Bitcoin celebrated its eleventh birthday on January 3rd, 2020, the anniversary of the creation of its Genesis Block. The first working peer-to-peer system of electronic cash was born into turbulent times. In that original block lies a hidden message which reads: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. It is generally accepted that the final push to bring cryptocurrency into being was the global financial crisis which broke the bonds of trust in centralised banking systems. There has been plenty of interest in Bitcoin’s early years (including intense speculation on its immediate parentage), and its younger siblings are always clamouring for attention, but like every modern superhero, it also has a riveting Origins story just waiting to be told.
Authors have for decades dropped their characters into alien lands, both on earth and around endless fictional universes, assuming blithely that they have the means and method to settle their bar tab wherever they may be. What is the strange currency that keeps our wandering heroes in cocktails? Over the many years that galactic travellers have been hanging around in disreputable bars, researchers and cryptographers have been working toward a vision of digital cash. There have been plenty of false starts. Today, many of us use PayPal as an easy payment option – I made a micropayment just now to the creator of the cute birthday image at the head of this post – but few realise that PayPal, like many other less rounded concepts which fell by the wayside, started out as an attempt to create a system of electronic cash. It found its niche as a payment system using established, centralised currencies and has been successful there: according to its annual report, its 267 million active users made almost 10 billion transactions in 2018.
The concept and workings of digital cash were first suggested almost 40 years ago by David Chaum in his 1982 thesis, “Computer Systems Established, Maintained and Trusted by Mutually Suspicious Groups”. He proposed a secure vault to hold the hashed root of a bundle of transactions, something we would now recognise as a block in a chain. (This hash is the Merkle Treet Root, named for Ralph Merkle after his 1979 thesis on cryptography in public key systems.) Sharp-eyed readers will also notice that the idea of trust between mutually suspicious groups is one of the wider use cases for blockchain technology. Chaum went on to develop the concept of blind signatures, and in 1989 founded DigiCash. This introduced Cyberbucks, probably the first electronic money system, but was short-lived.
Cypherpunks vs the NSA
More significant players in our Origins story emerged in the 1990s: the Cypherpunks. This community grew from a mailing list around the Crypto Anarchist Manifesto which was published by Timothy C. May in 1988. At that time in the United States, encryption was the preserve of government. It was so important to securing communications in wartime that it was classified as a munition, and even nascent tech companies were unable to use anything beyond 40-bit encryption to secure their user licences. The Cypherpunk movement stood up to National Security Agency and succeeded in bringing strong encryption into the public domain. This was a watershed moment for cryptography, privacy, and the development of cryptocurrency.
It takes a village
The Cypherpunks probably counted the creator/s of Bitcoin among their number. Although the person or persons behind ‘Satoshi Nakamoto’ are unknown, this group included some extraordinary people who contributed to the puzzle. Among these was Nick Szabo, whose 2005 concept ‘BitGold’ introduced timestamping for transactions, and Wei Dai, who suggested broadcasting transactions to multiple nodes of a network in a 1998 paper about ‘B-money’. While we may never know the true identity of Satoshi, and arguably we should not, the Cypherpunks were a major part of the village which raised our Bitcoin child. On the fringes, we can also thank the developers of peer-to-peer networks of varying notoriety such as Napster and The Pirate Bay, the protocols developed by BitTorrent, and the SecondLife community whose Linden Dollar showed that virtual (if centralised) currency was viable.
Our little Bitcoin was almost thirty years in the making, and hasn’t it grown? You can read more about the origins of Bitcoin in my new book for Business Expert Press: Blockchain Hurricane: origins, applications and future of blockchain and cryptocurrency.
Originally published via LinkedIn Pulse, January 2020 https://www.linkedin.com/pulse/happy-birthday-bitcoin-heres-all-family-kate-baucherel/