Here at NewsBTC we believe that education and knowledge is fundamental to the wider adoption of cryptocurrencies and growth of the blockchain industry. We will be expanding our education section by delving deeper into some of the machinations and technology behind the blocks. Our weekly articles aim to provide a greater understanding of how things work in the crypto ecosystem.
Early Origins – A Brief Pre-Bitcoin History
To kick things off we will take a look at the history of cryptocurrency and go back to its very beginnings. As governments and banks became more powerful a libertarian cypherpunk movement evolved to advocate the use of technology to protect privacy. By using cryptography they defined it as the power to selectively reveal oneself.
According to A Cypherpunk’s Manifesto written by mathematician and computer programmer Eric Hughes in 1993;
“Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know. Privacy is the power to selectively reveal oneself to the world.”
Bitcoin was not envisaged for another fifteen years after this was written but there were a few early attempts at an anonymous digital transaction system. One of the first one came from American computer scientist and cryptographer, David Chaum. In 1990 he founded DigiCash, a cryptographic electronic payments system which employed ‘blind signatures’ to allow users to digitally sign off on transactions without revealing their identity. The downfall of the system was centralization as it was hosted by Chaum’s own company which was responsible for validating each signature. Eventually this led to bankruptcy in 1998.
Hashcash was proposed in 1997 by British cryptographer Adam Back. It was originally designed to prevent email spam as a cryptographic puzzle, or proof-of-work, was required to send out an email. Recipients could then verify authenticity by checking the Hashcash stamp in the header.
B-money came in 1998 from computer engineer Wei Dai as a precursor to Bitcoin. The anonymous, distributed electronic cash system laid out some core concepts that would later be included in Satoshi Nakamoto’s whitepaper. Core concepts included a proof-of-work function used as a means of creating money, everyone maintaining a copy of the database showing who owns what, and work was verified by the community who all worked to update a collective ledger. Just like modern cryptocurrencies, workers were rewarded funds for their effort in expending computational resources.
The concepts from B-money would later influence the development and design philosophy of Bitcoin. Dai Wei along with Adam Back were the first two people contacted by Satoshi Nakamoto while he was developing Bitcoin in 2008.
Next Week: Nakamoto’s Vision