Nick Szabo is an American computer scientist and legal scholar well-known for his work in cryptography, digital contracts, cryptocurrencies, and for inventing the concept of smart contracts. ^[1][2]

Education

Nick Szabo graduated from the University of Washington in 1989 with a degree in Computer Science and received a Juris Doctor degree from George Washington University Law School. He holds an honorary professorship at the Universidad Francisco Marroquín. ^[1][3]

Background

In an interview, Nick Szabo disclosed that his father participated in the Hungarian uprising against the Soviet Union in the late 1950s. This upbringing instilled in him a deep understanding of government abuse of power, particularly evident in communist societies. Szabo's insights into the potential for government abuse, particularly in controlling financial systems, influenced his involvement in the emergence of Bitcoin, where his long-standing proposals began gaining mainstream attention. ^[4]

Nick Szabo's significant contributions to Bitcoin and cryptocurrency include his seminal paper on Bit Gold and his pioneering concept of smart contracts, which he first discussed in 1996. Bit Gold is considered the precursor to Bitcoin, refined later by Satoshi Nakamoto in the Bitcoin whitepaper, while smart contracts enable cryptocurrency transactions, forming the foundation of the entire field. ^[4]

Vitalik Buterin, the co-founder of Ethereum, named a unit of Ether after Nick Szabo as a tribute. The unit ‘Szabo’ is part of Ethereum's denomination system and it’s used for micropayments. This naming convention is a nod to Szabo’s contributions to the field of cryptocurrency and smart contracts. ^[9]

At the core of Szabo's philosophy lies the concept of "trust-minimization," which suggests minimizing reliance on trust in interactions with strangers. In a society where interactions with unknown individuals are frequent due to urbanization, trust minimization becomes essential for safeguarding against potential abuses. Szabo simplifies this principle, likening basic security measures like locking doors to trust minimization in its simplest form. ^[4][5]

Bit Gold

Nick Szabo's concept of trust minimization was integral to his vision of creating a secure, decentralized, and trustless payment network known as Bit Gold. Initially proposed in 2005^[5], Bit Gold utilized timestamped blocks, and cryptographic puzzles for rewards, and relied on proof-of-work, sharing notable similarities with the Bitcoin network. The Bit Gold proposal outlined a seven-step process:
1. Generation of a public challenge string.
2. Utilization of a benchmark function by a computer node to create a proof-of-work string from the challenge string.
3. Timestamping of the proof-of-work by decentralized services to ensure decentralization.
4. Addition of both strings (proof-of-work and challenge string) to a distributed property title registry for Bit Gold.
5. The most recent Bit Gold string generates challenge bits for the next string.
6. Verification of the Bit Gold string in the title registry by another computer node.
7. Verification by the second node of the remaining process components: challenge bits, timestamp, and proof-of-work string.

Although Bit Gold was not finalized, its proposals laid the groundwork for the core architecture of Bitcoin, which Satoshi Nakamoto later refined. It signaled a potential solution to the flaws in the monetary system, notably inflation, as Szabo acknowledged:

"In summary, all money mankind has ever used has been insecure in one way or another. This insecurity has been manifested in a wide variety of ways, from counterfeiting to theft, but the most pernicious of which has probably been inflation. Bit gold may provide us with a money of unprecedented security from these dangers." - Nick Szabo concluded in his proposal^[5]

Smart Contracts

Nick Szabo's contributions extend beyond Bit Gold, setting the stage for the development of Bitcoin, crypto, and blockchain concepts. His pioneering work on smart contracts introduced the idea of self-executing contracts encoded with predefined criteria. These contracts automatically fulfill obligations when conditions are met, operating on blockchain networks for immutability and traceability. ^[6]

Like Bit Gold, smart contracts facilitate trustless transactions between anonymous parties in a decentralized manner, eliminating the need for enforcement mechanisms or centralized authority. ^[4]

Szabo initially proposed smart contracts in 1994, predating his discussions on Bit Gold. These early concepts, coupled with his profound understanding of technology, economics, and monetary systems, have led many to speculate about his involvement in the creation of Bitcoin and the broader crypto ecosystem. Despite Szabo's denial, investigations into the timeline of his writings raise questions about potential efforts to conceal his role in Bitcoin's inception. ^[4][6]

Views on Ethereum

Initially, Szabo was an Ethereum advocate and was on good terms with the community. In November 2015, he was invited to the Ethereum DEVCON1 held in London and delivered a keynote speech titled “Smart Contracts and Ethereum”, showcasing his optimism about the integration between the two platforms. ^[10]

During this period, Szabo expressed his admiration for Ethereum across various public platforms, from Twitter (X) to podcasts. ^[10]

For instance, on August 2nd, 2014, he tweeted: "Ethereum has the best ideas in blockchain tech." ^[11] In a podcast in September 2015, he compared Bitcoin to a pocket calculator and Ethereum to a general-purpose computer. Additionally, on February 14th, 2016, he replied to a Twitter thread stating: "Most breakthroughs start off as seemingly unrealistic and definitely unrealized. And often as Bitcoin & Ethereum as white papers."^[10][12]

However, in 2017, Szabo’s views on Ethereum evolved. He criticized Ethereum for becoming too centralized and straying from the core concept of trust minimization. For example, on June 5, 2017, he retweeted Vitalik with a comment: "Ethereum is headed for either a huge bureaucracy or disaster".^[13] On August 19, 2018, he replied "Computational scalability and a governance model that violates immutability are both huge problems for Ethereum". On October 21, 2019, when asked about his shift in attitude on Ethereum on a podcast, he responded: "The attitudes of leadership changed. It's in their self-interests now to preach a pro-centralization technology". ^[10][14]

In September 2019, Szabo replied to a Twitter comment asking him how his Ethereum venture was going saying:

"Abandoned long ago, in no small part due to Ethereum leadership's poor understanding of governance and trust minimization."^[15]

When asked whether ETH is a “shitcoin”, he replied, “Sadly, yes, Ethereum, which once sounded so promising, has become a shitcoin as a result of devolving into a centralized cult.”^[16][17]

Satoshi Nakamoto Speculation

Nick Szabo, known for his involvement in pre-Bitcoin technologies, has been suggested as a potential identity behind Satoshi Nakamoto, the creator of Bitcoin. Despite speculation and circumstantial evidence presented by researchers like Dominic Frisby, no conclusive proof exists linking Szabo to Nakamoto. ^[3][7]

In response to claims, Szabo has consistently denied being Nakamoto, expressing familiarity with such allegations. Nathaniel Popper of The New York Times highlighted Szabo as a convincing candidate based on available evidence. Szabo's prior writings, including a blog comment from 2008 discussing the concept of a hypothetical currency, have contributed to suspicions regarding his involvement in Bitcoin's creation. ^[4][7][8]

Elon Musk, founder of SpaceX and Tesla also speculated Nick Szabo as Satoshi Nakamoto on Lex Fridman's podcast saying:

"Obviously I don't know who created bitcoin ... it seems as though Nick Szabo is probably more than anyone else responsible for the evolution of those ideas. He claims not to be Nakamoto ... but he seems to be the one more responsible for the ideas behind it than anyone else." - Musk said^[18]

Cypherpunks

Nick Szabo is a key figure in the Cypherpunk movement, despite joining it later than some others. The Cypherpunks were the first non-government scholars to explore cryptography and its potential applications and implications for the general public. ^[19][20]

Szabo developed integral examples of the Cypherpunk philosophy. He was one of the Cypherpunks who delved deeper into the quest for a digital form of cash. His quest culminated in Bit Gold, however, Bit Gold wasn’t an optimal solution. ^[20]

One of the Cypherpunk movement founders, David Chaum, was also the founder of an early fiat alternative called DigiCash. Szabo served as a consultant at DigiCash for half a year. The company later went bankrupt and Szabo noted the need for decentralization early on. ^[19]

Szabo’s work, along with that of other Cypherpunks, contributed significantly to the development of digital currencies and privacy technologies. Their research and development efforts aimed to protect people’s privacy as communication and money transfer moved from the physical to the digital world. ^[19][20]