The story behind how Wei Dai's b-money was discovered by Satoshi tells us a couple things about Bitcoin and Satoshi.

See the full Medium version of this article here: https://medium.com/@Fiach_dubh/the-bitcoin-whitepaper-footnotes-part-2-b-money-by-wei-dai-b4d4fe2bd55b

Apparently, Satoshi's first known point of contact with anyone was Adam Back, through a private email on August 20th 2008.

For Part One of This Series on the Whitepaper Footnotes: #1265795

Adam replied back the next day and referred Satoshi to the b-money paper for more background on the ideas he was working on.

Satoshi responded by saying he had not been aware of b-money before this referral by Adam. Eventually, Satoshi would include b-money in his already written draft of the Whitepaper (which did not yet have the Bitcoin name, but only "E-cash").

A little more then two months latter, Satoshi released the Whitepaper on the cryptography mailing list.

Given this context, it appears that b-money wasn't a primary source that Satoshi relied upon to create Bitcoin. Rather, it was an additional after thought when much of the Whitepaper and Bitcoin code was already written. It's inclusion was likely a respectful nod to Adam Back and Wei Dai, who Satoshi also reached out to in private emails soon after this email exchange with Adam.

Wei Dai also made a comment 15 years ago, before these Adam Back emails were public, that corroborate the non-primary source of b-money idea. (Interesting to note that Dai had some kind of access to this private Adam Back email conversation with Satoshi before it was public?)

Despite the synchronicities contained within b-money that make it appear to be a pre-cursor to Bitcoin proper, it's influence on Satoshi was likely after the fact of Satoshi's already nearly complete prototype of Bitcoin and draft of the Whitepaper.

Though this b-money contribution factor to Bitcoin overall is difficult to estimate, since the release of the partial 50% complete Bitcoin code only happened on the cryptography mailing list in November of 2008 with a select few cypherpunks. With that said, there was two months between this b-money discovery by Satoshi and his release of the final Whitepaper, with the added factor of the full 100% finished code being released 4 months latter on January 3rd 2009. That time lag could have been enough to make b-money have some kind of direct impact on the final version of Bitcoin.

However it's evident by the Adam Back email contents that Satoshi put most of the critical Bitcoin pieces together already by this time, without b-money.

With that said, b-money is still an important sign post in E-cash history, and may have been a factor in Satoshi's final choice in choosing the name "Bitcoin" for the project instead of "Electronic Cash", as suggested by gwern.net

Dai's b-money was deeply influenced by Tim May's seminal work, The Crypto Anarchist Manifesto. May envisioned a world where cryptography replaces coercion, making governments and violence obsolete.

"Unlike the communities traditionally associated with the word anarchy," Dai wrote, "in a crypto anarchy, the government is not temporarily destroyed, but permanently forbidden and permanently unnecessary."

In such a world, participants cannot be linked to their real identities or locations, rendering violence and state enforcement impossible. What makes this vision compelling is that Dai wasn't just dreaming - he described a technical framework for how this could actually work.

Dai's proposal outlined two protocols for enabling untraceable, pseudonymous cooperation among participants through a shared digital currency and self-enforcing smart contracts.

Anyone could create b-money by solving computational problems - the digital equivalent of Proof of Work mining. The reward for solving these problems was tied to the computing effort required, expressed in a "standard basket of commodities." This is strikingly similar to Bitcoin's proof-of-work mechanism, which also ties money creation to computational effort. However, unlike Bitcoin's difficulty adjustment mechanism tied to a 2 week moving average of 10 minute block times, b-money's issuance schedule for new currency was to be based on demand for new b-money, that issuers would bid for. Specifics on these details was lacking, so this was a bit hand wavy by Dai.

Participants would use public-key pseudonyms to send funds. For example, Alice could broadcast a message: "I give X units of money to Bob," signed with her digital key. If Alice's balance allowed it, everyone would update their records accordingly - creating a distributed consensus on ownership.

 • Contracts would specify obligations, penalties, and an arbitrator.  • Participants digitally signed and broadcast the contract.  • If a dispute arose, reparations would be automatically calculated and enforced through the network. This in theory sounds somewhat similar in implied concept to double spend protection. Though it's interesting how Satoshi enshrined this using proof of work race conditions, while Wei Dai seems to be waving a wand here on the specifics, relying mostly on reputation systems, similarly found in PGP.

Each participant (or, in the second version, a set of trusted "servers") maintained a database of all balances and transactions. Servers (like Bitcoin nodes) had to stake collateral and periodically publish proofs of integrity to prevent fraud. In theory, Dai's system ensured that even if servers colluded, they could not inflate the money supply without detection.

For this above first protocol of b-money, Dai claimed that it "is impractical, because it makes heavy use of a synchronous and unjammable anonymous broadcast channel." In 1998, when b-money was written, this was probably an accurate diagnosis given the slower nature of the internet at that time, but just 10 years latter, the internet conditions had improved dramatically to make this first, very Bitcoin like protocol, viable. Wei Dai continued to outline a second b-money protocol in view of his assumption that the internet was not robust enough to accommodate the first. In addition, he also outlined another Alternative Money Creation mechanism.

Following b-money's publication in November of 1998, it sparked numerous discussions among cypherpunks. Responses came from figures such as Adam Back (creator of Hashcash, another Bitcoin precursor), Tim May, and even the owner of X.com - the domain name now owned by Elon Musk. One anonymous reply defended Dai's ideas passionately, describing b-money in terms of digital gold - years before Bitcoin would be called the same.

Side note: Nick Szabo's Bit-gold and Wei Dai's b-money are very closely related, since both Dai and Szabo discussed these concepts together on a private mailing list in 1998. (If anyone has an archive of this private mailing list I'd appreciate a copy for historical purposes! please reach out.)

Szabo would latter publicly release his Bit-gold blog in 2005, echoing Dai. Both b-money, Bit-gold and Crypto Anarchy formed a philosophical lineage that leads directly to Bitcoin. The ideas of decentralization, pseudanonymity, and cryptographic enforcement trace back to this small but visionary circle of early internet thinkers.

Today marks November 27, 1998 - the 26th anniversary of Wei Dai's b-money. Dai made this mark on the world a day after Thanksgiving. While b-money never materialized as a working implementation, it remains a blueprint for decentralized money and a bridge between theory and Bitcoin's reality, that we should all be eternally grateful for.

"The protocol can probably be made more efficient and secure," Dai wrote, "but I hope this is a step toward making crypto anarchy a practical as well as theoretical possibility."

Thank You Wei Dai, and Happy Anniversary,

₿-MONEY