize?

I mentioned the Turing award above, but as you say, blockchain (technical name for the distributed trusted ledger, which is is the real innovation) is a practical and not a theoretical advance. Now, if he had patented his idea, he would already be a millionaire.

I believe he's already a multimillionaire, if not a billionaire, because of all the bitcoins he owns.

Right, anonymous cryptocurrency is not a new invention. Digicash operated in the 1990s and was based on cryptographic innovations from the 1980s.

But digitization hasn't eliminated skimmers; indeed, it has created more of them, such as Paypal (mentioned by Chowdry) and Google and Facebook and every other web site devoted to data mining and skimming money from manufacturers and distributors for products in the chain of commerce whose price includes the skimmers' hidden charge that comes at the expense of the manufacturers and distributors. Aren't Google and Facebook "free"? Because the skimmers' charge is hidden, there's the illusion that it's free. Implicit in Chowdry's praise of Bitcoin and digitization is the fiction that it eliminates or reduces the role and costs of the skimmers. If you believe it, I have some Ripoff coins I'd like to sell you.

isn't this post a few weeks too late? The Econ Nobel has been awarded already.

I have never bothered to work through the algorithms underlying BitCoin because the whole thing seems like a scam but just reading the descriptions of it, if Bitcoin ever became widely used the BlockChain databases would grow at explosive rates and the whole system would collapse from data bloat.

BitCoin seems to be a fantasy of libertarians and criminals.

If you don't know how the use of space by bitcoin algorithms scales with number of transactions, you're talking out of your ass.

I send many more emails than I make financial transactions, and each email is one to five orders of magnitude more data than an entry to the bitcoin ledger --- yet GMail stores all my email since 2004 and I'm only using about 20% of the space they give me for free. (I could buy many times more space for a trivial yearly cost.)

Jake - I will bite.

If I use Bitcoin for a transaction:
1) how many bytes get added to the Block Chain database for a typical transaction
2) how many copies of the database are maintained in the distributed system that is at the heart of the system
3) how many bytes from how many sources need to be accessed to verify a transaction. will this number grow as the history gets longer and the database gets bigger.

How many transactions per day do you expect would be added to the Block Chain if BitCoin becomes widely used.

Thanks in advance.

1) A transaction with single address for both sender and receiver is ~225 bytes, though transactions with more addresses involved can be upwards of a kilobyte.
2) There are a few thousand nodes verifying transactions at the moment, probably somewhere in the range of 5-10k, though it's difficult to be more precise.
3) Transactions are verified by their incorporation into blocks in the blockchain and their validity is confirmed first by the miner based on the cryptographic signature between the sender's public and private keys, and then by the receiving party based on the cost of a double-spend attack. By convention, 6 blocks of confirmation is considered to be irreversible, and therefore valid, by the recipient.

As to the last point, there is no conceivable future where Bitcoin becomes widely used anymore than there's a conceivable future where PGP becomes widely used. Strong cryptography is a tool for the best of us, not the lowest common denominator. In this sense, Bitcoin is closer to a Picasso or a condo overlooking Central Park than some trendy new iApp.

Bitcoin's learning curve is incredibly steep, which is precisely what makes it so valuable.

It is just like claiming the the Fed wont be able to keep track of your transactions. Ever heard of "sidechain" ?

“The bitcoin network is reaching scaling limits. Sidechains act as a sort of relief valve for the bitcoin network.”

Um. Wrong URL.

Everyone can "keep track" of transactions, the Fed included - the blockchain is a matter of public record, after all - but that doesn't mean that you can prove who owns either the sending or the receiving address. You might have suspicions, sure, but the costs of actually proving your hunch beyond a reasonable doubt quickly approach infinity due to the size of the address space.

Also, Bitcoin isn't reaching "scaling limits," it's reaching the point when a bunch of children who were too late to the party want to "fix" the party by making another "just as good" party in the room next door where everyone (read: even the not cool kids) can hang out, but mostly just say they were there. Really, "sidechains" are not unlike barnacles on the SS Savannah.

Obvious optimistic Alex post vs pessimistic Tyler post, who has been calling for the demise of bitcoins past 2 years.

Make or break in 2015! Price will plummet! Competition will drive price to 0! Tyler focuses on the "price" and equates that with worth being blind to the uses of public ledger.

Bitcoin serves as litmus test for control freaks.

The easiest people in the world to cheat are people who think they are in on a con on someone else.

The people buying BitCoins think they are in on a "con" on governments everywhere.

If BlockChains are so wonderful then anyone could create a digital currency denominated in dollars. You deposit your dollars with the sponsor and it issues digital currency to you. The sponsor turns around and deposits the money at the Federal Reserve as excess reserves and uses the interest to pay the cost of administration.

It does appear that people are starting to apply the blockchain concept outside of money when there is a need for a decentralized transaction database of some sort. Of course, banks already have highly reliable centralized systems for maintaining transaction ledgers so it likely wouldn't be worth their while to retrain all their employees and roll out a brand new system. I believe banks were the last customers in the world of the telegraph system until it was shut down for good a few years ago.

Thanks to cheap computing financial firms have digitised their inner workings; but they have not yet changed their organisations to match. Payment systems are mostly still centralised: transfers are cleared through the central bank. When financial firms do business with each other, the hard work of synchronising their internal ledgers can take several days, which ties up capital and increases risk.

Distributed ledgers that settle transactions in minutes or seconds could go a long way to solving such problems and fulfilling the greater promise of digitised banking. They could also save banks a lot of money: according to Santander, a bank, by 2022 such ledgers could cut the industry’s bills by up to $20 billion a year. Vendors still need to prove that they could deal with the far-higher-than-bitcoin transaction rates that would be involved; but big banks are already pushing for standards to shape the emerging technology. One of them, UBS, has proposed the creation of a standard “settlement coin”. The first order of business for R3 CEV, a blockchain startup in which UBS has invested alongside Goldman Sachs, JPMorgan and 22 other banks, is to develop a standardised architecture for private ledgers.

I do not see it. Bitcoin is an achievement in computer science broadly speaking. But economics? Was the contribution not to operationalize the concept, and not invent the concept? I don't see how this is an achievement in *economics*. But I applaud the idea to broaden the scope of what a prize in economics represents. Hmm, I suppose in the past prizes have been given to psychologists (Kahneman), political scientists (Ostrom), and computer scientists (H. Simon). Maybe this isn't so crazy after all.

You can't be nominated for a Nobel Prize in economics, because there is no Nobel Prize in economics. The economics prize was created by Sweden’s Central Bank in 1969 and is called the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” It was not established by Nobel, but supposedly in memory of Nobel. It was done completely against the wishes of the Nobel family.

Thanks Martin/Dick. No one has very pointed this out before.

But it's well worth repeating at every opportunity.

I'm not sure whether it's supposed to add to our detract from its credibility.

I thought everybody was pretty sure it was Szabo?

I would love for this to happen. Very few of the laureates have had any significant impact on the real world (with the exception of Coase and spectrum auctions), so this might start a new trend!

It will be interesting to see if this entices the original Satoshi Nakamoto out of anonymity to claim the prize.
I suppose he could claim it pseudonymously, but there would be no way to verify if the person claiming the prize is the "real" Satoshi Nakamoto.
I would want whoever came forward to provide proofs that he/she is the real Nakamoto, such as notes or previously unpublished code from the time when bitcoin was being created.

If Satoshi signs a message with his PGP key, it's undeniably and irrefutably him. This is actually pretty simple to verify.

Did he use PGP to post the original code or articles?

Y'know, that's a really good question. Not that I've seen, he hasn't. Though, allegedly, personal e-mails from him would be signed and encrypted.

He/she has to be alive to win the prize. Wouldn't the committee have to have some verification that he/she is alive?

Not that he/she will ever win. This is a ridiculous nomination.

Why not? They gave Obama a Peace Prize just for being elected.

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