On Bitcoin’s Distributed Defense

As a currency, Bitcoin forms a social scenario, that is, the relationship between people. The defense we are talking about is against this social scenario, not a linear protocol.

In the world of Bitcoin, consensus rules define the currency. Changes to these rules are implemented through hard forks and soft forks. In a hard fork, new transactions may be invalid even if they comply with the original rules. In a soft fork, new transactions are valid as long as they comply with the original rules.

For example, the gold standard was decoupled from the Fed’s currencies in 1933 (hard fork), and from time to time these currencies were replaced with new currencies, although the old currencies remained legal (soft fork). A hard fork that is not generally agreed upon by coin holders is theft, which is why the rules that define Bitcoin are called consensus rules.

As for currency, the Federal Reserve System is centralized (there is an authority), while gold is distributed (there is no authority). Gold is a currency defined by the smallest unit, which is impossible to transmit online and is not suitable for modern business. As an information currency, Bitcoin's innovation is that it is immune to the censorship of the authority (no censorship is required). A Bitcoin hard fork is equivalent to changing the smallest unit of measurement of gold.

The social landscape is defined by people’s choices, and people protect themselves from fraud in transactions by choosing to accept or oppose changes to the currency. And only through the widespread application of such self-interested policies can the currency be protected from manipulation by authorities (e.g. hard forks that are not supported by consensus). The advantage of Bitcoin’s censorship resistance is that it is a function that ordinary people can confirm in transactions.

How should we define this decentralization advantage?

In the simulation system, a node represents a person, and an edge represents a valid Bitcoin transaction. The flow of Bitcoin in this scenario is directional, and each edge reflects the flow of Bitcoin and implies the number of transactions.

If a person has never received bitcoin in a transaction and has never confirmed a transaction, then he/she does not contribute to this defense mechanism. If a person delegates his/her confirmation function to another party, then this proxy represents a node. In other words, the "payment processor" or "web wallet service" is just a node in the whole scene, and the clients they represent are not shown.

When customers decide to leave the payment processor and confirm the transaction themselves, they cannot take any defense until they confirm it. The difference is like being fully armed vs. having the ability to be fully armed. The latter is of no use if you are being robbed. Imagine yelling at the robber, "Get out of my house or I'm going to the gun closet!"

At any time, Bitcoin's defense capabilities are related to the number of users and the degree of decentralization of transactions. The strongest system is this: everyone in the world has the same amount of Bitcoin in a certain period of time. The most vulnerable system is this: a payment processing agency (or online wallet service provider) handles all Bitcoin transactions in a certain period of time. The centralized situation is shown in the figure: