Fans of various innovative solutions often like to think of them as something ingenious, which was created from nothing. The same is true of the authors of these phenomena. Meanwhile, the whole development of technology is a sequence of successive inventions. It is no different with Bitcoin and blockchain. Both the first cryptocurrency in history – and the network of blocks – are the result of the evolution of a certain way of thinking and a characteristic ideology. If you are interested in the genesis and history of Bitcoin, we encourage you to read this text!
The father of digital money
It’s been a decade since the oldest cryptovcurrency was established. Probably some of the younger members of the blockchain community will be surprised by the fact that the first foundations of the technology behind Bitcoin were laid in the early 1980s.
The foundations for the network of blocks of flats were laid by a cryptologist who specialized in anonymous electronic communication. This is David Chaum. Some researchers even call him “the father of digital money” and appreciate his contribution to the development of anonymity on the Internet. We will add straight away that Chaum himself is not mentioned today as one of the potential candidates for the anonymous creator of BTC – Satoshi Nakamoto – but it is widely appreciated that he created the DigiCash system for anonymous electronic payments.
At that time, in the early 1980s, Chaum was already aware of the risks of surfing the web and wanted to make sure that internet users were as anonymous as possible. He described the whole concept at work in 1982. “Blind signatures for untraceable payments”, which in free translation means..: “Invisible signatures for unintentional payments. Chaum added that data collected by banks and other financial intermediaries (e.g. on whereabouts and lifestyles) could be dangerous in the future and even violate civil rights.
Therefore, his system ensured anonymous transactions. What is interesting, Chaum’s idea interested Visa, Microsoft and Deutsche Bank. It turned out, however, that his tool has a significant drawback. Namely, it was not immune to the so-called double disbursement. In other words, using the gaps in the code it was possible to make two separate transactions with two different sellers using the same means.
In the fight against spam
Another innovator who got a few rods for blockchain construction is Adam Back. In 1997, he presented the hashcach system, which was designed to limit the mass sending of e-mails. Spam in the 90s was one of the first Internet plagues, hence the tool seemed to be in place.
The technology itself had nothing to do with payments but contained elements that later helped Satoshi Nakamoto. We are thinking about the function of calculating the proof of work. It was based on marking the e-mail before it was sent, which was a result of adding a special token to it. The latter operation forced the sender’s/receiver’s computer to perform a specific calculation work before sending/receiving the message. In the case of a single mail, this was not a problem. If we were talking about mass mailing, it was a great challenge for the hardware. Thus, hashcash saved humanity from spam.
Let us return, however, to the attempts to create an independent and alternative payment system. At the beginning of the 1990s, the Cypriot movement was created. But before you can imagine an environment with radical musical connotations and eye-catching clothing, we must worry you. Meetings and exchange of thoughts of members of this community must have been fascinating, but rather not controversial (because and to a small extent understandable) for many contemporary audiences.
Members of the cypherpunk movement were liberal cryptologists who opposed the actions of the U.S. government, which strongly limited some of their research. They also considered their field of expertise to be a science that could change the world for the better. Among the leading representatives of this community were, for example, Timothy May and Eric Hughes.
Of course, quite quickly the debates of cryptologists became digital. Since then, the legendary mailing list has become an inseparable part of the movement.
One of the members of the Cypherpunk was Wei Dei. In 1998 he presented the concept of an anonymous digital currency – b-money. Sound familiar? It gets even more interesting when we read Deia’s speech. He argued that a society that cares about privacy should be based on “having an efficient means of exchange (money) and effective ways of enforcing contracts”. The b-money itself was to be decentralized, while transactions taking place in the system were to be recorded in a special register, a copy of which would be held by each of the participants of the network. Some even think that the Dei project was the first cryptocurrency in the world.
Unfortunately, b-money had a lot of technological defects. These related to the way the transaction was verified. The whole system was again poorly protected against attacks and forgery.
We’re finally getting to the Hal Finney character. A remarkable and important person in our history to such an extent that the Sirin Labs company named its “blockchain smartphone” – Finney – after him.
In 2004. Finney designed a proof of reusable work that required some computational work on the part of the client. The idea was to protect computer systems from DoS attacks. As it turned out, it was also part of an idea that Satoshi Nakamoto himself implemented a few years later.
Interestingly, Finney himself was even accused of being the creator of Bitcoin. He was also the first respondent on Satoshi’s mailing list when he announced a crypto start. It was him who, as the first man in history, gave Bitcoins to Nakamoto. Naturally, the question arises: “Why would Satoshi write to himself and send the BTC to his alternative wallet? Did he want to conceal his identity to such an extent? We don’t know the answer to this question…
Satoshi Nakamoto and the predecessors
We’re about to get to the BTC launch in a minute. However, it is worth summarizing the current part of our story. Did Nakamoto consult with some of the people mentioned above? Some researchers suggest that this was the case. It is suggested that Adam Back and Wei Dei were involved in the process. We have already mentioned Hal Finney. He was not only a person who made a pioneering transaction with Satoshi himself, but also was in a very small group of programmers who worked and modified the Bitcoin system in the first period of the cryptocurrency operation.
As you can see, despite the fact that we do not know Satoshi Nakamoto’s identity, we know a lot about the people who inspired him from the technological and ideological point of view in the process of creating Bitcoin. The very concept of an anonymous, decentralized digital currency was not the first one, because as we mentioned before, a group of people presented such concepts before 2008. However, the genius of the blockchain’s creator was that he was able to carefully analyze the achievements of his predecessors and draw the right conclusions from them.
The very idea behind the cryptocurrencies can be described as a continuation of some Cypherpunk ideas. However, the financial crisis of 2008 gave all the more importance.
Before we move on to the creation of Bitcoin himself, it is worth outlining the historical background for the events that we will be dealing with in a moment. The world in 2008 was naturally different from today. Although we do not always notice the changes that take place in our everyday life, in retrospect they can be seen much better. In 2008 we still lived in a world where there was a single geopolitical power – the United States. Although this giant began to wobble slowly after the war in Iraq, hardly anyone thought that any other country could throw a glove at the Americans.
However, everything changed in this particular year. The Wall Street crash and its consequences led to a revolution in the world of politics and finance. Firstly, almost the entire world has been affected by this financial crisis. Its consequences were felt in Europe only a few years later. Much less was hit by China, which used this moment to start strengthening its position on the globe. The current (more or less intense) trade war between the USA and the Middle Kingdom is just another stage of the competition, which took place in 2008.
Who is/was Satoshi Nakamoto?
The lack of trust in banks – a phenomenon linked to this meltdown – must have had an impact on Satoshi Nakamoto. The main character of this part of the story is not known to anyone by his real name. He appeared to the world under a pseudonym and has remained so to this day. We don’t even know if one man was behind the project of the first cryptocurrency in the world, or if “Satoshi Nakamoto” is a nickname for the whole team of people.
Who was Satoshi? Most legitimately, he was an American. A Twitter user with the nickname “Bounty Hunter” explored the question of the location of the place where Bitcoin would be broadcast. Judging by IP, it was Van Nuys, California.
The IP address was allegedly not linked to a VPN or TOR node. The investigator located exactly two addresses, but one of them belonged to Hal Finney, with whom Nakamoto cooperated.
To this day, however, the exact identity of the blockchain wizard and bitcoin based on it has not been established.
The start of a big project
Satoshi Nakamoto presented the assumptions of the Bitcoin project in the document “Bitcoin: A Peer-to-Peer Electronic Cash System”, whose translation into Polish can be found here: LINK. The whole project was launched in January of the following year. The members of the “metzdowd” mailing list were initially informed about this fact. These were also the ones who, as pioneers, could download and test the early versions of the cryptocurrency software.
Why did Nakamoto want to create Bitcoin? Reading this document shows that the main goal was to reduce transaction costs and increase the anonymity of the payments themselves. He also pointed out the weaknesses of the contemporary financial system at that time.
In two places, Nakamoto referred to banks, which in his opinion did not work well as intermediaries and the so-called “third party”. Researchers are divided on whether Nakamoto was actually the enemy of the banks. Some point out that he simply wanted to improve online payments and not necessarily dismantle the entire system. This would mean, however, that the whole project started to live its own life in a sense, and the whole crypto community gave it a new meaning. The clue that the supporters of the ‘Nakamoto as an enemy of banks’ theory cite is that in the BTC code, the author has hidden a sentence referring to the action of the UK Treasury Chancellor, Alistair Darling, who allocated billions of pounds to save the English banking system. But is this sufficient proof that Satoshi was a staunch opponent of the banks? We do not know that.
Bitcoin lives its own life
We mentioned earlier that Bitcoin as an idea started to live its own life. The same thing happened to the project in terms of functioning on the market.
A lot has happened since then. Cryptocurrency started to serve as a real means of payment. To show the scale of the phenomenon, it is enough to realize that in May 2010 a BTC fan paid for two pizzas of 10,000 bitcoins. It was probably a kind of fanaberia or experiment. In 2017, the Japanese government had already debated whether to recognise Bitcoin as a legitimate means of payment. Eventually, on April 1, 2017, Japanese politicians voted in favour of the relevant legislation. The development has also affected the stock exchanges. The Mt. Gox platform was launched in July 2010. It was the platform which, several years ago, remained the leader of this market. Today, cryptocurrencies can be bought on countless such places in the network.
When the project started, cryptocurrencies could be copied on almost any home computer. Today, professional halls are built for this process, which are then filled with specialized equipment for mining.
The number of websites and shop windows where you can see the inscription “Bitcoin accepted here” is constantly growing. The number of bitomats is increasing at a similar rate. The first such device was installed in Vancouver in 2013. At the time of writing these words, the number of bitomats worldwide, exceeded 4000 machines.
Finally, in 2011, one Bitcoin had to be paid $1 for it. Today, such an amount seems unimaginable.
Since 2009. Bitcoin has undergone several speculative bubbles, has become the subject of serious political and economic debates, many books and countless scientific articles. In each of these environments, it has gained both enemies and supporters.
Bitcoin also appeared in pop culture. He sang about him with Eminem and many other stars. The protagonists of the series “CSI” joked about him. Metal band Mastodon sold one of their albums for fractions of Bitcoin.
The whole market was created on the basis of his technology. Today we’re not just talking about Bitcoin, but about the whole cryptocurrency space and other projects that use blockchain for various purposes.
What future awaits Bitcoin? There is no clear answer to this question. However, we can assume that the project will be further developed, mainly in terms of express payments (Lighning Network technology). We can certainly count on the continuation of the above mentioned trends, i.e. an increase in the number of bitomats or points where one can pay in cryptocurrencies.
Today, there is little evidence that BTC should share the fate of other pioneering technologies and be forgotten, such as the MySpace social networking site or the AltaVista search engine. Rather, we can say that despite the skepticism of many of his opponents, bitcoin will stay with us for longer.
Today, all we have left is to follow the rest of the story, which we encourage you to do as well. We are convinced that it will be a long and fascinating journey.
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