3. December 2020

Bitcoin: its birth, its 12 years of existence and its future

IN BRIEF

  • It has been 12 years since the Bitcoin white paper was published, created by Satoshi Nakamoto.
  • BeInCrypto has chosen to celebrate this anniversary with a retrospective article on the evolution of BTC and its mission in the relationship between humanity and money.
  • The creation of Bitcoin is and will remain a key moment in modern monetary history.

Twelve years have passed since the publication of the Bitcoin White Paper. Entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” and published by the mysterious Satoshi Nakamoto on 31 October 2008, it is one of the most transcendental documents in the history of money. More than ten years later, this white paper is still the source of in-depth studies, interpretations and, most of all, unanswered questions.

A peer-to-peer e-money system

Talking about the history of Bitcoin is quite complicated and can be confusing. This is mainly because Bitcoin is not a “thing” being a by-product of the evolution of something else. Indeed, the core of how Bitcoin works was the result of the adjustment of different principles and sciences that had never been approached in the same way as when it was created. In other words, Bitcoin is a creation derived from the combination of different functionalities that were never brought together, nor were they planned for the purpose that Bitcoin was intended to achieve.

However, given the definition of Bitcoin’s main document, and the inclusion of “peer-to-peer electronic payment system” in its title, this review provides an excellent starting point. According to this information, Bitcoin was probably intended to meet the definition described in its title. And for this type of purpose, fortunately, there is a history.

A starting point from Milton Friedman

In 1999, Nobel Prize-winning economist Milton Friedman gave an interview to the National Taxpayers Union (NTU). In it, he revealed an idea very close to what Bitcoin is proposing today.

His comments, which seem perfectly synchronised with the white paper that Satoshi Nakamoto published 9 years later, are as follows:

The only thing missing, but soon to be realised, is the real e-caisse. A method by which, on the internet, you can transfer money from A to B, without A knowing B or B knowing A. In the same way, I take a 20 dollar note and give it to you without any trace of where it came from; and you could receive it without knowing who I am.

In his words, Milton Friedman probably proved to be the best and most reliable antecedent of Bitcoin. An antecedent born from a simple thought constructed by one of the world’s greatest economic minds. A thought that was able to describe Bitcoin 9 years before its birth, with a predictive dimension.

Birth of Bitcoin

On Friday 31 October, at 14:10 EDT, the post that changed everything was published by the mailing list “The Cryptography Mailing List”. Entitled “Bitcoin P2P e-cash paper”, the person(s) behind Satoshi Nakamoto’s pseudonym shared an idea based on a “new digital money system” that would unveil the nomination and founding of Bitcoin for the first time in history.

I worked on a new electronic payment system that is totally peer-to-peer, with no trusted third party.

The document is available at the following address:

https://www.bitcoin.org/bitcoin.pdf

 

Its main properties :

 

Avoid double expenditure with a peer-to-peer network.
There are no entities or other trusted third parties.
Participants can be anonymous.
New parts are issued from a proof of work test in “Hashcash” style.
The proof of work for the generation of new parts also allows the network to avoid double expenditure.

Excerpt from Satoshi Nakamoto’s original publication where he first shared the Bitcoin project.

The idea was interesting for many cryptography enthusiasts, as Bitcoin was closely related to this science. Similarly, the applications given to “Proof-of-Work”, data storage, and the complete operation of Bitcoin itself presented very coherent and innovative solutions in the field of cryptography at the time. Thanks to the interest gathered, Satoshi ended up working with colleagues on his new project.

On January 8, 2009, just over two months after publication, words turned into deeds: the mysterious creator mined the first block of Bitcoin, with a reward of 50 new BTCs sent to 12c6DSiU4Rq3P4ZxziKxzrL5LmMBrzjrJX, and generated from the entire process described by Satoshi in his first article. A milestone in the modern history of money.

A curious detail, the description of this first block in code contains the headline of The Times newspaper corresponding to January 3, 2009, which announced “(British) Chancellor plans second bank rescue programme”. Apparently, Satoshi called to protest against the excessive printing of money at the time, as a rescue package for the financial collapse of 2008. Bitcoin came at the exact moment when the system of trust was collapsing, with the aim of separating money from the state once and for all.

Bitcoin’s first transaction and its beginnings of exchange

On January 12, 2009, Hal Finney became the first recipient of a peer-to-peer Bitcoin transaction. And yes, it was Satoshi Nakamoto who sent him the first BTCs used for the purpose for which they were created. Finney, on the other hand, became the first person to use the Bitcoin software, and he ended up being one of the main developers of the project during the first year of Satoshi’s creation.

At the end of the same year of creation, more precisely on October 5, the New Liberty Standard was created. Known as Bitcoin’s first buying and selling service, which quoted the cryptom currency for the first time against the dollar at a rate of 1,309.03 BTC for every US dollar.

From then on, Bitcoin’s expansion began to accelerate incredibly: Satoshi Nakamoto created the Bitcointalk space in November 2009, setting up a forum to talk about Bitcoin and encourage its development. In February 2010, the Bitcoin Market, one of the first major platforms for buying and selling Bitcoin using traditional payment methods, was published in this forum.

On 18 July 2010, through the same forum, the mythical Mt Gox was announced, preceded by Jed McCaleb, giving meaning to Bitcoin’s first major trading platform. It also introduced volume values, maximum prices, minimum prices and trading positions; with it, the first steps of the big industry around Bitcoin were laid down to become what we know today. On 12 December 2010, Satoshi Nakamoto published his latest message on the Internet via Bitcointalk. After that, we never heard from him again.

Bitcoin: his future

From a technical point of view, and from the creator’s point of view throughout the history of the project, Satoshi Nakamoto would be proud of what Bitcoin is today. With a current capitalization of $250 billion, Bitcoin preceded an industry that today boasts nearly $400 billion, more than 7,000 different types of crypto-currency and tokens, and countless other companies that generate thousands of jobs and billions of dollars in profits and investment.

Of course, beyond the references to currency, it has managed to deliver what it promised: a new, censor-resistant, inflation-resistant, decentralised, sovereign, portable and digital monetary system that has been maintained for 12 years without any major jolts that might cast doubt on what it has come to achieve in the world.

Today, more than two major companies consider Bitcoin to be insurance against traditional economic collapse. Others are seeking to be part of a new harmonious integration that will allow them to link fiduciary money to decentralised cryptographic money. In truth, Bitcoin is a word known worldwide, with exponential growth in its usability. Thanks to its 12 years of life, it leaves an excellent perspective for the next few centuries that mankind foresees in its relationship with the new money.