The Bitcoin History

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Fans of various innovative solutions often like to think of them as something brilliant, which arose from nothing. The authors of these phenomena are also looked at in the same way. Meanwhile, the whole development of technology is a sequence of inventions that arise in succession. It is no different from Bitcoin and blockchain. Both the first cryptocurrency in history – and the network of blocks – are the result of the evolution of a certain mindset and characteristic ideology. So if you are interested in the genesis and history of Bitcoin, we encourage you to read this text!

The father of digital money

A decade has passed since the creation of the oldest cryptocurrency. Certainly, some of the junior members of the blockchain community will be surprised, however, that the first core of the technology behind Bitcoin was created in the early 1980s.

The foundations for the network of blocks were created by a cryptologist who specialized in anonymous electronic communication. We’re talking about David Chaum. Some researchers even refer to him as the “father of digital money” and appreciate his contribution to the development of anonymity on the Internet. We will immediately add 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 system for anonymous electronic payments – DigiCash.

Already then – at the beginning of the eighties – Chaum saw the risk of navigating the Internet and wanted to provide Internet users with the greatest possible anonymity. He described the whole concept in 1982 in “Blind signatures for untraceable payments”, which in free translation means: “Invisible signatures for intangible payments”. Chaum added that data collected by banks and other financial intermediaries (e.g. regarding whereabouts or lifestyles) can be dangerous in the future and violate even civil rights.

Hence, his system ensured anonymous transactions. Interestingly, Chaum became interested in Visa, Microsoft and Deutsche Bank. However, it turned out that his tool has a major drawback. Namely, it was not resistant to so-called double-spending. In other words, by exploiting the vulnerabilities in the code, you could make two separate transactions with two different sellers using the same means.

In the fight against spam

Adam Back is another innovator who has added several links to the construction of blockchain. In 1997 he presented a hash system whose purpose was to limit mass email sending. Spam in the 90s was already one of the first online plagues, hence the tool seemed to be in place.

The technology itself had nothing to do with payments but contained elements that later greatly helped Satoshi Nakamoto. We are thinking about the function that calculates the proof of work. It was based on marking the e-mail before sending it, which resulted from adding a special token to it. The latter operation forced the sender/recipient’s computer to perform specific computational work before sending/reading messages. For a single email, this was not a problem. If we were talking about mass mailing, it was a great challenge for the equipment. Thus, hashcash saved mankind from spam.

Cypherpunk

Let’s return to attempts to create an independent and alternative payment system. At the beginning of the 90s a cypherpunk movement was created. However, before you imagine an environment with radical musical connotations and eye-catching clothes, we must worry you. Meetings and exchanges of thoughts of members of this community had to be fascinating, but rather not controversial (because and to a small extent understandable) for many contemporary recipients.

Members of the cypherpunk movement were liberal-minded cryptologists who opposed the actions of the US authorities severely restricting some of their research. They also considered their field as a science that could change the world for the better. Leading representatives of this community were, for example, Timothy Mayor Eric Hughes.
Of course, the cryptologists’ debates quickly took on a digital form. Since then, the legendary mailing list has become an inseparable part of the movement.

B-money

One of the cypherpunk members was Wei Dei. In 1998 he presented the concept of an anonymous digital currency – b-money. Sounds familiar? It gets even more interesting when we read in Deia’s statement. He claimed that the foundation of a society that cares about privacy should be “having an efficient medium of exchange (money) and effective ways of enforcing contracts”. B-money itself was to be decentralized, while transactions in the system were recorded in a special register, a copy of which would be available to each of the network participants. Some even think that the Dei project was the first cryptocurrency in the world.

Unfortunately, b-money had major technological disadvantages. They concerned the method of transaction verification. The whole system was again poorly protected against attacks and counterfeiting.

Hal Finney

Finally we come to the figure of Hal Finney. A person extraordinary and important to our history to such an extent that the company Sirin Labs named his “blockchain smartphone” – Finney.

In 2004, Finney designed a reusable work ID that required some work to be performed by the requester. The idea itself was intended to protect computer systems against DoS attacks. As it turned out, it was also part of the idea that Satoshi Nakamoto himself implemented a few years later.

Interestingly, Finney was even accused of being a Bitcoin creator himself. He was also the first respondent on Satoshi’s mailing list when he announced the start of a critical currency. Nakamoto gave him Bitcoins as the first man in human history. The question naturally arises: “Why would Satoshi write to himself and send BTC to his alternative wallet?” Did he want to cover up his identity to such an extent? We don’t know the answer to this question …

Satoshi Nakamoto and the predecessors

We’ll get to the topic of BTC in a moment. However, it is worth summarizing the current part of our story. Has Nakamoto consulted his idea 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 trial. We have already mentioned Hal Finney. He was not only the person who entered into a pioneer transaction with Satoshi himself, but was also in a very narrow group of programmers who worked and modified the Bitcoin system in the first period of the cryptocurrency.

So as you can see, despite the fact that we do not know the identity of Satoshi Nakamoto, we know a lot about people who inspired him from the technological and ideological side in the process of creating Bitcoin. The very concept of anonymous, decentralized digital currency was not the first, because, as we mentioned, a group of people presented such concepts before 2008. The genius of the creator of blockchain was, however, that he was able to thoroughly analyze the achievements of his predecessors and draw the right conclusions from them.

The very idea behind cryptocurrencies can be described as a continuation of some cypherpunk ideas. However, the financial crisis of 2008 gave additional importance.

Historical background

Before we get to the creation of Bitcoin, it is worth to outline the historical background for the events that we will deal with in a moment. The world in 2008 was naturally different from today. Although we do not always notice the changes that are taking place in our everyday life, in retrospect they can be seen much better. In 2008, we still lived in a world where there was one geopolitical power – the United States. Although after the war in Iraq, this giant was slowly starting to wobble, hardly anyone thought that some other country could throw a glove to the Americans.

Everything changed, however, in this special year. The Wall Street crash and its consequences led to a real revolution in the world of politics and finance. First, almost the entire world has been affected by the financial crisis mentioned above. Its consequences were felt in Europe a few years later. China, which took advantage of this moment to start strengthening its position on the globe, suffered much less. The ongoing (more or less intense) trade war between the US and the Middle Kingdom is just the next stage of competition that took place in 2008.

Who is / was Satoshi Nakamoto?

Lack of trust in banks – a phenomenon related to the described crash – must have had an impact on Satoshi Nakamoto. The main character of this part of the story is unknown to anyone by their real name. He revealed himself to the world under a pseudonym and it has remained so until today. We don’t even know if there was one man behind the world’s first cryptocurrency project, or maybe “Satoshi Nakamoto” is the nickname for a whole team of people.

Who was Satoshi? Mostly American. A Twitter user with the nickname “Bounty Hunter” investigated the location of the place where Bitcoin would be issued. In conclusion from the IP, it was Van Nuys, California.

The IP address was not allegedly associated with a VPN or TOR node. The researcher located exactly two addresses, but one of them belonged to Hal Finney, with whom Nakamoto cooperated.

To date, however, the exact identity of the blockchain wizard and bitcoin-based on it has not been established.

The start of a great project

The assumptions of the Bitcoin project, Satoshi Nakamoto presented in the document “Bitcoin: A Peer-to-Peer Electronic Cash System“. The whole was launched in January of the following year. Members of the metzdowd mailing list were initially informed of this fact. It was these chosen ones that could also as pioneers download and test early versions of cryptocurrency software.

Why did Nakamoto want to create Bitcoin? Reading this document indicates that the main goal was to reduce transaction costs and increase the anonymity of payments themselves. In addition, he drew attention to the disadvantages of the financial system of the contemporary system.

In two places Nakamoto referred to banks, which in his opinion did not quite work well as intermediaries and so-called. “Third side”. Researchers are divided on whether Nakamoto was actually the enemy of banks. Some point out that he just wanted to improve online payments rather than necessarily dismantling the entire system. However, this would mean that the whole project began to live its own life in a sense, and the entire cryptocurrency community gave it new meaning. The hint cited by proponents of the Nakamoto theory as the enemy of banks is that in the BTC code, the creator hid a sentence referring to the action of the Chancellor of the United Kingdom Treasury – Alistair Darling, who spent billions of pounds on saving the English banking system. Is this, however, sufficient evidence that Satoshi was a staunch opponent of banks? We don’t know that.

Bitcoin lives its own life

We mentioned earlier that Bitcoin as an idea began to live its own life. The same thing happened with the project in terms of functioning on the market.

A lot has happened since then. Cryptocurrency began 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 10,000 bitcoins for two pizzas. It was probably a kind of fad or experiment. In 2017, the Japanese government was already debating the recognition of Bitcoin as a full means of payment. Finally, on April 1, 2017, Japanese politicians voted the relevant legislation. Stock exchanges have also been affected. In July 2010, the Mt. Gox. She was the leader of this market a few years ago. Today, cryptocurrencies can already be bought on countless numbers of this type of place on the web.

When the project started, you could kick cryptocurrencies on almost any home computer. Today, professional halls are built for this process, which are then filled with specialized mining equipment.
The number of online and store websites where you can see the inscription “Bitcoin accepted here” is constantly growing. The number of bitcoin ATMs is increasing at a similar pace. The first device of this type was installed in Vancouver in 2013. At the time of writing, the number of bitoin ATMs worldwide exceeded 4,000 machines.

Finally, in 2011, one dollar had to be paid for one Bitcoin. Today this amount seems unimaginable.
Since 2009, Bitcoin has gone through several speculative bubbles, has become the subject of serious political and economic debates and many books, and countless scientific articles. In each of these environments, he gained both enemies and supporters.

Bitcoin also appeared in pop culture. He was sung by Eminem and many other stars. The characters from the CSI series joked about him. The metal band Mastodon was selling its one for fractions of Bitcoin.
The entire market was created based on his technology. Today, we are not just talking about Bitcoin, but about the entire cryptocurrency space and other projects that use blockchain for various purposes.

Future

What future awaits Bitcoin? There is no definite 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. the increase in the number of bitomats or points where you can pay with cryptocurrencies.

Today, there is little indication that BTC should also share the fate of other pioneering technologies and go into oblivion, such as the MySpace social networking site or the AltaVista internet search engine. Rather, it can be said that despite the skepticism of many of his opponents, bitcoin will stay with us for longer.

Today, all we can do is follow the rest of this story, which we encourage you too. We are convinced that it will be a long and fascinating journey.

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