b-money, Wei Dai's plan

In November 1998, Wei Dai, a young cryptographer who graduated from the University of Washington and the author of the Crypto++ library, posts on the cypherpunks list a short text titled "b-money" (still online at weidai.com/bmoney.txt). The first sentence sets the tone: he is fascinated by Tim May's crypto-anarchy, a community where violence is impossible because the participants are identified only by cryptographic pseudonyms.

The protocol describes two variants. In the first, each participant maintains their own copy of a database indicating how much money belongs to each pseudonym. Money is created by solving computational problems whose cost is verifiable, and transactions are broadcast to everyone, signed by their issuers. In the second variant, more realistic according to Dai, only a subset of servers keeps the ledger, posting a security deposit that gives them an incentive to stay honest.

Anyone who has read the Bitcoin whitepaper immediately recognizes the structure: a replicated ledger, transactions broadcast and signed, monetary creation through proof of computation, pseudonymity. The major difference is that b-money does not fully solve consensus, how all nodes agree on the correct version of the ledger when they diverge. That is precisely the gap Bitcoin will fill with its chain of proofs of work.

b-money is reference number 1 of the whitepaper. A notable forensic detail: Satoshi writes to Wei Dai in August 2008 (an exchange since published by Dai), telling him he was directed to him by Adam Back, and asks him for the exact publication date of b-money in order to cite it correctly. Wei Dai has always denied being Satoshi. Full text, translation and evolving versions.