Why Blockchain’s Operators Have Failed Satoshi

Contrary to his original intentions, cryptocurrencies and DeFi platforms are now more vulnerable to privacy breaches and hacking than traditional banking.

In his original bitcoin manifesto, creator Satoshi Nakamoto talked specifically about how the “traditional banking model” maintained privacy by “limiting access to information to the parties involved and the trusted third party”.

Here, the weak link is the trusted third party, which is usually the financial institutions that control the bank accounts and electronic systems we use. These institutions could be pressured by law to turn over information or simply hacked by malicious actors.

In contrast, using a distributed ledger technology called blockchain, Satoshi designed the bitcoin system to use a network of volunteer computers across the Internet (called nodes) to keep records and process transactions. Counterparties can only be identified by encrypted key pairs which are regenerated each time a transaction occurs. This prevents transactions from being consistently traced and “linked to a common owner”.