30.08.2019

Bitcoin history

The fact is, Bitcoin is a lot of different technologies gathered in one place. In his famous work Satoshi Nakamoto suggested nothing new: in the Bitcoin he combined what has already existed before him in one form or another.

Blockchain technology

 It is a technology of maintaining a distributed ledger (database), which allows to exclude distortion of stored data or information, committed with or without malicious intent. Blockchain is the basis of Bitcoin technology: it is the key one on its own, but at the same time it unites a set of other technologies, first of all cryptography.

 Blockchain technology could not exist without cryptography algorithms and data hashing technology. Cryptography algorithms gave blockchain the concept of asymmetric encryption keys, private and public keys, procedures for calculating the key (hash) for some sequence of information. Before blockchain appeared, keys (hashes) were already used as a tool for storing and quickly accessing data in information storage systems.

 The principle of asymmetric keys has allowed to make encryption impossible for hacking and penetration by third parties and a high level of security of information transfers which is reached due to the fact that one of keys (public or private) is never transferred via open communication channels that excludes the risk to compromise them. This has made it possible to make cryptography (encryption) of data for users far from this procedure. All that remains is to keep one of the keys secret.

 The cryptocurrencies received the prefix “crypto” from the word “cryptography”. Without encryption it would have been impossible to implement blockchain technology.

Cryptography began to be used by independent communities to create intercept-safe data communication systems in the early 2000s. The most famous systems are TOR (the onion router) and BitTorrent. And BitTorrent works on the principle of peer-to-peer (from one user directly to another - P2P) and allows you to share any files. Bitcoin network also works on this principle.

 The emergence of such closed networks has led to the need to create a separate currency, which would be decentralized, and it would lack control by the state. The cryptopunks movement has helped in the theoretical understanding of such a task.

Cryptoanarchism and cryptopunks

 In 1992, Timothy C. May, an engineer from Intel who became a popular technical and political journalist in the U.S., published “The Crypto Anarchist Manifesto”, in which he voiced the idea that cryptography makes it possible to make economic relations in the world free from government and big business interference. He writes: “Two persons may exchange messages, conduct business, and negotiate electronic contracts without ever knowing the True Name, or legal identity, of the other. Interactions over networks will be untraceable, via extensive re- routing of encrypted packets and tamper-proof boxes which implement cryptographic protocols with nearly perfect assurance against any tampering. Reputations will be of central importance, far more important in dealings than even the credit ratings of today. These developments will alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret, and will even alter the nature of trust and reputation”.

 Another founder of the online privacy movement is Eric Hughes, who wrote the “A Cypherpunk’s Manifesto” in 1993.

 As a result, Timothy May and Eric Hughes, together with a group of like-minded people, joined forces to form a club. May himself believed that among those who came to these meetings could be a person (or a group) who then wrote the famous work under the name of Satoshi Nakamoto.

Influence of the Internet on Bitcoin creation

Another key technology for Bitcoin is Internet technology.  The presence of such a network makes it possible to connect millions of computers all over the world into a single network. Users of such computers and other devices can receive information anywhere in the world where there is a network.

 The emergence of other payment systems has led to the emergence of electronic wallets, where users of the system stored their electronic money.

 The combination of these technologies, blockchain, P2P networks, the Internet and electronic wallets, has led to the emergence and creation of bitcoin.

Decentralization of software development. Open source code

 With the development of the Internet, it has become possible for developers from all over the world to participate in software development. An example of such developments is, first of all, the Unix family of operating systems. The ability to use open source code and the distribution of developer teams allows you to create a complex software product without major financial investments.

Closing word

As can be seen from the history of blockchain technology development, in particular, Bitcoin, it emerged due to the penetration of cryptography into the usual civil circulation, theoretical justification of its necessity on the part of cryptopanks, the development of the Internet and electronic payment systems, the emergence of decentralized developer communities.

Satoshi Nakamoto’s work brought together thoughts and technologies that had already existed before, into a single whole called Bitcoin.