It has been 15 years since the pseudonymous creator of Bitcoin, Satoshi Nakamoto, presented the Bitcoin white paper to a mailing list of cryptographers on October 31, 2008.
“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party,” Satoshi claimed in the opening sentence before linking the document titled “Bitcoin: A Peer-to-Peer Electronic Cash System.”
The white paper introduced a decentralised system to enable peer-to-peer transactions, addressing the common issue of “double spending” in digital currency. The proposed solution involved a network of nodes responsible for validating and recording transactions using a proof-of-work consensus mechanism. This system was implemented two months later, on January 3, 2009.
How was Bitcoin brought to life?
Satoshi’s breakthrough in computer science was built upon significant advancements in cryptography and electronic money. The Bitcoin white paper acknowledges Wei Dai’s creation of B-money, an unrealised electronic peer-to-peer cash system that played a crucial role in Satoshi’s Bitcoin vision. Like Bitcoin, B-money suggests that participants maintain a database of account balances to monitor money ownership. Transactions were initiated by broadcast messages, updating account balances for involved parties—a concept resembling the nodes in Bitcoin’s protocol, responsible for recording the expanding blockchain.
This process involved proof-of-work, a cryptographic method where a party demonstrates a specific computational effort expended. Satoshi incorporated this idea into Bitcoin, attributing inspiration to Adam Back’s 1997 invention of Hashcash, which utilised proof-of-work to combat email spam and denial-of-service attacks.
The Cypherpunks and Fathers of #Bitcoin:
- Hal Finney: Reusable PoW
- Adam Back: Hashcash
- Wei Dai: B-money
- David Chaum: DigiCash
- Nick Szabo: BitGold
- Phil Zimmermann: PGP
- Bram Cohen: BitTorrent
- Tim May: Crypto Anarchist Manifesto
And Satoshi Nakamoto: Bitcoin
— Crypto Leroy (@TheBitLeroy) June 27, 2020
Timestamps constitute another fundamental aspect of Bitcoin, successfully integrated by Satoshi. In Bitcoin’s timestamp server, a hash—resembling a unique serial number—is generated for a block of transactions and timestamped upon its addition to the blockchain. These hashes establish cryptographic links between blocks, ensuring the integrity of Bitcoin data. Timestamps are crucial in preventing double spending, enhancing the network’s resistance to tampering and ensuring immutability.
Satoshi credited the contributions of Henri Massias, Scott Stornetta, Stuart Haber, and Dave Bayer in implementing timestamping within Bitcoin’s protocol. Simultaneously, Merkle trees were incorporated into Bitcoin to authenticate transaction data using digital signatures, with Satoshi acknowledging Ralph Merkle’s work in developing public-key cryptosystems.
“David Chaum – “DigiCash” 1995
R.C Merkle – “Protocols for public key cryptosystems” 1980
Adam Back – Hashcash – “A Deniel of Service Counter-Measure” 2002
Nick Szabo – “Bit Gold” 2005
Wei Dai – “b-money” 1998
Satoshi Nakamoto – “Bitcoin: A Peer-to-Peer Electronic Cash System 2008 pic.twitter.com/EjfVsE4pDc
— Crypto Shaman (@CryptoShaman256) September 10, 2022″
Jameson Lopp, a Bitcoin supporter and cypherpunk, emphasised the importance of acknowledging the precursor projects that laid the foundation for Bitcoin. However, Lopp highlighted Satoshi’s brilliance in assembling these various elements into a cohesive and operational system:
“There’s no single piece of the puzzle that I think is more important than the others. Nakamoto’s genius was not any of the individual components of Bitcoin, but rather the intricate way in which they fit together to breathe life into the system.”
What Bitcoin did
Bitcoin represented one of the pioneering applications of cryptography to detach currency from governmental control successfully. Satoshi’s creation empowered users to circumvent traditional banks and financial institutions, facilitating global transactions directly between individuals. The inaugural real-world Bitcoin transaction occurred in May 2010 when Laszlo Hanyecz exchanged 10,000 BTC for two pizzas.
Initially, mainstream media often emphasised Bitcoin’s association with criminal activities like money laundering. However, this narrative has evolved. Bitcoin’s acceptance has grown globally, exemplified by its designation as legal tender in El Salvador in September 2021.
“President Bukele just announced that a new #Bitcoin City will be built in El Salvador.
Bitcoin will be legal tender. There will be 0% income, capital gains and property tax.
A 10% VAT will serve as a key source of city revenue.
The city will be financed by a “bitcoin bond”. pic.twitter.com/CvCPvXvPIq
— Peter Young (@petermiyoung) November 21, 2021″
Recently, financial institutions have sought approval to introduce spot Bitcoin exchange-traded funds (ETFs) in the United States, paralleled by the initiation of Bitcoin ETFs in Europe by other entities. Various advancements have been introduced to enhance Bitcoin’s scalability and broaden its range of applications. In 2018, the Lightning Network was launched to expedite Bitcoin transactions by relocating computation off-chain. In January, non-fungible token-like Ordinals were introduced on the Bitcoin network, made feasible by the Taproot soft fork implemented in November 2021. Bitcoin’s market price has experienced significant fluctuations, from a mere penny in 2009. Throughout its existence, BTC has weathered multiple bullish and bearish trends, witnessing price volatility reaching as high as 88% in certain instances.
BTC is currently priced at $34,350, down 50% from its all-time high price of $69,000 on November 10, 2021.