Review of the technological milestones that led to the birth of Bitcoin and the ideals of the first cryptocurrency enthusiasts.
The birth of Bitcoin cannot be traced back to a specific event. It was more of a process that went from the origin of its ideals and the technology that preceded it beyond the issuance of the first bitcoin (BTC). This digital currency and its technology arise as a response to the need for people to become independent from central banks and become actual owners of their money.
The cypherpunk movement played a leading role in the development of Bitcoin and continues to do so. The followers of this cause were the ones who laid the philosophical and technological foundations of the forerunner of all cryptocurrencies. Later, Satoshi Nakamoto would take the best of these proposals to give rise to Bitcoin.
The arrival of Bitcoin marks a turning point in the history of money. Its issuance, protection, and transparency of its technology, among other characteristics, make Bitcoin an unparalleled tool that was born to become the key to people’s financial freedom.
Who started Bitcoin?
The creator of Bitcoin is known under the pseudonym, Satoshi Nakamoto. To this day, his identity is a mystery. Several crypto and computer experts are suspected of being the face behind the founder of Bitcoin, but so far, there is no certainty as to who he might be.
In the bitcoin community, it is also believed that there could be a group of people who worked on creating and developing this technology behind Satoshi Nakamoto. Some of them are most likely still involved in the development of Bitcoin, but the secret has been kept very well guarded since 2008.
How was Bitcoin born?
The process of the birth of Bitcoin consists of two themes developed in parallel. On the one hand, the advancement of cryptography and computing; on the other, the establishment of the anti-establishment ideals that are at the heart of the cypherpunk movement, the birthplace of Bitcoin.
The technological foundations of Bitcoin
Bitcoin is a financial and technological tool that originates from a combination of computing and cryptography. The Bitcoin White Paper mentions previous works and projects that served as inspiration and a basis for Satoshi to develop his digital currency.
Hashcash and proof of work
Hashcash by Adam Back was one of those projects that paved the way for Bitcoin to start its journey. Hashcash was initially designed to limit denial of service (DoS) attacks and spam.
However, it would also become the forerunner of proof of work (PoW) used in Bitcoin mining today. According to various sources, Back was the first person Satoshi contacted before publishing his famous whitepaper.
B-money, a predecessor of Bitcoin
Wei Dai is another of the referents who, without knowing it, collaborated in the birth of Bitcoin. He covers a couple of protocols that dictate the operation of a network where digital money is issued and transferred, similar to Bitcoin. In fact, it was Adam Back who introduced Satoshi to Dai’s work.
There is evidence of the first email that Nakamoto sent to Dai several weeks before the publication of the Bitcoin White Paper, where he asked for the year of publication of his article to include in the bibliography of the document in question.
According to Dai and Back, Nakamoto was not initially inspired by “b-money,” although he must have taken some idea from there if he included it among the references.
The Merkle tree and digital signatures
The Merkle tree, presented by Ralph Merkle in 1980, is an advance in computing that makes data processing more efficient through cryptography. A Merkle tree has a structure that allows a large amount of data to be tied to a common point. This facilitates the process of verification and validation of such data.
Satoshi used the Merkle tree for different purposes in Bitcoin, among which are: saving storage space in the nodes and verifying payments without the need for a full node, as he explains in the White Paper of his digital currency.
In his publication titled “Protocols for Public Key Cryptographic Systems,” Merkle talks about the importance of digital signatures, a concept attributed to cryptographers Whitfield Diffie and Martin Hellman. It is a fundamental piece in the functioning of Bitcoin. In fact, Satoshi defines the concept of electronic currency as “a chain of digital signatures.” These allow for verifying a Bitcoin’s path from its issuance to its most recent owner.
The timestamps
Timestamps are also an elemental part of Bitcoin technology. Satoshi explains, in the Bitcoin White Paper, that the double-spending problem that some of this digital currency’s predecessors dealt with can be fixed with timestamps.
“We propose a solution to the double spending problem by using a distributed peer-to-peer timestamp server to generate computational proof of the chronological order of transactions.”
Stuart Haber and S. Scott Stornetta published their report on how to put a timestamp on a digital document in 1991. The authors propose two different schemes to use timestamps, although they conclude combining both can work more practically and safely than separately. Notably, Satoshi cited three investigations by these scientists in his groundbreaking whitepaper.
Satoshi Nakamoto’s motivation
Adam Back and Wei Dai had something else in common with Satoshi Nakamoto apart from Bitcoin: his anarchist nature. All of them were active members of a community of computer scientists and cryptographers known as cypherpunk or crypto-anarchists.
The cypherpunk movement is mainly focused on using computing and cryptography for the protection of the privacy of each individual in many aspects. Bitcoin, for example, mainly covers independence in the area of finances and making payments, although its technology has the potential to encompass much more.
The position of crypto-anarchism regarding how governments and their institutions use their power is one of rejection. Hence his quest to put more power in the hands of the people, even if this means taking power away from the aforementioned entities.
Satoshi Nakamoto was a promoter of these ideals, and he shows it in statements like the one he published in the P2P Foundation forum in February 2009.
The root of the problems with conventional currencies is all the trust that is required for them to work. Banks demand confidence that they will not devalue the currency, but the history of fiat currencies is littered with violations of that confidence.
Bitcoin before becoming the big BTC
Before sharing the Bitcoin whitepaper with the leaders of cypherpunks, Satoshi sent Dai and Back an abstract that did not have Bitcoin’s name in the title. He only presented it as “Electronic Cash without Trust in Third Parties.”
Adam Back, in an interview he gave to a journalistic outlet in 2020, commented that the idea of electronic cash or e-cash was a topic that was being discussed on various cypherpunk mailing lists. There they discussed ethical and technological principles of well-known projects in the niche, such as Wei Dai’s b-money and Nick Szabo’s Bit-Gold. However, according to Back, many decentralized electronic money projects were under development at the time.
The first Bitcoin transaction
Hal Finney was the first recipient of a Bitcoin P2P (peer-to-peer or person-to-person) transaction. To test this network quality, Satoshi successfully sent 10 BTC to his new collaborator in January 2009.
Adam Back, in an interview, while talking about the beginnings of Bitcoin, said: “Bitcoin gradually gained momentum and was no longer a simple proposition, but real and decentralized digital money, really working.” These words reinforce, in a certain way, the idea that the birth of Bitcoin could be a process of maturation and not a specific event.
Protagonists of the development and expansion of Bitcoin
In this order of ideas, it is worth mentioning some people and situations that have driven the growth of Bitcoin in technology and adoption. Gavin Andresen, for example, was the first to take the reins of Bitcoin development.
It could be said that this torch was received by Andresen from the hand of Satoshi since the last verifiable email from the creator of Bitcoin was to him, and he was the only one at that time with the access keys to the Bitcoin code. However, some sources indicate that the American developer simply assumed the role of a Bitcoin maintainer in the absence of the founder.
Later, other developers were added to the maintenance of Bitcoin, such as Andrew Chow, Henadii Stepanov, Marco Falque, Michael Ford, and Pieter Wuille. Also, founding members of the management team holders, such as Gavin Andresen, Wladimir van der Laan, Jonas Schnelli, and Samuel Dobson, decided to step aside to take on other projects and responsibilities.
There are also developers who, without being part of the official team of Bitcoin maintainers, often make essential contributions to its improvement at a technological level. They include Matt Corallo, Gregory John Newberry, Cory Fields, Peter Todd, and Gloria Zhao. However, the last one on the list officially entered the group of Bitcoin code maintainers. Zhao is the first woman to hold this position.
Areas where Bitcoin began to prove itself as digital cash
The adoption of Bitcoin was initially driven by websites such as Wikileaks, a page with top secret information from governments that have been leaked, where they began to accept donations in BTC once traditional platforms such as PayPal were forced to suspend their accounts.
Another website where bitcoin took its first steps as a currency was Silk Road, a defunct online market where many of its users paid with bitcoin for goods and services. The problem is that many of the offered things needed to comply with the laws of the United States and other countries.
On the one hand, promoting the use of Bitcoin on sites such as Silk Road and Wikileaks tarnished the reputation of this digital currency. On the other hand, these events set a precedent that proves the usefulness of Bitcoin in the real world.
The evolution of Bitcoin from its beginnings to the present day, as well as the growth in its adoption worldwide and evolution at the technological level, are evident. However, for Tim May, co-founder of the cypherpunk movement and author of the Cryptoanarchist Manifesto, Bitcoin has sacrificed some of its values in order to be more recognized today.
In his words, the participation in the buying and selling of Bitcoin by traditional institutions has not only turned it into an instrument of speculation but has also come up with regulations, user identification policies, and blocking access to balances. All of these ideas are totally contrary to the principles that this technology shared with the cypherpunk movement.
While answering questions from a media outlet that interviewed him in 2019, May said: “I think Satoshi would throw up. Or, at least, he would work on a replacement for Bitcoin.” With this, he was referring to how many currently see Bitcoin and the turn governments and financial authorities want to give it.
Despite his crude opinion about Bitcoin, May recognized that there are aspects that this network has managed to preserve and deepen, which are by the principles that he has professed since its inception.
Bitcoin can be bought or mined, it can be sent in various ways quickly, small fees are paid, and receivers get Bitcoin, and it can be sold in tens of minutes, sometimes even faster. No permissions are needed for this, no centralized agents, and no trust between its participants. Bitcoin can be acquired and stored for many years. Beyond its technological potential, the social and philosophical scope makes it more than just money or an asset to speculate on.
