Birth of blockchain

Blockchain technology today is growing rapidly and is used in a myriad of industries. Some of these industries are being revolutionized by the ability of blockchain to capture value and the community. Large brands such as Nike, Adidas, Coca-Cola etc. are currently exploring the impact this technology can have on their brands, communities and the bottom line.

So what is it all about? Catchphrases and buzzwords like DeFi, NFT, Metaverse, DIDs etc. are common and can be confusing for people not familiar with the industry. It is often forgotten what blockchain really is, who created it and what problems it solves. So today we are going back to the start - we will talk about how blockchain came into existence and what were the motivations behind it. 

In the 1970s and 1980s mathematicians and cryptographers such as Whitfield Diffie and Martin Hellman developed some basic cryptographic primitives that are now widely used in computers around the world. As the 1990s came along and the Internet started to be used globally, concerns around online security and privacy grew. Phil Zimmerman developed PGP in 1991 enabling securely encrypted communication over the Internet. Zimmerman became the target of criminal investigation in 1993 when PGP found its way outside of the USA because at the time it was seen as “munition” that was exported illegally. He found a legal loophole by printing out the source code of PGP into a book and sold the book widely. American law, namely the First Amendment of the Constitution protects the export of books. Zimmerman was eventually freed of charges, but these kinds of actions from the US government led to the creation of a group who called themselves cypherpunks. 

Cypherpunks were a collection of cryptographers, engineers and all-around technology enthusiasts who fought for online privacy which they considered a basic human right. “A Cypherpunk’s Manifesto” is a short text written by Eric Hughes describing the purpose of the cypherpunk movement. Here is a short excerpt that captures the mission quite well: 

Cypherpunks main communication channel was the famous cypherpunks mailing list started in 1992. Julian Assange, founder of WikiLeaks, was also a notable author of the mailing list. The mailing list was basically a service which automatically sent an email to everybody on the list, it was the 90s version of social media. Conversations (and arguments) were held around all sorts of social topics, mostly including privacy and technology, but also many other more common themes. Full archive of the cypherpunks mailing list can still be found here:
https://mailing-list-archive.cryptoanarchy.wiki/

As cryptography developed, the idea of the digital cash system started becoming more and more feasible. David Chaum, an active member of the mailing list, founded DigiCash in 1989 trying to build a cryptographic online cash system.

From 1995 to 1998 one bank in the US actually used DigiCash for microtransactions. Wei Dai’s attempt called “b-money” defined the use of public-key cryptography for money transfers and initial definition of proof-of-work: 

Nick Szabo’s “bit gold” further defined the proof-of-work puzzle, but ran into the famous “double-spend” problem. Adam Back’s “hashcash” defined a proof-of-work algorithm with adjustable difficulty and easy verifiability. Hal Finney’s “Reusable Proofs of Work” software expanded Back’s and Szabo’s ideas by adding so called “RPOW tokens” which can be exchanged thus defining a basic version of a cryptocurrency.

Finally, on October 31, 2008, a link to a paper called “Bitcoin: A Peer-to-Peer Electronic Cash System” signed by pseudonymous Satoshi Nakamoto was published to the cypherpunks mailing list marking a first public successful attempt of blockchain technology implementation. Satoshi managed to solve the “Byzantine generals” problem. He embedded his motivation in the first block of Bitcoin. The text embedded in the block was a reference to the headline of “The Times” newspaper on the day of the Bitcoin launch:

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"

At the time, a huge economic crisis of 2008 was shaking the world and putting the weakness of the existing central bank fractional reserve system on display. Bitcoin was Satoshi’s response. It was coded in the spirit of cypherpunks - no central point of failure, no censorship, free-to-use, pseudonymous-through-cryptography, open sourced money. First transaction of bitcoins, a cryptocurrency, on the Bitcoin blockchain was from Satoshi to Hal Finney. Finney downloaded the Bitcoin software on the first day and was playing around with the code. Szabo, Dai and Back were early adopters as well. 

On April 26th, 2011, Satoshi wrote the last public message and left the project never revealing his/hers/theirs identity which is unknown to this day. Books were written, cases presented and shouting matches occurred about who Satoshi is but no absolute clear conclusion was ever made. Strongest cases were made for the aforementioned cypherpunks Nick Szabo, Adam Back and Hal Finney. All of them denied being Satoshi. Adam Back is still very much engaged in Bitcoin development through his company Blockstream, Nick Szabo rarely appears in public and Hal Finney sadly passed away in 2014. The Bitcoin community took over development of source code and the governance of the protocol building more and more on top of it since in true open source fashion. 

The term blockchain was actually coined much later after Bitcoin launched signifying any kind of data structure of timestamped blocks without the possibility of altering previous blocks. Blockchain technology developed significantly since the inception of Bitcoin and hundreds of other blockchain networks are active today supporting thousands of cryptocurrencies and this is only when we consider public blockchains. Private blockchain solutions exist as well, for corporate use and data protection. Adoption levels of blockchain today are clearly signaling that this technology is here to stay and change the world for the better.

In our next blockchain blog post we will be talking about cryptocurrency, the first killer app of the blockchain technology. Stay tuned!