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How Bitcoin Began

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2008 White Paper

The now infamous Bitcoin: A Peer to Peer Electronic Cash System white paper was released in August 2008, by the now legendary and mysterious Satoshi Nakamoto. Prior to release, there had been previous attempts to create digital currencies secured by encryption that used online ledgers. B-Money and Bit Cold are two examples, but none were ever fully developed and more or less faded away. The person (or group) releasing the white paper under the synonym has never been identified, and all contact or activity ended shortly afterward. Nakamoto’s accounts remain inactive, and all coins in the original wallet remain unspent.

There is some speculation that a group of people who filed a secure communication-related patent are involved. Coincidentally they filed their patent two months prior to the purchase of the domain name. The evidence available doesn’t support the speculation, however. Based on extensive reviews, Nakamoto’s online emails and writings were written with few errors, American spellings were used in the first post, but in the Queen’s English for all the rest. Embedded into the Bitcoin code is a tag that relates to a Jan 3, 2009 headline from the Times of London.

Leading computer security experts have combed Bitcoin’s code looking for flaws. None were found, and experts have concluded that Nakamoto would have to be a world-class programmer with an extensive background in cryptography, economics, peer-to-peer networking, and a deep understanding of C++ programming. A person this bright could easily avoid being identified back in the day – before smartphone mass adoption. It is widely agreed the complete disappearance was the best thing that could happen for Bitcoin, but that hasn’t stopped countless attempts at discovery. You might enjoy reading one such investigation found when researching the origins for this kb-post. You can also read Satoshi’s posts in the original Bitcoin Forum, which he founded. The last post was made on Dec 13, 2010. Chances are the world will never know for certain who Satoshi Nakamoto really is – and that it wouldn’t much matter.

2009 Public Release

Regardless of Satoshi Nakamoto’s true identity, there are countless dedicated developers, researchers, and educators who openly worked or still work on the Bitcoin project. Nakamoto described the approach to writing the software was first to prove to personally that the concept of purely peer-to-peer electronic cash was valid; and secondly that a paper with solutions could be written. The software was first made available to the public in 2009 via first Sourceforge, and then later on GitHub.

2010 First Trade

By 2010, Bitcoin had been mined but never traded until someone swapped 10,000 of them for two pizzas. This transaction was the first time a value was recorded and is now celebrated as somewhat of a holiday, given the value at current prices.

  • Bitcoin Network is the peer-to-peer payment network operating on a cryptographic protocol.
  • Bitcoin Core is free and open-source software that serves as a bitcoin node and provides a bitcoin wallet which fully verifies payments. It is considered the bitcoin reference implementation – the standard from which all other implementations and corresponding customizations are derived.
  • Bitcoin is the actual cryptocurrency.

There is no formal structure for the network, so development is based around BIPs (Bitcoin Improvement Proposals), and public mailing lists are used to vet initial expressions of ideas. If sufficient support for an idea is displayed, a BIP document is written. The standard for sharing ideas and gaining community feedback to improve bitcoin was initiated by programmer Amir Taaki in 2011.

2011 First Altcoins

In 2011 the first alternatives to bitcoin were created, dubbed “altcoins” which claimed to improve on the original design to some degree or another. Among the first were Litecoin and Namecoin, but currently there are over 1,700 other cryptocurrencies in circulation. None with the “network effect” of Bitcoin, which is a phenomenon whereby a product gains more value as it adds more users. Metcalfe’s Law is recognized as the rule for valuing “network effect”, which states that the value of a network is proportional to n² where n is the number of participants (nodes) in the network. While there is some difference of opinion on the strength of Bitcoin’s network effect, it is clearly stronger than that of competitive altcoins.

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