Social Network Principle

In the terminology of Paul Baran's 1964 paper on distributed networks the importance of topology in network design is in the ability of communications to withstand the loss of a certain number of nodes. A centralized (star) network will fail with the loss of one node. A distributed (mesh) network is more resilient. A hybrid of these systems is considered decentralized.

As a money Bitcoin forms a social graph. Only a person can decide to accept one money or another in trade. A society of people may share the same definition for a money, which is referred to as a consensus. Authority in a monetary system is the power to define the money. Bitcoin is a tool that people can use defend against the tendency toward authority, in order to preserve their agreement and therefore utility in the money.

In distributed systems terminology a Bitcoin "node" is a person and the system is money. It does not matter how many machines the person controls, the loss of that person is a loss of a node in the system. A centralized money cannot withstand the loss of one person. If that one person changes their rules, the original money ceases to exist. As shown in Risk Sharing Principle, Bitcoin relies on decentralization to allow people to resist authority. This decentralization makes the money more able to withstand the loss of more people when faced with state attacks.

While it is essential that people are able able to communicate, the Public Data Principle shows that peers communicate entirely public information. The more widely spread the data, the more secure is the money. Protocols to prevent observation of the data serve no purpose other than as base technology required for identity. Restricting communication to such known parties harms the money by isolating less desirable (or anonymous) parties despite conformance to consensus rules, thereby shrinking the consensus group (security). Identity also exposes parties to taint, reducing fungibility (utility).