Part 4/17:
Lane points out that Bitcoin's breakthrough was not inventing proof of work but combining existing technologies—Merkle trees, peer-to-peer networks, and proof of work—to create a system that:
Is permissionless
Scales beyond prior protocols
Self-heals capacity, recovering from forks or network partitions automatically
He emphasizes that Nakamoto consensus—the core to Bitcoin—is an elegant and simple solution that aligns game theory incentives—miners who "burn" their electricity costs are implicitly punished if they cheat, as invalid blocks are rejected, and their investment is wasted.
How Proof of Work Solves Byzantine Challenges
Lane explains the process:
- Miners compete to find a valid nonce that meets difficulty—proof of work.