The History of Bitcoin: Context and origin of digital currency

In 2023, bitcoin celebrated its 15th anniversary.…That’s how long it took for this technology to be “understood” and adopted by an ever-growing population.

Since the ancestors of bitcoin, we can say that cryptographers and computer scientists have been trying to create the ideal electronic money for more than 30 years.

However, you say to yourself that it is still complicated? That it is incomprehensible? Worse, that you don't understand anything about it and that it's not for you?

Ah! Wait a bit, dear friends... Bitcoin (Editor's note: I will explain below the difference between bitcoin with an uppercase or lowercase letter) may seem complex at first glance, it's true. That said, rest assured, it is a perfectly understandable technology when it is well explained.

It is not reserved for an elite and we (the Zone Bitcoin team) have prepared this course so that everyone can understand and master this formidable technology, which is perhaps still suffering, a decade later after its appearance. , misinformation.

So, if you are ready to learn more about blockchain, bitcoin and cryptocurrencies, you have landed on the page you need!

We will see in this free training the history of bitcoin, in what context the cryptocurrency appeared.

Once you are familiar with the history of bitcoin, it may be easier to better understand the importance of bitcoin.

The general context of the financial system in 2008

In this first chapter, we will discuss the history of bitcoin, and see in an abbreviated way the history of money and the classic banking system. It is essential to understand the status quo of current finance to better understand how bitcoin appeared.

Yes, bitcoin is part of a certain reality and if you want to fully understand its issue, then it is really important to know how it appeared.

A simplified history of banking and money

I am not deliberately giving you a complete and precise course on the history of money here. It would be way too long and it wouldn't really be relevant to go into detail to understand the history of bitcoin.

We are nevertheless obliged to underline the context in which bitcoin appeared because it remains fundamentally a currency. A digital currency, certainly, but a currency all the same.

Let's first get to the basics, if you wish, with a short retrospective of what money is.

The origins of money and banking:

First of all, you probably already know that money had no other use than in barter. That is, we exchanged objects for other objects. This is in fact the most primitive form of money. That is, we exchange "things" according to the value we attribute to them.

For example, we could exchange 5 chickens for 1 sheep for example.

Well, this is just an example; What matters is the very idea of ​​money in its oldest forms: barter.

And, what we can emphasize in this example is simply the idea that value was subjective and resulted from a negotiation between two people. For this or that person, 3 chickens will be worth 1 ox and for others, it will be worth a sheep. Not really any objective value, as you can see.

So this is the basis of the exchange, you might say, this sort of barter.

But, over time and to facilitate trade, we moved to gold. Oh my, yes, I know, I'm going quickly and making leaps in history but understand that it's necessary to better understand the appearance of bitcoin.

So, back to gold which was perfect for trading and for several reasons:

• It's a metal, so it doesn't get damaged quickly.
• You can do a lot of things with it (including jewelry and others)
• It is rare (you don't find it everywhere, as you know).

Until now, gold remains the number 1 safe haven.

But, you see, gold...well it's heavy...It's not easy to carry around with kilos of gold under your arm.

So, even if it was practical in theory, it was not really easy in terms of permanent and daily exchange, not to mention the risk of theft increased tenfold by the mere sight of gold.

In fact, from the moment we started depositing gold in safes (the ancestor of banks, in fact), we can say that we can start talking not about money but about cash.

Why? Simply because when a person deposited gold, the banker gave him a paper specifying the amount he had deposited. He was therefore given a "voucher" in paper format. Now you immediately understand the idea of ​​the bank note with an amount written on it.

Sorry again, it's really very summary, but once again, this is the idea that interests us here of the origin of the bank, eh.

There, it's still very simple, isn't it, and to be precise, we're not yet talking about a banking system strictly speaking.

So, let's actually get to that. You know what made people start talking about banking instead of safes?

Well, it's for 2 main reasons. In fact, people rarely came to collect their gold that they had placed in the bank. Moreover, more and more people were coming to ask for loans!

Bam! It is with usurious work that we officially speak of banks. And we are in the 17th century.

Yes, this is how banks have always worked. They issue "vouchers" to people who apply for loans in exchange for repayment with loans.

This is also how banks became banks and by definition, they make a lot of money.

Currency based on the gold standard and floating exchange rates

Okay, here we are going to get into the hard part. Please note that until the First World War, all currencies were indexed to gold. This is the famous gold standard. Every currency could be converted into gold.

Then, the world as it is made with its American domination meant that there were the Bretton Woods agreements, in 44, which declared that only the American dollar would be convertible into gold.

Yes, the story would require a pause on this event but that is not the subject here.

Then, in 1971, the USA felt trapped with this convertibility because they wanted to issue more notes than they had in gold reserves. It was therefore in 1971 that the gold standard was completely abolished.

And, if currencies are no longer indexed to gold, they then become indexed directly to it.

This is called floating exchange rate. Why floating? Quite simply because the currencies between them will exchange according to market fluctuations. More precisely, everything here depends on the law of supply and demand. One day, 1 dollar equals 1 euros then the next day it is the opposite. (I exaggerate to emphasize the floating nature of exchanges).

Bitcoin to fight against centralized and…failing banking system?

Actually, what I'm getting at with this short introduction is that you can better understand the context in which bitcoin appeared. This is where we understand the history of bitcoin better, right?

This is really important if you want to understand the full extent of this technology and why we are talking about a technological revolution.

So, let's see how our banks work. Above all, let's discover flaw number 1.

Frankly, when we think about it seriously, we would say that this affair is almost a Ponzi.

Well, we have clearly seen that a bank is a bank from the moment it keeps money, gives you a receipt and lends money on credit.

Ok. But, if everyone comes to get their money, what happens? Well, the bank couldn't return the money to everyone since it lent it to other people, could it?

The banking system is based on credit and cash money (that noted in bank accounts) is for many, debt money.

This is also what explains the recurring crises of the classic financial system, like the last one with subprimes for example, in 2008...

Remember this date carefully. It is above all the historical date of the birth of bitcoin.

Yes….It is precisely there, at this precise moment that bitcoin appeared…

Besides, I repeat that this is simply an abbreviated story and that economists are not throwing stones at me.

Likewise, the neutral tone is sometimes put in quotation marks despite myself for the simple reason that bitcoin has (also but not only) its origins in the flaws of the banking system. It was therefore important to highlight the weakness of the current banking system, without wanting to be too pejorative. The history of money, currency and banking are super complex and necessarily I made mistakes in summarizing everything. Mea Culpa.

Understanding the concept of Bitcoin

Here we are finally! In this chapter, we will see how and why Bitcoin appeared and how it manifests itself in practice.

1. First… There is blockchain?

As I told you in the intro, the appearance of bitcoin dates from 2008. A person or group of people – we still do not know at this time – named Satoshi Nakamoto publishes a document online, a 8-page PDF version. Yes, in 8 pages, a real revolutionary technology is explained. This is what we call a White Paper and it is this paper that speaks and explains for the first time what blockchain is.

This doc is still available for free consultation here: https://bitcoin.org/bitcoin.pdf

This can be a bit technical but know that everything related to blockchain and bitcoin is very well described.

It is therefore this document posted online which marks the birth of Bitcoin. This is how the whole history of bitcoin actually begins.

We will now explain why this is strictly speaking revolutionary!

Already, as you see in the abstract of the bitcoin white paper: it is a question of finding a way to exchange money without going through a central institution, like a bank for example.

Already, I find and all crypto-enthusiasts certainly agree with this, this simple way of thinking is simply incredible and the system put in place, simply brilliant.

A giant account book, a register book:

You have understood, this is the meaning of the term blockchain. A blockchain in French, which actually means a large accounting book. This is how we like to think of blockchain.

All expenses and purchases (in the idea) are therefore transcribed in this book. Each action is noted, with crazy precision. The date and time of the transaction.

• Jacques sends 300 euros to Paul, August 30, 2019
• Paul sends 1000 euros to Marisk on August 31, 2019
• etc.

This document lists all the transactions that have taken place and will take place. Do you see the idea? A sort of giant ledger where everything that has been done is recorded forever. These operations are recorded in blocks.

We close a block after – for example – 10,000 recorded operations. Then, we open another block.

An unlimited block chain

There you have it, one of the great strengths of the blockchain is that the register of these blocks is unlimited. In fact, the ledger includes each block. The ledger contains many other books, so that this ledger is unlimited in the number of recorded actions.

Each beginning of each book contains the summary of what is in the previous book. The blocks follow one another and they form a "chain of blocks", which is the literal translation of the word Blokchain.

That said, the blockchain in its principle only explains part of what Bitcoin is.

Please note: Bitcoin with a capital b represents the bitcoin blockchain. The lowercase bitcoin therefore refers to the cryptocurrency bitcoin, which is a simple application of this blockchain.

Understanding Hashes

First of all, the concept of hash is known in computer science. It was used long before Bitcoin appeared. This is one of the words commonly used by programmers, for example.

If the terms MD5, SHA1, SHA256 mean anything to you, it's because you've already had your hands in some code, right?

Hashes are mathematical functions that transform any content into a large hexadecimal number composed of letters (from "a" to "f") and numeric characters, i.e. numbers.

For example, in programming, we can talk about hash if we "convert" the term "work" by a formula like z67892dhkdhbf889920037382Y3.

This transformation of the word work into this sequence of numbers and letters is what we call HASH.

Yes, it looks like your WIFI codes when you have just bought a new internet box.

Imagine the Blockchain

Normally, the blockchain can be imagined like this (in simplified version):

In each block, remember that there are all the operations recorded, such as "Jacques sent 300 euros to Paul". So, here, we understand that everything is recorded, ok for that.

But the other great innovation of this blockchain is that it cannot be modified. For what? Because each block contains a summary of the previous block. So, no one can modify the information contained in the blockchain.

This is in fact where the other big, simply crazy feature of the blockchain is found: inviolability.

For example, in the Bitcoin blockchain, it is Satoshi Nakamoto (the creator of bitcoin) who made the first bitcoin transaction, precisely on January 9, 2009.

We can in fact go back to all operations on the blockchain. If you think that it takes up too much memory, you have to tell yourself that in fact, it is not huge because our computers are becoming more and more powerful.

Since then, the blockchain has continued to grow, as there is a new block formed approximately every 10 minutes. And, this will last until all the bitcoins are created, i.e. 21 million bitcoins.

There, then, was the visible and simply descriptive part of the history of bitcoin. In the next chapter, we'll dig a little deeper and go into detail and see how bitcoin works in practice.

Read other articles:

• Discover the “ancestors” of Bitcoin: eCash, B-Money, BitGold…
• By the way, do you know the different players in the Bitcoin ecosystem?
• “Bitcoin and me”, the famous letter from Hal Finney
• “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?
• Discover the mystery of the Bitcoin Genesis Block…

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