Phil Champagne - Compiler of the Book of Satoshi

Phil ChampagnePhil Champagne is the compiler of the Book of Satoshi.


Interview with Phil Champagne on Book of Satoshi Review

Trace Mayer:  Welcome back to the Bitcoin Knowledge Podcast.  We have with us Phil Champagne.  He is the compiler of the Book of Satoshi.  Welcome to the podcast, Phil.

Phil Champagne:  Well, thank you, Trace.

Trace Mayer:  How did you get into bitcoin and like what is this Book of Satoshi?

Genesis of Book of Satoshi

Phil Champagne:  So how did I came up with that?  Well, just like pretty much a lot of people the first time I've heard about it and it was my conversation over a phone call with my cousin.  He was telling me about it where in the first ten seconds after he's talking I said what.  I was dismissing this thing.  It was like a community paper money would be equivalent, but just for the Internet you know.

But then I started reading a little bit more about it wow, you know, I mean, it really got interested and intrigued and an interest grew and grew and decided to learn it from well, the first person to teach about it which was Satoshi himself.

So I wanted to read his white paper and even though I have the background and software engineering it seemed like a little bit daunting at first.  Gosh, okay, I'm going to read this but you know, actually it was readable, very well written so it was nice.

But also I want to get a little bit more information from him and I was curious.  To advance that and so I decided to go through all the posting that he's done and I realized actually it was not that easy to do. The way they are crafted and you end up somewhere and then you have to get the context of the conversation where and in what context he's answering.  Sometimes it's feasible, but sometimes not as much.

And that gave me the idea.  I guess this is so much a milestone that all of that is getting me really critical and even more, I mean, the idea for the book might not be as much as important if he was still around and we just like Linus Torvalds. For example Linus Torvalds was only in the first two years of Linux and then went off.  The historical context of the teaching of this guy, talking about it will have been a little bit more important than if he actually just briefly stayed there.

The intrigue is a little ahead to the fact that Satoshi is gone after two years.  Well, I want to and I mean all the information I'm getting about bitcoin is always from other people than the creator.  So, the only way to get it is really through the only posts that he's done.

Trace Mayer:  Yeah.  Go to the source material because he did make a lot of posts on the

Phil Champagne:  Which are supporting.

Trace Mayer:  But there it's kind of hard to find them, right?  I mean you got to go there.

Phil Champagne:  Yeah.

Trace Mayer:  So you compiled them all.  That's in this Book of Satoshi, available on and lots of other places.  Two of the main topics in here, you know, is what I think we will discuss.  Page sixty-nine we have a response on 13th November, 2008 and it looks like Satoshi responded the proof of work chain is a solution to the Byzantine general's problem period.  Is that a big deal?  Does that matter at all?

Phil Champagne:  Well.

Trace Mayer:  I mean, you're a software engineer.

Phil Champagne:  Yeah.

Trace Mayer:  Like does that matter?

Phil Champagne:  Well, actually I have to admit.  I didn't know about this problem at all. I mean, I was not aware of it.  Okay, I have actually -- my degrees in electrical engineering.  So I've actually learned software engineering later on and in the work, my first early work.  But had never came across those things, theoretical concept like that.  But I was fascinated by this and yes, it is block chain in general solves or is likely to be solving so many problems that are somewhat derived to this claim that he's making.

Trace Mayer:  And this is the concept of distributed consensus, right?

Phil Champagne:  Yes.  And just for the listeners, the concept the general concept of Byzantine general is how two attacking generals can coordinate an attack for a given time of a city and if only one general attack their force will be distorted so they need to synchronize the attack.  Now by sending a messenger which could be intercepted, killed, whatever so therefore the other general --.

Trace Mayer:  Falsify.

Phil Champagne:  Yeah.  And so the other general will not be able to know about their time of the attacks so they need a confirmation but you a confirmation and a confirmation of the confirmation of the confirmation.  And so it's actually interesting to spin off your heads like actually you really need a confirmation constantly of which -- the block chain itself indeed will be in a mechanism in which it would be to solve it.

Trace Mayer:  This is a problem that has vexed computer science particularly computer networking for decades.

Phil Champagne:  Yeah.

Trace Mayer:  I mean, this is a -- we need to have this canonical version of reality you could say and when we're talking about information theory the block chain really creates a new fact in terms of information theory.  A fact that can't be edited can't be destroyed or altered, like that fact exists now in that block chain and everybody agrees that fact exists.  I mean, that's -- and it doesn't matter like what any particular individual might think about the fact.  The fact stands on its own and it's mathematically provable, right?

Phil Champagne:  Yeah.

Trace Mayer:  I mean, what do we mean by that?  Mathematically provable and we're talking about this applied financial cryptography.

Phil Champagne:  So what I really had to what you're saying is before any kind of problem like it was always going back to a centralized point like trust for SSL securities and those certificates.  The only thing that has been considered before is the trusted source.  You go there and then they'll be taking care of things.  With the voting you have to trust the authorities which you're voting for and explains why things were.

And the same thing for everything else would need some forum centralize.  Now suddenly you can decentralize and it'll be an information that is publicly available.  Just like you can look at the Mt. Everest and everybody will agree on its shape by just looking it.  It's a public information that is accessible by anyone with a pair of eyes.

Trace Mayer:  Yeah.  I mean, when somebody asserts that the skyscraper's X number of feet tall.  I mean, you can get out the ruler and you can measure it.  It either is or it isn't.

Phil Champagne:  Yes, that's right.  It is very similar.

Trace Mayer:  Yeah.  I mean, we got facts.

Phil Champagne:  Block chain is the same thing.  It's all been public information accessible to anyone.

Trace Mayer:  And this public information, at its very smallest unit is just zeros and ones, right?  This leads us to another just fascinating discussion and this is on page two eighty-one, a post by Satoshi on August 27th, 2010.

As a thought experiment, imagine there was a base metal as scarce as gold, but with the following properties.  One, boring grain color.  Two, not a good conductor of electricity.  Three, not particularly strong, but not ductile or easily malleable either and not useful for any practical or ornamental purpose.  But it has one special magical property.  It can be transported over a communications channel.

Okay.  So, without getting too far into that.  What does he mean by that?  It can be transported over a communications channel.  Like what is a communication channel to begin with?  And what's that mean that we can transport this fictional commodity over that communication channel?

Phil Champagne:  Yeah.  So, what I like so much about bitcoin is finally we have something that can complement not replace gold and silver, but complement.  Because we always need another source of -- actually derivatives of gold and silver whenever we want to communicate them over a communication channel be it the internet or wire transfer anything we're a long distance requiring it an electronic transfer.

Trace Mayer:  And I mean way back in the day like we were doing it over the rover tracks.  You know, 150 years ago.  Like that tap tap tap tap ta tap tap.

Phil Champagne:  Yeah.

Trace Mayer:  I mean that's what it meant to send a wire, right?

Phil Champagne:  Yeah.

Trace Mayer:  Like in a telegram.  So, I mean, these are communication channels.

Phil Champagne:  And requires always a derivative and a trusted party and all that a bank or something like that.

Trace Mayer:  And what you mean by derivatives is?  Like if gold is the money then the gold certificate would be the money substitute, right?

Phil Champagne:  That's correct.

Trace Mayer:  So, that's the derivative you're talking about.

Phil Champagne:  Yes.

Trace Mayer:  What are examples of communication channels?

Phil Champagne:  Well, in our today's world.  Maybe in the future Star Trek will have sub-space channel, but for now we have the Internet obviously and anything where we have the electronic forms so.

Trace Mayer:  I guess to answer my own question I mean we've got copper wires and we've got electrical wires and we've got physical communication channels also.  I mean, there's whole areas of OPSEC and COMSEC and INSAC.  We got different forms of emissions that can be used as communication channels.  I mean all of these are different.

Well, I guess an INSEC, for example, there is a potential attack factor on a cold wallet.  You could have the cell phone in your pocket that's using the motion sensor and it could actually derive like what keys you're typing into the board.  So it will be wise just as part of your OPSEC to protect your INSEC, your operational security to protect your emanation security which is a subsection of that to just not have your cell phone in your pocket when you're accessing your cold wallet.

Because there's another potential recording of data or information that happens there and so when we're looking at these different communication channels and different ways that we can transmit information because at its core bitcoin is just information.  Just these ones and zeros and so anything that we can transfer ones and zeros over could potentially become this communication channel that he's talking about.

Phil Champagne:  Yes.

Trace Mayer:  Right.

Phil Champagne:  Yeah.

Uniqueness and Importance of Bitcoin

Trace Mayer:  Kind of to finish up his post he says, "If it somehow acquired any value at all for whatever reason than anyone wanting to transfer wealth over a long distance could buy some, transmit it and have the recipient sell it.  Maybe it could get an initial value circularly as you suggested by people foreseeing its potential usefulness for exchange. I would definitely want someone, maybe collectors, any random reason could spark it.  I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce and object with the automatic bootstrap of intrinsic value will surely went out over those without intrinsic value.  But if there were nothing in the world with intrinsic value they could be used as money only scarce but no intrinsic value.  I think people would still take up something". You know we're talking about.  When bitcoin crawled out of this primordial ooze and began being used as a form of currency in the very earliest of the days.  Because we use different things for currency now, but there are like Hayek and Mises, they all came up with this regression theorem that trace back why we use our items for money and they all had a previous use.

You know, we traced them back to gold or salt or cows or whatever.  But with bitcoin it didn't really have this prior use.  It's almost as if the information age has inverted these particular theorems, you know.  We now have stuff that's being created as money and then we figure out applications for.  As opposed to the things that have applications and then we decided to use it as money.  This is pretty exciting, isn't it?

Phil Champagne:  Yes, it's very -- Yeah, I went through the same kind of thoughts, you know, series of thoughts.  When I heard those things what Mises and all that. They're the framework on the history of how money was come up to being and you look at how things are with bitcoin.  But it's really serving major issues like how can we have something that is not where we -- there's a requirement for a third party trust or a government money.  There was a real need for this, a void until now.

Trace Mayer:  Yeah.  And I had actually published a book in March of 2009.  So, about two months after bitcoin came out called The Great Credit Contraction.  Explain talking about this massive problem that we've got in the financial system and how it was actually very predictable.  Mainly because what has happened is we have corrupted the atomic unit of our entire financial structure, you know, and if our atomic unit is no longer stable or even definable then how in the world can we build anything with that unit.

For example, if our unit for measuring length if one inch equalled one foot which equalled a yard which equalled undefinable would it be any surprise that when we're cutting boards or pouring cement or whatever to build skyscrapers that there just going to lopsided and fall over and crash and hurt people.  And yet under US Federal Law, Section 31 USC 51 of 15118 we define under federal law that one dollar is one ounce of silver.  The fifty dollars is one ounce of gold.  That's unintelligible because last time I checked one ounce of gold did not equal fifty ounces of silver on the periodic table.  And yet we have defined that by law.  You know it's like saying that one foot equals fifty feet.  I mean it's just unintelligible.

And then we further complicate it because we've got nickels and pennies and quarters and dimes and all these things that also equal dollars but they've got zinc and copper and everything in them.  And then we have also got Federal Reserve Notes which are undefinable.  Dr. Edwin Vieira, he has a Ph.D in chemistry, also a law degree, practices before the U.S. Supreme Court all these degrees are from Harvard.  He has four Harvard degrees and he's author of Pieces of Eight.  He has actually raised the issue what is a dollar and his answer is under Federal law it's unintelligible.  There is no answer to it.

Phil Champagne:  Yeah.  Self-recursive.

Trace Mayer:  Yes.  Self-recursive, undefinable.  We've got Federal Reserve notes or dollars but they're not defined as anything.  We got things that are nobody's liability like gold and silver that are defined as dollars and we’ve got things that are the central bank's liability to define this dollars.  And all of this introduces chaos into the monetary definitions.

Phil Champagne:  Yeah, the only thing that actually gives some forms of stability in the dollar with this old system and it's completely screwed up is the fact that the mass believes that it still has the strong foundation even though it does not.  And their price, they are getting paid in dollars.  They have to pay taxes in dollars, everything is so much.  If suddenly you had just had one competing currency to the dollar.  Just, you know, and okay.  Now, suddenly you're allowed to also use gold and silver it would not take long before the light bulbs light up on all those people.

Trace Mayer:  Well, that's really what Satoshi's is getting at with bitcoin, isn't it?   In the Genesis blog.

Phil Champagne:  That's the thing.

Trace Mayer:  I mean, he writes about it in Genesis blog.  This issue of counterparty risk.

Phil Champagne:  We got the issue of Cyprus bailing.  Now I'm thinking it's like the next time we have a big one, even bigger bailing at is.  People would really realize that well, okay, no matter how much bitching has been done or even someone was bitching about bitcoin you realize that well, when the banks are closed and the ATM is just restricting four hundred dollars per day suddenly bitcoin looks very attractive.

Trace Mayer:  Well, and part of what makes bitcoins so attractive is you know who actually has it, right?

Phil Champagne:  Yeah.

Trace Mayer:  It's allocated to a particular address in the bitcoin network that is agreed upon by everybody and there's this distributed consensus with Byzantine general's problem that everybody agrees that those bitcoins are in that address.  We don't know what's on whose balance sheet and we don't know who owns what in our current system.  We don't know what collaterals been pledged, and hypothecated and re-hypothecated.  I mean, we have these customer segregated funds that get pledged and then loaned and Jon Corzine and MF Global and Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, Bear Stearns, like the list goes on and on and on and we're not talking little in that.

Phil Champagne:  Because everything is closed up.

Trace Mayer:  Yeah.  Everything's closed up.  There's not a centralized ledger that everybody agrees that that's who owns what.

Phil Champagne:  And at best, that books will be audited by a third party that you know that you have to trust that third party and that's the best -- that's when they actually they are audited.  But I'm curious to know, I've actually wrote an article on Bitcoin Magazine.  Not sure if you read it.  Where I was talking about a way to -- so bitcoin right now is what eight or nine transaction per seconds or what's the max or maybe it can go all the way to 50 transactions a second --.

Trace Mayer:  Yeah.  But like you've talked about bitcoin's extensible.  We can keep adding on and building out more usefulness to it.

Phil Champagne:  Yes, we can -- right now with the network and how things you know, they see a difficulty if we go with that credit card level kind of a thing.

Trace Mayer:  Right, of course.

Phil Champagne:  So, okay, fine.  But the article I was writing -- that I wrote made the point that if we actually used a Coinbase or other things and actually they were using a separate block chain where they would be taken care of Coinbase and other Bitstamp or whatever takes third party then at least they'll have a public ledger that is there even though it's not decentralized.

The beauty of it is that every night that will exchange the balance just like banks were doing this before with gold.  And then you will be able to see exactly, okay, I have -- this is a bitcoin I am supposed to have and they have that amount of bitcoin total and things like that.  So there will be forced because at least the block chain will be public ledger to at least verify there's no fractional reserve banking.

Trace Mayer:  Yeah.  Or you can at least verify who owns what and know with absolute certainty that those bitcoins are in that address.  Like I don't necessarily think it's fractional reserve banking that's the problem or even fiat currency.  The problem gets much more to the heart of our property rights as we define them.  And we've defined property rights mainly through legal code.

But now with bitcoin we're able to lay down and define property rights with software code, with mathematical precision and then we all have this distributed consensus that is the property right.  That's how it's currently allocated and I think that that's a huge, huge innovation and potential application that we're able to make with this block chain technology, in addition to the thousands of other application that this can be used for.

Phil Champagne:  Yeah.  I understand.  Considering that you've got a background in law.  I'm sure that you see even more the prefund changes of that.

Trace Mayer:  I mean, any time we needed a canonical record of something whether it's the law, whether it's titles to cars or houses or boats or airplanes or royalties or copyrights or patents, everything.

Phil Champagne:  It will be quite more secure this way.

Trace Mayer:  Well, of course it's more secure.  The proof of work that we talked about, you know, with this Byzantine general's proof of work innovation that build on Adam Back's work with hash cash.  It is a whole new way of defining property rights.   Phil Champagne:  One of the typical issues like okay normally with property rights for house or land it will be at the courthouse or something --.

Trace Mayer:  Why trust the courthouse's ledger?

Phil Champagne:  And then when there's a war in a given city or town and whatever it is gets affected, it burns down, oops the record.  Now, well, we don't know actually who owned and what's the record for that plot of land and everything gets really chaotic after, you know, you've seen it in Portugal and whatever.  Now with the block chain, no matter what kind of thing happens you still have that secured.

Trace Mayer:  Well, and it doesn't even have to be a war.  We had the New York Attorney General coming in and we asked him like what are your big main pain points?  And he was like we get two thousand calls a day with people who can't find the deeds to their houses.

Phil Champagne:  You're kidding me.

Trace Mayer:  No, I'm not kidding you.  He's like it's an absolute nightmare.  And we saw the problem during the financial crisis with MERS and --

Phil Champagne:  Yeah, yeah.

Trace Mayer:  I mean, wouldn't it be nice to know exactly who owns it.  Be able to publicly look it up and any encumbrances on it.  And not just with houses but with securities, with all the central counterparty clearing that we're able to get rid of, you know, no DTCC which got flooded during Hurricane Sandy.

Phil Champagne:  Yeah.

Trace Mayer:  We know exactly who had owned and have encumbered any of these assets.  So this book hopefully people can understand what Satoshi's talking about and it's not just dolphin speak to them.  Because it's really, really complex.  Even though on its surface and I've read the whole thing even on the surface, you know, you think you understand it, but it is just the tip of the iceberg in terms of the applications of this technology.

Phil Champagne:  Yeah.

Trace Mayer:  Well, thanks so much.  We've had Phil Champagne, compiler of the collected writings of bitcoin creator, Satoshi Nakamoto.  It's the Book of Satoshi, available at and plenty of other places.  Thanks for being with us, Phil.

Phil Champagne:  Thank you very much, Trace.

Written by Phil Champagne on February 23, 2015.