The story of Bitcoin

Welcome back reader.

So you’ve read about the crazy new world of crypto currency and want to understand where it all began?

The tale of Bitcoin is long and winding, it all begins with an underground online community which emerged in the early nineties on a usenet mailing list.

Meet the Cypherpunks.

A cypherpunk advocates the use of cryptography to enhance personal privacy and encourage social and political change.

The movement followed the public availability of strong cryptography which was made possible in the 1970s following the publication of a seminal work on public key cryptography by Whitfield Diffie and Martin Hellman.

The ideology of cypherpunks can be traced back to a 1980s paper by David Chaum which touched on topics including digital cash. This eventually led to the creation of the cypherpunks mailing list in 1992, enabling in depth discussions on mathematics, computer science, cryptography, modern privacy, digital cash, philosophy and pseudonymous reputation amongst many other topics.

The main principles of the movement were immortalised in A Cypherpunk’s Manifesto, published by Eric Hughes in 1993. The overriding message of the document is that privacy is an essential right which can and must be defended through the use of computer software, recently enabled through cryptography.

It was in this nascent community that a series of precursors to, and enablers of Bitcoin were born.

Inspiration for Bitcoin

  • eCash was developed by David Chaum in 1983. The system used public key cryptography to digitally sign money stored on a users computer. The system relied on a central authority, typically a bank, to sign funds and prevent double spending. Key inspiration for Bitcoin is the use of public key cryptography as an enabler of securing digital money.
  • Hashcash was developed by Adam Back in 1997. Despite the name, it actually has nothing to do with money and was actually originally designed to prevent email spam. The system employs a computer algorithm to implement a proof of work system. This work is computationally expensive to calculate but computationally cheap to verify. Key inspiration for Bitcoin is the use of a proof of work algorithm which is now used as a critical component of Bitcoin’s incentive system.
  • b-money was developed by Wei Dai in 1998. It was an early proposal for anonymous, distributed, electronic cash and was posted as a possible application for Hashcash. Key inspiration for Bitcoin is the broadcast mechanic and distributed ledger.
  • Bit Gold was developed by Nick Szabo in 1998. Bit Gold is a decentralised digital currency, but was never actually implemented. It utilises cryptographic puzzles, the solver of which is provided with an incentive in the form of the currency itself which ultimately end up as part of a chain of proofs, aka a blockchain. Bit Gold itself can be thought of as a near direct precursor to Bitcoin, indeed Szabo is often hypothesised to actually be Bitcoin’s illusive creator although he denies this.
  • BitTorrent was developed by Bram Cohen in 2001. BitTorrent is unrelated to the above and did not begin in the cypherpunks movement but does remain a critical inspiration for Bitcoin. It is a peer to peer file sharing protocol which is used to distribute information over the internet. You have probably already heard of BitTorrent as it spawned a tidal wave of copyright piracy in the early 2000s. Key inspiration for Bitcoin is the method of peer to peer distribution.

Enter Satoshi Nakamoto

In November 2008, a whitepaper was published to the cypherpunks mailing list under the pseudonym Satoshi Nakamoto and titled Bitcoin: A Peer-to-Peer Electronic Cash System.

The paper proposed combining all of the key innovations discussed above; public key cryptography, proof of work, distributed ledgers, incentives and peer to peer decentralised networking to create the worlds first fully decentralised digital crypto currency.

Shortly after, in January 2009, the first software implementation of the protocol was made available for download. The first genesis block was mined, the Bitcoin network popped into existence and the world was forever changed.

Join me next time for a detailed explanation of how Bitcoin works.

Until then, have a read of the Bitcoin whitepaper linked above and join the revolution.

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Yours, X.

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