The developer and writer known by the pseudonym Gigi, recently exposed in a video a series of reasons that defend the importance of mining with proof of work (PoW) in the entire Bitcoin ecosystem. The video was posted by Strike company founder and fellow developer Jack Mallers on his YouTube account.
From the outset, Gigi’s presentation exalts the relevance of PoW in Bitcoin by quoting himself in a tweet thread from May 2021, where he states that “Failure to understand proof of work is to fail to understand Bitcoin.”
Next, the developer defines Bitcoin as apolitical money that arises as a result of its four facets: money, time, energy and information. According to Gigi, removing any of these features would be turning Bitcoin into a “shitcoin.”
Bitcoin, proof of work and money
Since the publication of the Bitcoin White Paper by Satoshi Nakamoto (its creator), it was already defined as “an electronic cash system…” Gigi reinforces this concept by comparing it to fiat money which, due to the centralization of its issuance and the registration of their transactions, more than a tool for the freedom of the people, it becomes a control tool for governments and central banks.
Bitcoin, unlike fiat money, is about a money system that keeps its own unalterable record in a decentralized ledger. It should be noted that anyone who has the necessary hardware to do so can manage a Bitcoin node. There are no extra requirements to meet and no authorization from anyone is required; unless it is a mining node, since in certain countries the authorities require permits to be able to mine cryptocurrencies.
Mining, through proof of work, verifies the validity of transactions in the Bitcoin network and adds them in blocks of data to the blockchain. Under this concept, it can be said that Bitcoin is information.
Thinking of Bitcoin as information highlights two of its great advantages over fiat money. One is that information crosses the barriers that physical money may have. The other is that the digital registry of transactions is not in the hands of an entity or a board of directors, but of a protocol with which the majority of the participants in the network agree.
The Bitcoin Timechain
Speaking of the Bitcoin blockchain, Gigi thinks that another appropriate term for it was “time chain«. That is, instead of a chain of blocks, a chain of time. This concept is not far from reality if it is taken into account that each block of data that is added has a chronological order verified by each node of the network. Therefore, saying that Bitcoin is time makes a lot of sense. In fact, time is so relevant in Bitcoin that three of the eight references Satoshi Nakamoto mentions in his White Paper relate to this topic in some way.
The idea of valuing Bitcoin as time is reinforced by the fact that it is virtually impossible to turn it back. Jack Mallers comment in this regard that “for the first time there is an accounting book in which the past is unchangeable and the future is uncertain”. These two features of the Bitcoin blockchain owe their efficient operation to proof of work.
On the one hand, PoW makes modifying a block that is already on the chain almost impossible and very expensive for the attacker. On the other hand, it is impossible for a miner to know the result in advance that will allow him to add a subsequent block. This result is directly tied to the previous block, so blocks cannot be mined in advance.
Bitcoin as energy and information
Other definition of Gigi for Bitcoin is energy. Certainly, the energy in the proof of work comes to be a kind of shield that protects Bitcoin. This is a crucial point that differentiates PoW from PoS, the proof of stake. A network whose consensus mechanism is PoS puts its security in the hands of the investment, while PoW, beyond the investment in the native asset of the network, demands energy consumption. That’s why it’s called proof of work, because it actually works to secure the network.
The last term Gigi defines Bitcoin with in her exposition is information. From one perspective, everything that is stored on the blockchain is just that, information. Only, unlike fiat money, the preservation of this information is decentralized. Both its progress and its protection is in the hands of a global network of nodes that anyone is free to join.
Information also has a very powerful feature, which is that it can be shared without getting lost and can be teleported from one place to another. Both of these reasons put Bitcoin ahead of fiat money. Added to this is its transparency, since it allows anyone to verify first-hand each of the transactions carried out on the networkunder the pseudonymity that it provides, since it does not show names or other data other than the addresses where each bitcoin comes from and where it goes.
Mallers, inspired by Gigi’s explanation, mentions three statements about proof-of-work that are worth keeping in mind: “Because of proof-of-work is that Bitcoin is a closed-loop system that only depends on itself,” “because of the proof of work is that Bitcoin has no commitments or references to the real world”, “for the proof of work is that Bitcoin is property and everyone has the right of property”.