The Origin of Bitcoin
Even though Bitcoin’s creator, Satoshi Nakamoto, has become the greatest mystery on the internet, researchers have solid and important clues capable of revealing Bitcoin’s origin and how it was created.
Most of the specialized web portals in the area agree that the main candidates who are possibly Satoshi Nakamoto are: Hal Finney, Dorian Nakamoto, Nick Szabo, Adam Back, and Wei Dai.
If you want to solve the mystery of who Satoshi Nakamoto is, click on the following link: Who is Satoshi Nakamoto? 4 Closest Satoshi Nakamoto Candidates.
It is very interesting if we consider that four of these candidates were identified or identified currently with the Cypherpunk movement. All of this clarifies that the origin of Bitcoin is directly associated with and inspired by this movement.
It is a movement whose main ideology consists of defending the citizens’ privacy and absolute security by making use of the internet through the best encryption technology.
Although, in reality, Cypherpunk emerged in the decade of the 80s as a movement in parallel with the development of computing itself, it was not until 1992 that the word Cypherpunk was coined for the first time by the well-known hacker; Jude Milton. For this she joined “cypher” (encryption) and “punk” (rebel). Simply put, Cypherpunk is “encryption rebels.”
Thanks to this movement, the ideological gene would be born that progress through various influential characters (events and inventions) would give Bitcoin shape and life.
Henceforth, a host of innovations created by these influencers would model the computer operating system of that idea of a decentralized economy that we know today as Bitcoin.
But what were these innovations that ended up inspiring and shaping the creation of Bitcoin?
Somehow the blockchain already existed in the form of an experiment, as Stuart Haber and W. Scott Stornetta in 1991 introduced a computationally practical solution for time-stamped digital documents so that they could not be modified or tampered with.
The system used a cryptographically secure blockchain to store the time-stamped documents. Later, in 1992, the Merkle trees were incorporated into the design to synthesize all the network data in just seconds.
If you want to delve a little more about blockchain technology, check Best Applications of Blockchain Technology (2020).
If we were to mention a key technology for Bitcoin as we know it, secure and decentralized, that would be Hashcash.
Hashcash is a Proof of Work (PoW) technology used to minimize spam and denial of service attacks (known as DoS or DDoS).
This technology was created by Adam Back in 1997, precisely one of the most influential characters in the creation of Bitcoin, and one of the suspects of the identity of Satoshi Nakamoto, as we mentioned earlier.
For this, Adam Back was based in work called; “Assessment through the processing or combat of spam.” A document was presented in 1992 by computer experts Cynthia Dwork and Moni Naor.
The objective of HashCash is to require a work of computer for it to be verified. Once said work is verified, the user is allowed to use the resource.
In the case of its use and application in Bitcoin, the cryptocurrency miners must do a proof of work in order to obtain the right to mine or validate a block; this is a security measure of Bitcoin against DoS or DDoS attacks.
RPoW (Reusable Proof of Work):
Even though the predecessor of the Proof of Work of Bitcoin, that is, the Hashcash above, laid the foundations to avoid Spam emails, or Dos or DDs attacks.
For a decentralized financial system to be created, a problem still had to be solved. That problem is the famous and much mentioned one; double-spending (computer attack that involves the multiple uses of the same digital currency) of a Token or a digital cryptocurrency.
At this point, the Reusable Proof of Work (RPoW) enters the scene, created in 2004 by probably the biggest suspect to be Satoshi Nakamoto, Hal Finney.
RPoW is basically a solution protocol of the Proof of Work Hashcash, which allowed converting non-fungible and non-transferable tokens to tokens that could then be transferred from person to person P2P. All this while maintaining the same registered ownership in a reliable server designed to allow users to the integrity of their digital assets in realtime.
Along the same lines, it is essential to note that Hal Finney created this new type of token signed by RSA or “Rivest, Shamir, and Adleman” (a public key cryptographic system developed in 1979).
RPoW can be considered an early prototype and an essential initial step in Bitcoin’s history and decentralized cryptocurrencies in general, which would ultimately inspire Satoshi to create the ideal Proof of Work for Bitcoin.
This is the base protocol that would give life to Bitcoin (BTC), and above all, the consensus among all those who participate guaranteeing the decentralization of this digital currency as we know it today.
One cannot ignore the fact that in 2008 the world was going through a financial crisis caused by the housing bubble and the indiscriminate printing of money by the world governments to save banks.
All this became the trigger that motivated Satoshi Nakamoto to create Bitcoin, a decentralized digital currency that would give the people financial power.
This is how the unification of all these factors led to the birth of Bitcoin. On Friday, October 31, 2008, Satoshi Nakamoto, on the Metzdown.com crypto mailing list, spoke about Bitcoin for the first time by publishing his whitepaper.
Months later, on Friday, January 9, 2009, Satoshi Nakamoto uploaded version 0.1 of the Bitcoin software, and on January 12, 2009, the first transaction in the history of Bitcoin was made. Hal Finney receives ten bitcoins from Satoshi Nakamoto to test the network and that everything works correctly.
Everything mentioned above shows that Bitcoin is a social and technological phenomenon of concatenated facts (like its chain of blocks) that gave life to a solution that solves human needs regarding a new way of managing the finances of our time. That is, in a freedom and decentralized way.
What is Bitcoin?
Everything mentioned above shows that Bitcoin is a social and technological phenomenon of concatenated facts (like its chain of blocks). It provides real-life solutions that solve human needs regarding a new way of managing their finances in a free and decentralized manner.
What is Bitcoin?
Bitcoin is a consensual network that allows a new payment system through an encrypted digital currency (BTC) that works to exchange value between two people in a decentralized way. This means that both the Bitcoin network and its digital currency (BTC) are autonomous and are not controlled by any government or private company.
How is Bitcoin transforming the history of humanity? The answer to this question lies in this article about Bitcoin Revolution: How it Will Shape Our Future.
Its invention in 2009 by Satoshi Nakamoto was truly revolutionary. Blockchain technology would be applied for the first time with the proof of work technology. This integration allows the consensus between the parties, encryption, and the decentralization of the world’s most important financial network.
Characteristics of Bitcoin
As we mentioned earlier, decentralization is the most novel fact of the invention of Bitcoin. For the first time, we have a financial system free of governments and private companies’ control. In contrast, Bitcoin is continuously controlled and monitored by its users who are responsible for the network.
Although each user belonging to the Bitcoin network has a public key that identifies him in the blockchain network, he does not have to provide confidential personal information to any public or private entity. Likewise, you should not provide your identity on the blockchain network.
Can the blockchain help you protect your identity? Learn the art of protecting your identity on the blockchain with Blockchain Application Series: Identity Management.
It is important to note that various centralized exchanges request your private details on registration. These details are based on a security protocol called KYC (Know your Client). Such exchanges request for KYC because they are subject to the international standards of ALM (Anti-Money Laundering).
It is also true that Bitcoin’s anonymity is not 100% as in the case of the Monero platform and its cryptocurrency XMR.
This is because Bitcoin is an open-source network. That is, it is completely auditable. All transaction records are recorded on your blockchain from the Genesis block.
Thus, a highly experienced IT professional could well trace users’ public address and later link them to the identity of one or many people in the real world. Still, you could say that Bitcoin is much more anonymous than the fiat financial system.
When Satoshi Nakamoto designed the Bitcoin blockchain, he considered that the network should protect each user’s identity. At the same time, he realized that it was also vital that it be open source to everyone, no matter where they are in the world, even if they are not part of the network.
This is because transparency (Auditability) strengthens trust and credibility in the network. This is how transparency has become one of the pillar values of Bitcoin.
Also, being open-source, this implementation leaves a possibility of security. Especially if at some point the crypto-community decides to take measures regarding money laundering through bitcoin. Auditability is a good starting point to fix these issues, as long as it is the consensus of the Bitcoiners.
No matter where you are in the world, you can always access and move your bitcoins. Thanks to this, you will find numerous benefits such as:
- Traveling without as much documentation and financial management as is customary in the fiat world.
- You will not have problems at airports due to excess cash.
- Cancel products and services in businesses (stores) that accept bitcoin.
- Avoid high commissions for international transfer. With Bitcoin, it could even be free. Although if you want your transaction to be fast, you will have to pay a commission, but much less than that of the fiat world.
- You can rule out the problems of changing phone numbers by moving from country to country as a means of verifying your identity.
Note: Most of these benefits apply to decentralized personal wallets. You will also find benefits in wallets managed by private companies (Exchange) but with more limitations.
Bitcoin is much faster than any fiat method you can imagine. But there is an exception; the speed will also depend on the amount you will transfer.
The higher the amount of your transfer (and therefore the commission that will provide said operation), the faster your transaction. This is because the nodes are programmed in such a way as to give priority to transactions with higher amounts (the commission is higher in most cases).
When we talk about fast, we mean that the process of creation and verification per block in the blockchain network is approximately 10 minutes on average.
It should be noted that it is no secret to anyone that today there are cryptocurrency platforms that can make these transactions instantly. In any case, the Bitcoin community is already working on improving Bitcoin’s scalability in all its aspects, and speed is one of them.
Bitcoin itself has become an alternative for all ordinary citizens of the world, especially those living in developing countries.
How can Bitcoin represent an opportunity in oppressed countries and of dubious democracy? Click on the following link, and you will know: Bitcoin: An Opportunity in Oppressed Countries and Doubtful Democracy.
This is because people now have a decentralized financial system that allows them to control their money, 24 hours a day, 365 a year. This way, they no longer need to be subject to a one-way financial system imposed by political regimes.
They can now exit the financial systems known to cause social distortions, such as inflation. This is how bitcoin empowers the world’s citizens by providing them financial freedom and defeating social distortions such as inflation.
The exact number of bitcoin that will exist is known. The supply limit of Bitcoin is 21 million, and it will not increase or change. A situation that, together with Bitcoin’s pillar values like decentralization, transparency, and security, has made it the most influential crypto asset.
Even the Bank of America has ranked bitcoin as the most important valuation asset of the last decade.
Once a bitcoin transaction has been made, it cannot be reversed. This fact can be both an advantage and a disadvantage. What is clear is that before transferring an amount of bitcoins, it is crucial to do it carefully and safely.
Transactions for bitcoins are irreversible because, as we have mentioned above, it is a decentralized network. That is, there is no central entity that manages claims.
Bitcoin Data Sheet:
- Creation date: January 3, 2009.
- Algorithm: SHA-256.
- Consensus: Proof of Work (PoW).
- Maximum supply limit: 21 million bitcoin (BTC).
- Block time (Average): 10 minutes.
- Reward per block: 12.5 BTC (as of 2018).
- Difficulty setting: every 2016 block.
- Website: http://bitcoin.org
This is a guest post contributed by Remitano – Cryptocurrency exchange.