Bitcoin, in a way, is the child of blockchain. It is said that the creator of bitcoin initially created it with the hopes of showing the public the marvels of blockchain technology, which is digital information (a "block") that's stored in a public database (the "chain"). Bitcoin was initially suggested as an idea over a decade ago by Satoshi Nakamoto, a pseudonym.
In 2008, Nakamoto's paper detailing the math and specifics of bitcoin was sent to a cryptography mailing list (cryptography is the art of writing and solving codes). Soon after, a game developer named Hal Finney became fascinated with the idea of a decentralized digital currency. Finney contacted Nakamoto and offered to mine the first original ten coins as a test. Nakamoto gifted the first ten coins to Finney for his successful creation. Finney later died in 2014 due to complications of ALS but his optimism in bitcoin remained till his last days. Finney left his coins to his family in an offline wallet with the hopes they would be worth something one day. Bitcoin creator Nakamoto left the scene in 2010, and allotted future design changes and modernizes to Mike Hearn, stating, “it’s in good hands.” Hearn, a former software engineer with Google, worked two years on bitcoin.
Bitcoin didn’t start attracting much public interest until 2012, when the Winklevoss twins, known for their legal battles with Facebook (read their story in Bitcoin Billionaires), purchased $11 million worth of bitcoin with their Facebook settlement. It's estimated that they own around 1% of available bitcoin, with a valuation of somewhere north of a billion dollars.
Before it's rise in the public eye, Silk Road, an online black market for illegal drugs, launched using bitcoin for payments in 2011. Silk Road was able to keep its users privacy secure while also successfully conducting business. Bitcoin demonstrated in real time a way to conduct business privately, securely and remotely. Many of the users to this day have not been charged for using this service, but that is a different story for the now defunct Silk Road webpage creator, Ross Ulbricht. Ulbricht is currently serving a double life sentence plus forty years without the possibility of parole, for conspiracy to traffic narcotics by means of the internet and money laundering.
A Shroud of Secrecy
Many attempts have been made to discover Nakamoto's identity, but with each name that's been suggested, each claims not to be the creator. Nakamoto's anonymous identity has helped build trust and credibility to bitcoin for a few reasons.
- Government agencies have been unsuccessful in pinning down which country bitcoin was created in. Confidence in the technology might be hindered depending on the true identity of the creator. If the country in which bitcoin was created was discovered, that could lead to different legal battles, control, and therefore diminish the faith in its use and perceived value.
- Depending on the country, it could face taxing and/or tariffs, and even face a ban of use from countries simply for the fact that it was created within one country's borders.
- Any country at any time can decide to make this technology illegal, such as China did in 2017, purely for its decentralized and unregulated features which China could not control.
- This new currency is reliant on being public, and unlike the fiat currency that we're familiar with these days, its value is created by the users and backed by their faith in the technology.
The story of bitcoin is an interesting one. From its cautious creation from an unknown person, to its public unveiling and shady dealings with Silk Road, bitcoin is a landmark technology that has proven to be a new method of currency that has shifted power from being centralized and private, to public and secure.
There are still risks in its use, such as the perceived value the market gives it and the public nature of the technology. But one must decide for themselves if it is a risk worth taking.
Watch a 2018 presentation on bitcoin basics with expert Andreas M. Antonopolous.
Explore books in the catalog about bitcoin or other digital currencies, or peruse the following list of materials hand-selected by a librarian on this topic.
Blockchain, cryptocurrency, bitcoin, decentralized currency. Chances are you've heard these buzz words. Check out the books below to broaden your understanding and find out if this is the investment opportunity for you.
This book provides historical background and a theoretical foundation for understanding the need for a new money system and bitcoin as a path to the future.The Bitcoin Standard