Bitcoin (BTC) is crypto-currency or blockchain what the figurehead is for the boat: what is put forward, what we see first. It is very often considered as the gateway to buying cryptocurrency. All the news about this small world revolves around Bitcoin. If you are a little rebellious or a fan of Vitalik Buterin, our founding friend of Ethereum, you will be tempted to leave Bitcoin aside. But you will get lost quickly … So do not try to miss it, you will have at one time or another to deal directly or indirectly with Bitcoin!
This article is quite long since Bitcoin is a little history of cryptocurrency in his looks! For the fignants, crtl + F is your friend.
The origins of Bitcoin
I could have titled this paragraph “Bitcoin: Origins” to refer to a famous video game but the indexing of this article would have been disturbed!
The history of the Bitcoin protocol does not begin in 2009 as you can read everywhere but in the late 1990s. The emergence of the internet has spawned a period of euphoria that ended with the famous ” bubble ” internet “. This technology has allowed the emergence of many different and varied projects. Without being directly related to the internet, we find 2 projects that are now part of the prehistory of cryptocurrency: B-money and BitGold.
B-money was proposed by computer scientist Wei Dai in November 1998. It describes the features in an archive kept on its website. Let’s just summarize it. B-money is characterized by 2 principles: a database retaining the value held by each user (1), a means to record this value put online by a user and visible by the entire network (2). In other words, you’ve got the ancestor of the proof-of-work (proof of employment) .
Proof of Work is a method developed in the early 1990s and perfected by a British cryptographer, Adam Back. He named his project Hashcash. The validation technique is very similar to the one existing today since all transactions are visible to all participants . However, the protocol provided for a possibility of repair in the event of a problem in the transaction. Something that does not exist today.
But Dai also developed a second protocol that is implicitly close to the proof-of-Stake (proof of stake) . It implies that some participants, grouped in “the server” , keep the accounts of all the others. A sum of money as a deposit is required to be part of it. But if this server is composed of dishonest people , I let you imagine the consequences for the other participants …
In spite of his ingenious idea of a real cryptocurrency, B-money never saw the day for lack of concrete realization.
BitGold is almost identical to the bitcoin protocol. Indeed, it is a distributed system of irredeemable and irreversible chains of evidence of work. The only difference, and not the least, is a security that leaves something to be desired. Szabo tried to solve the main problem of a transfer of cryptocurrencies: the double expense. Without success. I will come back very soon.
But let’s not forget that BitGold has also suffered from the competition of Rippleplay, a kind of Paypal of the foreign exchange market (I make it simple to summarize). Rippleplay is especially the first version of the crypto-currency Ripple, one of the most controversial in the world for reasons that are mentioned in the article about it.
The birth of Bitcoin
The manifesto of Satoshi Nakamoto
Bitcoin has this element of mystery that makes it both exciting, intriguing and suspicious. The creator of Bitcoin is indeed unknown and its identity is not likely to be revealed soon, even if you read the opposite here and there.
On October 31, 2008, the manifesto titled ” Bitcoin: A peer-to-peer electronic cash system ” (Bitcoin: a peer-to-peer electronic money system) is published. The author is a mysterious Satoshi Nakamoto who calls himself Japanese. Since he never revealed his identity, all speculations were considered: a group of people, Nick Szabo (although there are strong suspicions for him!), Hal Finney or other. Leave the investigation aside, I think it is a detail, storytelling, rather than vital information. The bottom line is that Bitcoin exists!
2009-2010: the first transactions in Bitcoin
In January 2009, Satoshi Nakamoto unveiled Bitcoin-QT, which has since become Bitcoin Core. This is a unit creation software of the famous peer-to-peer electronic cash. January 3, 2009 is the official birth date of Bitcoin, cryptocurrency and blockchain. The blockchain is indeed a technology that was born with Bitcoin and not the other way around. It is a date to engrave in the marble, perhaps the beginning of a new era in this XXI century. What, I exaggerate a little? We will see
The first Bitcoin transactions are confidential and only a few insiders participate. At the end of 2010, Satoshi Nakamoto finally leaves Bitcoin-QT … and disappears forever in anonymity! This only reinforced the mysticism surrounding this surname.
Since 2010: the globalization of bitcoin
The rest is history. Bitcoin is a financial asset considered sulphurous because of the secrecy surrounding it and various scandals. The largest of these is the Silk Road marketplace where you can buy anything and everything (weapons, drugs and other illegal products). Ross Ulbricht, its founder, is now in prison and will remain there until his last breath.
Yet, Bitcoin has always stood firm, despite its ups and downs that look a bit like that.
Bitcoin has even made small, competing, twin or even dissident cryptocurrencies. I repeat, it mainly gave birth to blockchain technology.
The year 2017 was when Bitcoin, known to geeks, anarchists, digital enthusiasts and (some) bandits, was the focus of media attention. At the ball of idiots, the big media, the bankers, the politicians even certain respectable professions (which do not belong the bankers) like the lawyers or the economists. A significant number of them told nonsense about Bitcoin, without understanding anything, without having touched it from near or far. Yet he is still there, alive and well.
It is not a novel vying for the price Goncourt, so I will stop my tirade and enumerate the characteristics of Bitcoin.
The characteristics of Bitcoin
Bitcoin is both the death of past mistakes and the birth of the blockchain. Let’s see why.
I said that will not be addressed the two crypto-dissenting currencies that are Bitcoin Cash (BCH) and Bitcoin Gold (BCG).
The realization of B-money and BitGold
As we saw earlier in this article, the two previous projects essentially failed because of security issues, authenticity or various difficulties related to the complexity of the system. The first of them is the famous double expense, also nicely called the problem of the Byzantine generals.
I admit my total ignorance of this problem before having read books and articles on the characteristics of Bitcoin! So I will summarize simply (but a little longer), with my words and my little passion for the Byzantine – Ottoman Orient! My metaphor differs from the classical one, but it is equally valid for describing the problem.
The Byzantine Empire sees its capital Constantinople besieged by the Ottomans. 10 generals of the Byzantine army are posted on the city walls and only a perfect coordination of the 10 will defend it. If one or more of them are traitors, the capital falls. Indeed, generals cannot communicate directly with each other and trust messengers considered reliable. The goal is to find out how the loyal generals’ defense plan works despite the presence of these treacherous generals. In cryptographic terms, it is a question of finding an algorithm allowing to coordinate the trust between the generals thanks to written messages, signed and especially unfalsifiable .
In the case of Bitcoin, this algorithm makes it possible to eliminate the fear of double spending, for example when Michel sends 1 bitcoin to Denis but in parallel potentially this same bitcoin to Robert. Thanks to the proof-of-work and mining consensus, the Bitcoin protocol solves this problem of Byzantine generals and avoids double spending. Thus, when Michel sends his bitcoin to Denis, he can not transmit it in parallel to Robert until he no longer has it. Blockchain technology today is the only one that can solve this problem of Byzantine generals.
The fundamental principles of Bitcoin
There are six of them. I will only list them because, talking about CPUs, nodes, public key / private key, hash is a bit too complex for me who is neither a computer cryptographer ?:
- The Bitcoin blockchain is a peer-to-peer network that is not regulated by a central authority => users therefore exchange bitcoins without the intervention of a trusted third party,
- Bitcoins traded have a fixed value in traditional currencies that vary by the sole mechanism of supply and demand => the price variation is therefore only influenced by the purchase and sale of the Bitcoin unit,
- The exchanges are validated by a complex system already evoked ( proof-of-work ) where the asymmetric cryptography and the resolution of complex mathematical equations by super-powerful computers allow the recording of a transaction in a block and whose activity is called mining => it is the most complex type of blockchain, the most energy-consuming but also the most secure,
- Each transaction is recorded by a timestamp (of type SHA-256 ) in a distributed, tamper-proof, visible by all, which belongs to no one and whose modification is impossible => it is the perfect archetype of the public blockchain,
- The number of bitcoins is limited to 21 million, the last of which must normally be issued when we are all dust, the XXII century => like gold, its limit in fact its strength.
- The bitcoin cryptocurrency is divisible up to 8 decimal places. A satoshi equals 0.00000001, a 0.000001 bit and a 0.001 millibitcoin.
The objective of this article is not to give you a course of cryptography (I will be unable to ?), I will not venture into this field. The key is to understand these 6 principles!
It has already been mentioned above and I will be brief. No, it’s not the black mouths of the North mines but computers running at full speed. It is a so- called distributed and decentralized consensus protocol. Each transaction is validated by complex computer calculations that verify a transaction by decrypting the exchange, record the transaction and secure all transactions.
Minors are paid in bitcoins . The amount has been declining since 2009 and is expected to continue to decline.
The pseudonymization of transactions
Among the four notorious ideas about bitcoin, the most commonly used is the so-called anonymity of transactions. However, the Bitcoin is not an anonymous cryptocurrency! All transactions are visible on the blockchain that you can download here.
In Bitcoin Core, all transactions are recorded by exchanging a value between 2 cryptographic nicknames. However, even if the technique is not feasible by the first comer, it is possible to cross several data in order to find who owns the pseudonym. That’s what happened with Silk Road …
What, already? So fast? The conclusion is a little abrupt but rather than go far, I prefer to stop there! Bitcoin is the queen-mother of cryptocurrencies, so we could talk about hours, write pages.
Always Stay in tune with us Bitcoin – I wanted here to summarize the essentials of history and its characteristics, in an article without temporal value, being able to be the subject of punctual updates and which can be read in several years.