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Bitcoin: The Prequel

Leestijd: 5 min.

Brecht Soenen


Bitcoin, The Prequel

Everyone thinks BItcoin came out of nowhere in 2009. Nothing could be further from the truth. The holy grail of digital payment systems has been sought since the beginning of the Internet. More than 40 years of research have gone into this. So today we are going to tell the tale of the long road to Bitcoin and the underlying technology called Blockchain. One of the biggest problems here was the Double Spending problem. As you know when you send a picture to someone it's not that picture but a copy of that picture, same with emails and so on. This is just how the Internet works. Now of course you can imagine that with a digital currency this causes many problems. If every coin can be issued more than once, it is of course a worthless system. This is the problem that Satoshi Nakamoto managed to overcome. But let's start at the beginning.


In the early days of the Internet, few computers could communicate with each other since each brand of PC spoke a different language. This was solved in 1974 with the launch of the TCP/IP protocol. From this point on, everything moved quickly, as well as the cryptography that is the basis of crypto.


Here we talk about the RSA public key cryptosystem. This is a system that allowed for secure transmission of data. Not to be confused with the decryption key that allows only you to access certain data. Perfectly comparable to the private key in the crypto world. This system is known as the oldest part of secure data transmission.


Ralph Merkle found an appropriate protocol for the public key cryptosystems. Quite a step forward in the crypto world.


A certain David Chaum, who is fairly well known in the cryptospace world invented a system that made payments untraceable called "Blind signatures for untraceable payments. A great leap forward to the system as we know it today. David Chaum is an American computer scientist and cryptographer. He is therefore seen as a pioneer and inventor of digital cash in 1989.


In this year the group the Cypherpunks was founded by Erich Hughes, Timothy May and John Gilmore. This group of computer nerds saw what is now the big problem, namely privacy and anonymity. They did everything they could to make the Internet a lot safer without violating human rights.


At this time, an Internet payment system was launched for electronic commerce. The company provided an online payment wallet and provided the software to merchants to accept credit card payment. Later, a micropayment system was then launched the cybercoin. This was something that was not allowed at the time in America but their company got an exception from that rule. They never stopped innovating the world of digital payment methods and laid a foundation for later systems.


The government agency NSA also stepped in. They released a white paper called: How to make a mint: The cryptography of anonymous electronic cash. This white paper is already getting close to the original crypto. Whether they did anything further with it remains a mystery but it is certain that this paper is a puzzle piece of the Bitcoin story.


This was a busy year in development. Adam Back, the CEO of Blockstream invented the Hashcash in this year which was resistant to DDOS attacks due to the proof of work protocol. Nick Szabo also provided security on public networks. Nick Szabo is also a name that comes up regularly in that world anyway.


In this year, Wei Dai invented the currency B-Money, a decentralized database to record transactions through a proof of work system. E-gold was also launched this year. This was a digital currency invented by the Gold&Silver Reserve INC. This was a system with a gold standard in which people could exchange or use the currency among themselves as a means of payment. By 2009, there were already 5 million accounts registered. Bitgold was invented in this year by Nick Szabo. This was a decentralized system but he could not solve the well-known double spending problem.


Here we talk about coins that were used in the gaming world. So coins that could not be used in the real economy but for the gamers it was a big step forward. Also in this year Bram Cohen invented Bittorent. A kind of peer 2 peer system to share movies, games or music.


Reusable Proof-of-Work (RPOW) was an invention by Hal Finney intended as a prototype for a digital cash, based on Nick Szabo's theory of collectibles. RPOW was an important early step in the history of digital money and was a precursor to Bitcoin. Although RPOW was never intended to be more than a prototype, it was a highly sophisticated piece of software that would have been capable of operating a huge network, had it caught on.


In this year, Satoshi Nakamoto's white paper was released: BItcoin: A peer to peer electronic cash system. The rest is history. All the puzzle pieces over several decades made Bitcoin possible. This is where the double spending problem was solved and where the starting gun was fired for the 19,000 cryptocurrencies that exist today. Evolution goes fast, very fast and we cannot predict what the future will bring, but 1 thing is for sure, it will be a wonderful ride for the pioneers in cryptospace.

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