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Where does Bitcoin come from? A short cypherpunk history

bitcoin rebel

From bitcoin to blockchain to distributed ledgers, the cryptocurrency space is evolving rapidly. So fast that we’re more concerned with looking to the future than the past. But the history of bitcoin is a very interesting one. Today’s innovation is built on decades of work.

Bitcoin’s origins can be traced back to the CypherPunk movement. The Cypher-punk movement began to take shape through the work of David Chaum, who is sometimes referred to as someone who may be behind the pseudonym Satoshi Nakomoto.

David Chaum

As personal computing became more popular, people like David Chaum began to philosophize about the implications of information technology. In his article entitled Security without Identification: Transaction Systems to Make Big Brother Obsolete, Chaum outlines some of his greatest concerns. If you didn’t know any better, you’d think the article was written this year instead of 1985.

In late 1992, Eric Hughes, Timothy C. May and John Gilmore founded a small group that met monthly at Gilmore’s company Cygnus Solutions in the San Francisco Bay Area. They were jokingly called cypherpunks by Jude Milhon. Cyperpunks are derived from cipher and should not be confused with cyberpunks.

As the group grew, a mailing list was set up. This would allow them to reach other cypherpunks outside San Francisco. The mailing list grew in popularity quite quickly. The hundreds of subscribers used this list to exchange ideas, discuss development and try things out. These exchanges took place using encryption methods, such as PGP, to ensure privacy.

A Cypherpunk’s Manifesto

Only a few months later Eric Hughes published the “A Cypherpunk’s Manifesto”.  The most important principle underlying the Manifesto is the importance of privacy and security. These principles can also be applied to the Bitcoin network.

Privacy is necessary for an open society in the electronic age. Privacy is not confidentiality. A private matter is something you don’t want the whole world to know, but a secret matter is something you don’t want anyone to know. Privacy is the power to reveal oneself selectively to the world.ERIC HUGHES

Privacy in an open society requires anonymous transaction systems. Until now, cash was the primary system for transferring money anonymously. An anonymous transaction system is not a secret transaction system. An anonymous system allows individuals to reveal their identity when desired and only when desired; this is the essence of privacy.

Developments from the mailing list

Hashcash

In 1997, Dr. Adam Back, best known as the founder of Blockstream, created Hashcash. Essentially, this was an anti-spam technique that would add time and processing power to sending emails. A sender must prove that they had used computer computing power to create a stamp in the header of an email.

B-Money

A year later Wei Dai published a proposal for ‘B-Money’. He described two interesting concepts that should sound familiar when you’re working on BTC.- Each participant in the network would keep a separate database to keep track of what money belongs to whom.-All data is kept by a specific group of users.The second method is now known as ‘proof of stake’ (POS). The first is similar to what bitcoin does with proof-of-work and the consensus mechanism.

Reusable proof of workI

n 2004 Hal Finney created reusable proof of work (RPOW), which built on Back’s Hashcash. RPOWs were unique cryptographic tokens that could only be used once. This development was an important step in the history of digital money.However, validation and protection against duplicate spending is still performed here by a central server.Finney died of ALS in 2014. He was cryopreserved by the Alcor Life Extension Foundation. Finney hoped to be able to wake up again in the future as a result.

Bit Gold

Nick Szabo published a proposal for “bit gold” in 2005. This is a digital collectible that built on Finney’s RPOW proposal. The bit gold system consists of seven steps. It starts with generating a public code using a benchmark function.This is similar to the mathematical arithmetic puzzle used for mining bitcoin.

The user generates a ‘proof of work’ string from the benchmark function and details of the transaction are stored in a title register (similar to a blockchain in the consensus system).In Szabo’s system, the last piece of string is responsible for creating the next set of strings. Similar to the block creation process in bitcoin, where hash addresses are used as headers that refer to the next set of blocks.

Bitcoin

In October 2008, Satoshi Nakamoto comes into the picture. He sent a paper to the members of the cypherpunk mailing list. The paper was called Bitcoin: a peer-to-peer electronic money system, and referred to B-money and Hashcash.

The main contribution of the bitcoin white paper was how the problem of duplicate spending could be eliminated without the use of a third party.The first bitcoin was mined in 2009, but the origin of bitcoin goes much further. Bitcoin exists on all kinds of pieces of technology that Satoshi combined to create the protocol that was released in 2008.

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Hard times

Fed cuts interest rates and prints $700 billion out of thin air! Bitcoin short upswing.