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Inthis definitive guide weanalyze the question: 'How does Bitcoin solve the Byzantine Generals Problem? '
Matt Ruby
Apr 25, 2024April 25, 2024
11 min read11 minutes read
Let’s bereal. You don’t live inByzantine (FYI, that’s what they used tocall Istanbul), and you’re not ageneral commanding anarmy. So, why onEarth should you care about something called the Byzantine Generals' Problem?
Toanswer that, weneed tozoom out: Intruth, the Byzantine Generals' Problem isananalogy that demonstrates the challenge ofreaching consensus indistributed systems— inmost cases, that means acomputing network spread across many computers (aka nodes).
But let’s zoom out even further…
The real problem here iswith money— specifically,what happens when centralized authorities control it.
Think ofthe 2008 financial crisis, which cost the global economy trillions ofdollars, and how the public paid the price while large banks received bailouts.
Orconsider how often central banks print money tostimulate aweakeconomy. The result: Money eventually winds updebased and devalued.
Also, acentralized financial system means governments can confiscate your money asthey seefit. Unfortunately for asset holders, impoverished governments often turn todesperatemeasures.
Decentralized money (i.e., apeer-to-peer payment system that does not require atrusted third party) isasolution toall theseissues. But tocreate decentralized money, the Byzantine Generals' Problem must besolved.
Explaining the Byzantine Generals' Problem
The problem represents agame theory query about what constitutes rational decision-makingbehavior. So, even though you may not care about ancient military strategy, the solution tothis computing problem can have ahuge impact onour monetary lives.
The riddle tosolve:Ifthere’s adecentralized network that prevents people from verifying the identity (orreputation) ofother participants, how can anyone know who isactually telling the truth?
Without acentral authority, how can everyone reachagreement?
Before wegofurther: Who isthis piece for? The target audience isBitcoin investors (and potential future investors)— typically, though not exclusively, younger folks (18-25 years old)— who have heard about the Byzantine Generals’ Problem, but aren’t 100% sure what itisorwhy itmatters. They want itexplained clearly and inaway that’s not sleep-inducing. Plus, they want toknow ifBitcoin really solves itandhow. This piece will beespecially resonant for people new toBitcoin, beginner investors, and/or anyone else skeptical about crypto ingeneral and Bitcoin specifically. OK, let’s get back toit…
The Byzantine Generals' Problem uses game theory toclarify the riddle that Bitcoin mustsolve.
Illustration ofthe Byzantine Generals' Problem
Here’s the scenario:
Multiple divisions ofthe Byzantine army are stationed atvarious locations outside acity they want toinvade. Each division isled byadifferentgeneral. They communicate with each other viamessengers.
Ifthe generals attack atthe same time, they’llwin. But ifthe attacks come atdifferent times, they will bedefeated. So, the generals need toagree onajoint invasion plan.
But beware! There are traitors intheirmidst. The generals know these traitors will try tosabotage any attack plan byintercepting messages and inserting falseplans. The generals have noway oftelling ifthese messages have beenchanged.
The generals need toreach anagreement ontheir invasion without the traitors screwing uptheir battleplan. So, how can the generals organize asimultaneousattack?
What’s money got todowithit?
Historical Use ofCurrency:Various items like metals, shells, and beads have been used ascurrency, but each had limitations. Gold, inparticular, has been the most trusted but comes with weight, purity, and portabilitychallenges. For example, while plentiful, shells highlight the impracticality ofusing natural items asmodern currency (read more about the limitations ofusing gold).
Centralization ofMoney:Toovercome these challenges, nation-states have typically taken control ofmonetarysystems. Although this was intended toinspire trust inthe currency’s value and purity, history shows that central authorities oftenviolate this trust.
The Search for Decentralized Money:The ideal solution would beadecentralized, verifiable, counterfeit-resistant, and trustless monetarysystem. Many have tried toestablish asystem that operatesindependently from the government. Still, success was elusive until the emergence ofa*groundbreakingtechnology.
Introduction ofBitcoin:In2008, Bitcoin was introduced asthe first successful implementation ofdecentralized digital currency that solved the Byzantine Generals' Problem. This cryptocurrency ensures the integrity and value ofmoney through acryptographic, trustless system, making itresistant tocounterfeiting and free from central monetary control (discover the mysteries ofBitcoin). Itrepresents apivotal moment inthe evolution ofmoney, offering asolution that addresses fundamental problems with traditional monetary systems (learn how Bitcoin solves these problems).
“The root problem with conventional currency isall the trust that’s required tomake itwork. The central bank must betrusted not todebase the currency, but the history offiat currencies isfull ofbreaches ofthat trust.”
-Satoshi Nakamoto, the creator ofBitcoin
Blockchain tothe rescue
So, how did Bitcoin solve thisriddle? With ablockchain and aconsensus mechanism called "Proof-of-work.”
blockchain— asystem inwhich arecord oftransactions, especially those made inacryptocurrency, ismaintained across computers that are linked inapeer-to-peer network
Bitcoin relies onapublic, distributed ledger tostore ahistory ofall transactions. Remember how the Byzantine generals needed away toagree onthe same truth?
With Bitcoin, that truth istheblockchain. Instead ofgenerals, there are nodes andminers. And instead ofmessages, there isthe ledger and transactions. With the blockchain, every node agrees onwhich transactions occurred (and the order oftransactions). That way, everyone can verify ownership.
The result: adecentralized, functioning, trustless money.
Wikipedia citation #31.
Swan Bitcoin Byzantine General’s Problem Wikipedia Citation
How does itdoit? Via 'Proof-of-work.'
“Proof-of-work isasoftware algorithm used byBitcoin and other blockchains toensure blocks are only regarded asvalid ifthey require acertain amount ofcomputational power toproduce, ”saysblockchain developer Amaury Sechet.
“It’s aconsensus mechanism that allows anonymous entities indecentralized networks totrust one another.”
Under the proof-of-work algorithm, all Bitcoin miners must agree that atransaction isvalid before itisadded tothe blockchain.
Miners validate transactions using the historical information onthe ledger tocheck that the necessary account balances are available.
Ifthey encounter atransaction that appears contradictory tothe existing data, they have the power torejectit.
However, once atransaction has been validated, it’s recorded onthe ledger permanently, meaning that anyone can trust the history oftransactiondata. Since every miner onthe network has acopy ofthe same data, itcan always beverified astrue.
Inorder toadd information (aka blocks) tothe blockchain, anode must publish proof that the block they are adding required considerable work.
Hal Finney onBitcoin nodes:
Preference for Predetermined Consensus:There’s anotable preference for establishing apredetermined process for achieving consensus finality indigital currencies instead ofrelying onacompetitive consensusmodel. This approach has led toinnovations such as“user-activated soft forks” (UASF), highlighting the importance ofindividual nodes inthenetwork.
Inspiration from Finney’s Concepts:Inspired byHal Finney’s ideas, asolution tothe Byzantine Generals' Problem was conceptualized through the idea of'Byzantine soldiers.' This concept addresses the skepticism surrounding the effectiveness ofcompetitive consensus, especially atlarge scales orunder the premise that itmight befundamentallyflawed.
Addressing the Byzantine Generals'Problem:The core challenge involves ensuring reliable communication and trust, even when there isapossibility ofbetrayal. Bitcoin tackles this issue with its proof-of-work mechanism, which introduces acompetitive nature through difficulty adjustments.
Elimination ofInherent Trust:Bitcoin’s system removes the need for inherent trust among participants byrequiring them toprove their commitment through mining efforts before their version ofthe ledger isaccepted. This proof ofwork ensures only the most reliable and verified information ismaintained.
Incentive toPublish Honest Information:The energy-intensive nature ofmining Bitcoin secures the network and provides astrong incentive for miners topublish honest information, asthey receive Bitcoin inreturn for theirefforts. This robust mechanism iswhy theBitcoin network remains secure and has never been successfully attacked.
Example
Once ablock isadded, it’s extremely difficult toremove— and that makes Bitcoin’s pastimmutable.
immutable— inthe context ofablockchain, implies that the data orledger ispermanent and tamper-proof, and its history cannot bemodified orchanged after its creation
The result iseveryone onthe Bitcoin network agrees onall transactions onthe blockchain. Proof-of-work lets each node verify the validity ofblocks using computer hash power.
Ifanode inserts false information, other nodes immediately recognize itasinvalid, which means itwinds upbeingignored. Since every node can verify all information onthe network independently, Bitcoin isatrustless system wherein all members can agree onasingle truth.
This Reddit thread about the Byzantine Generals Problem provides agreat overview.
FAQs
What isthe Byzantine Generals’ Problem inblockchain?
The Byzantine Generals Problem isachallenge incomputer science that portrays the difficulties ofensuring security inadistributednetwork.
Toaddress the Byzantine Generals Problem, honest nodes must achieve consensus even with dishonest nodes inthemix. This implies that amajority ofnodes must set arule framework and agree onits enforcement within thenetwork.
How does Bitcoin tackle the Byzantine Generals' Problem?
Bysolving the Byzantine Generals' Problem, Bitcoin allows atransaction tobeconsolidated into ablock and appended tothe blockchain only after network-wide agreement isachieved.
Did Satoshi achieve Byzantine FaultTolerance?
Bitcoin, created bySatoshi Nakamoto, isthe first time adecentralized currency has successfully solved the Byzantine Generals' Problem. Satoshi does this using the proof-of-work consensusmethod. Inaddition, Bitcoin isthe first decentralized system toachieve BFT (Byzantine Fault Tolerance).
Why has Satoshi Nakamoto remainedanonymous?
Remaining anonymous allowed Nakamoto tostep back from the spotlight and encourage others totake ownership ofthe project’s development anddirection. Nakamoto emphasized the importance ofthe technology itself, rather than his (ortheir) personalidentity.
How did the financial crisis help createBitcoin?
One ofthe responses tothat crisis wasBitcoin. With its decentralized system and peer-to-peer technology, Bitcoin has the potential todismantle abanking system inwhich acentral authority isresponsible for decisions that affect the economic fortunes ofentire countries.
Conclusion
Nolonger doweneed acentral authority tovalidate transactions.Voila, the Byzantine Generals’ Problem issolved!
Kudos toSatoshi Nakamoto, the creator ofBitcoin, for figuring out abrilliant workaround tothisdilemma. Those Byzantine Generals would have loved tohave Nakamoto fighting intheirarmy.
Just beglad hewas fighting for youinstead.
Ifyou found this article about the Byzantine Generals' Problem helpful, check out our article about the Cantillon Effect.
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Matt Ruby isaseasoned content writer helping educate million worldwide about Bitcoin for Swan. Matt work with tech companies tocreate words, videos, and other content that makes them seem human. Hespecializes intaking boring/drab tech topics and making them interesting, educational, funny, and accessible toregular people.
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