ZoneBitcoin EditorialSatoshi Nakamoto, a man, a woman (or even a group of anonymous individuals) published the Bitcoin white paper on October 31, 2008. The title of the document " Bitcoin: A Peer-to-Peer Electronic Cash System” offers, as its name suggests, a new decentralized electronic currency system.
After a decade, bitcoin has entered the current “financial” landscape. Increasingly accepted and understood, today, bitcoin (and cryptocurrencies in general) are considered a modern version of money.
In this article, we will go back in time to discover the ancestors of bitcoin. It is essential to better understand Bitcoin to know the previous versions on which it is based. Bitcoin is not an invention ex nihilo, appears out of nowhere. It is part of a long line of cryptographic research, discoveries and innovations…
The ideology behind Bitcoin
It is accepted that Bitcoin is “the product” which is similar to the ideology called “CypherPunk”. It is a group composed primarily of tech-savvy individuals, futurists, and crypto-anarchists of varying degrees. Among them, we can cite Hal Finney, Timothy May, Nick Szabo and Eric Hughes. It is in this libertarian philosophy which makes confidentiality and freedom an essential right to human societies that Bitcoin takes root. There is a deeply political dimension (like it or not) to Bitcoin. It is not insignificant if Bitcoin is also used among opponents of certain authoritarian regimes, as a means and as an end.
“Privacy is necessary for an open society in the electronic age”
Eric Hughes, “The Cypherpunk Manifesto”
Satoshi Nakamoto sent his Bitcoin proposal to this community of computer scientists and cryptographers who were working directly or indirectly on attempts at digital currencies. Since the creation of the Internet in 1989, multiple experiments in this field have been launched (and obviously failed).
The CypherPunks
“The Cypherpunk Manifesto” by Eric Hughes served as an ideological reference for cryptographers. This stems from the “CyberPunk” science fiction subgenre that flourished in the 90s. The cyberPunk genre in literature often describes an Orwellian future where surveillance systems are omnipresent. The heroes are often anarchists who fight against the abusive surveillance established in these dystopian societies.
The best-known authors are John Brunner, William Gibson and Bruce Sterling. In their works, they often depict companies managed by long-toothed Big Brothers. Freedom and confidentiality are very often in the hands of governments and companies.
It is in this world of generalized surveillance that cypherpunks have highlighted the need for encrypted communications through anonymous messaging, among other things. Electronic money itself is a tool for the emancipation of free men in this type of society.
We can also mention by extension the philosophy of “extropianism”. It is a movement developed by the philosopher Max More, in a series of writings that emphasize a strong reliance on science and technology. Max More is a radical transhumanist, who conveyed a strong ideology claimed by many cryptographers. Among them, Nick Szabo, Timothy May et Hal Finney are recognized extropians. The latter fundamentally seek to improve the human condition through the use of new technologies such as cryogenics, robotics, genetics, space travel, etc.
Previous works that foreshadowed Bitcoin
We have the bibliographic references mentioned by Satoshi in the Bitcoin white paper. We then know what work he relied on to develop bitcoin.
Bitcoin is thus a solution which is based on different research work in different fields such as cryptography, distributed networks, economics, mathematics, etc. It is therefore essential to know the previous attempts of what we can call the “ancestors” of bitcoin.
The creation of e-cash
When it comes to e-money work, one of the brightest computer scientists is certainly David Chaum. He was a true pioneer in this field and his digital currency system dates back to the 80s, even before the launch of the World Wide Web.
David Chaum published in 1981 a major document “Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms”. It is from this document that confidentiality protocols like Tor were born. In 1982, he published another equally important document: “Blind Signatures for Untraceable Payments”. It details a future anonymous transaction system. It is admitted that it was this document that opened up attempts to create a digital currency.
This is in fact what he did concretely with the creation in 1989 of DigiCash. Originally, it was about being able to bring privacy to digital currencies as electronic banking services were taking shape. Based in Amsterdam, David Chaum developed the eCash protocol with his team. However, almost ten years later and due to lack of financing, David Chaum had to declare bankruptcy in 1998.
However, the creation of e-Cash has paved the way for new work regarding digital currency. It is even admitted that e-cash is the ancestor of central bank digital currencies (MNBC in French.
The e-Gold
After eCash, it is essential to mention eGold founded in 1996 by Douglas Jackson and Barry Downey. As the name suggests, e-gold was a digital currency backed by physical gold reserves in banks in London and Dubai. Even if technically the e-gold fulfilled its function, the project had to stop due to significant legal problems. Very quickly, and taking advantage of the absence of jurisdiction, criminal activities used e-gold…Thus, the founders were welcomed to have created a company to allow the transfer of money without a legal license…. The company had to close a few years later.
It is important to emphasize that until today (in 2022), some legal issues related to the issue of digital assets are still unresolved…
Adam Back's hashcash
In 1992, IBM researchers Cynthia Dwork and Moni Naor worked on “Sybil attacks” and other computer attacks that took shape in the early days of e-mail. The research duo then proposed an ingenious system through which the sender carries out some computational work to solve a cryptographic problem. So, in the email, the sender provided “proof of work” (or PoW). In terms of calculation, the process was rather insignificant. The aim is above all to prevent possible attacks and spam.
Based on this work, Adam Back, an active computer scientist and cypherpunk, proposed a similar system he called Hashcash. He insisted on the hashing process, which consists of transforming data into a random string of characters. Even a slight modification to the data would result in a different hash. We can then very easily check the data.
Hashing is the process of transforming any piece of data of any size into a random string of characters of predetermined length. Even the slightest change to the underlying data would result in an entirely different hash, allowing easy verification of the data.
Adam Back's hashing opened the way to digital currencies closer to Bitcoin such as B-money and Bit Gold.
B-Money by Wei Dai
In 1998, Wei dai, also a member of cypherpunk, proposed the B-Money system. In the Bitcoin white paper, Satoshi Nakamoto makes explicit reference to Wei Dai's work. Likewise, it can be noted that Vitalik Buterin to be named Ethereum gas fees, “Wei”, in reference to Wei Dai.
B-Money is a peer-to-peer alternative financial system that allows transactions outside of the traditional financial system. B-money supported a ledger distributed among a network of pseudonymous peers. To create the digital currency, a node had to solve a calculation problem (proof of work). The problem of “double spending” was nevertheless unresolved in the B-Money system. Understand that it was possible to spend several “same” assets simultaneously.
The B-money proposal was not materialized. However, B-Money is very similar to Bitcoin, in its design of distributed ledger and digital currency based on Proof of Work.
I think it achieves nearly all the goals you set out to solve in your b-money paper.
Satoshi Nakmaoto to Wei Dai (source: https://www.gwern.net/docs/bitcoin/2008-nakamoto#emails)
The big difference with Bitcoin was the fact that B-money already had a “value”, being indexed to certain commodities. In fact, B-money was closer to what we call a “stablecoin" for this reason.
The Gold Bit
Nick Szabo is a figure cypherpunk well known and greatly participated in the development of cryptography. In 1994, he proposed the establishment of smart contracts – contracts based on code rather than human jurisdictional law – as the foundation of internet commerce.
Szabo had worked for some time on DigiCash with David Chaum. He therefore had some knowledge of work on innovative electronic currencies. He set out to create a new currency for the internet. A currency that would be entirely digital, rare and expensive to falsify. He therefore had the idea of creating digital gold: bit gold was born.
Bit Gold is a sort of mix between Hashcash and B-money with the use of periodically time-stamped hash-based proof of work. There was however a significant problem with bit gold and that concerned the value which could decrease over time. Indeed, linked to the cost of calculation, its value would inevitably decrease with the arrival of more powerful machines and computers.
Bit Gold thus required other complementary infrastructures to perfect it. At the time Bit Gold was to be implemented, Satoshi Nakamoto published the Bitcoin white paper.
Szabo then abandoned Bit Gold recognizing that Bitcoin intelligently resolved Bit Gold's flaws.
Thus, Bitcoin turns out to be the successful scientific product after several attempts. Satoshi Nakamoto also wrote in a 2010 Bitcointalk forum “Bitcoin is an implementation of Wei Dai's B-money proposal […] in 1998 and of the Bitgold proposal of Nick Szabo ».
“Bitcoin is an implementation of Wei Dai’s B-money proposal […] in 1998 and Nick Szabo’s Bitgold proposal.”
Satoshi Nakamoto, Bitcointalk
—>Read our profile on Nick Szabo, the man behind smart contracts
The creation of Bitcoin, finally
When we know the history of electronic currencies, we understand that Bitcoin is not an invention that miraculously came out of Satoshi Nakamoto's hat. This gives even more weight and grandeur to this remarkable invention as there have been so many unsuccessful attempts. On November 8, 2008, Satoshi Nakamoto registered Bitcoin software on SourceForge so that cryptographers and computer scientists can discover it. Available as open source, the inventor of Bitcoin wanted to open it up to public scrutiny and collective work.
This is how slowly (certainly) the Bitcoin ecosystem was formed and today, it has a special place in economic and financial history. The ancestors of bitcoin and electronic money are precisely there to remind us that the road was long and tedious.
It is all the more interesting to note that thehistory of Bitcoin continues to evolve over time thanks to improvement proposals (BIP) notably. It is also this – the fact that it is fully part of a permanent evolution – which makes Bitcoin, certainly, one of the most fascinating human inventions there is.
Read other articles:
- Who in the crypto ecosystem owns the most bitcoin (BTC)?
- “We’re tired of the Get-Rich-Quick scheme with cryptos” Timothy C. May
- But who are CypherPunk and how did they influence the creation of Bitcoin?
- “Bitcoin and me”, the famous letter from Hal Finney
- Discover Wei Dai and B-money
Note: No financial advice is given in this or any other article on zonebitcoin. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.
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