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The Untold History of Bitcoin

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Introduction: It is a form of digital currency, which needs to be encrypted in order to be generated in units of currency and to be operated independently. The Crypto-currencies are a revolutionary new form of money that are being used to buy products and services. This money isn’t tied to bank, or controlled by a government. Crypto-currencies, are tax free and have no transaction fees. Transactions are also anonymous, and secure. How did the idea of cryptocurrency comes in existence? In late 1992, three individuals (Eric Hughes a mathematician from University of California, Berkeley; Tim May, a retired businessman who worked for Intel and; John Gilmore a computer scientist ) who had all retired young, invited 20 of their closest friends to an informal meeting to discuss some of the world’s seemingly most vexing programming and cryptographic issues.

THE CYPHERPUNKS GROUP

That initial meeting eventually evolved into a monthly meeting held at John Gilmore’s company, Cygnus Solutions. At one of the first meetings, Jude Milhon (a hacker and author better known by her pseudonym St. Jude) named the group as the “Cypherpunks” a play on the word ‘cipher’ or ‘cypher’, one of the ways to perform cipher(coding) and decipher(noncoding). From those humble beginnings, an entire movement evolved. As the group grew it was decided that setting up a mailing list would allow them to reach other “Cypherpunks” outside of the bay area. The mailing list grew in popularity fairly quickly and included hundreds of subscribers who were exchanging ideas, discussing developments, proposing and testing cyphers on a daily basis. These knowledge exchanges took place through the use of other novel cypher methods, such as PGP, to ensure complete privacy. As a result, ideas were shared openly. This privacy and freedom resulted in free flowing discussions on wide ranging topics from technical ideas such as mathematics, cryptography and computer science to political and philosophical debates. Although there was never consent on any one thing, this was an open committee where personal privacy and personal liberty were ultimately placed above all other considerations. The basic ideas behind this movement can be found in the Cypherphunk propaganda written by Eric Hughes in 1993. “The key principle which underpins the Propaganda, is the importance of privacy.

One can see this and other principles discussed in the manifesto being used to build the ideas that support some of the largest cryptocurrencies today.” Regarding privacy, the Cypherpunk propaganda says the following: “Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. A personal matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know.

Privacy is the power to selectively reveal oneself to the world.” Based on these principles a number of attempts were made to develop electronic money. The first attempt at such secret transacting system was made by Dr. Adam Back in 1997 when he invented Hashcash. At its essence, this was an anti-spam mechanism which would add a time and computational power cost to sending email, therefore making the sending of spam unprofitable. A sender would have to prove that they had expended computational power to create a stamp in the header of an email (similar to the proof of work use in BITCOIN) before they were able to transfer it.

In 1998 Wei Dai published a proposal for B-Money. His proposal included two methods of maintaining the transaction data; a) every member to the network would maintain a separate database of how much money belongs to users and, b) all records are kept by a specific group of users. In the second option the group of users who have custody over the records are incentivised to be honest because they have deposited their own money into a special account and stand to lose it if they are not. This method is called as “proof of stake” (POS) and the definitive groups of users (or master nodes) will lose all the funds they have stakes if they attempt to process any fraudulent transaction. This POS transaction method are used in Ethereum (ETH). In 2004, Hal Finney invent Reusable “Proofs of Work” which borrowed from the principles of Backs’ Hashcash and in 2005 Nick Szabo published a proposal for Bitgold which built on the ideas developed by Hal Finney and various other projects. As can be seen, various people from across the world have been working tirelessly on the blockchain technology and crypto currencies since the 1990’s and there have been multiple attempts to solve the complex issues surrounding cryptocurrency, by arguably some of the most brilliant minds in this space. In 2008 Satoshi Nakamoto, sent a research paper to the cypherpunk mailing list at metzdowd.com called: “Bitcoin: A Peer-to-Peer Electronic Cash System”.

The paper made direct references to B-money and hashcash and addressed many of the problems that the earlier developers faced including double spending (the risk that a single token is used multiple times to purchase goods). The paper attracted a lot of criticism from unbelievers, but Nakamoto continued on and mined the genesis block of Bitcoin on 3 January 2009. Since its inception, Bitcoin’s development has continued to come under fire by critics and skeptics but “the honey badger” (as it is commonly known) keeps on going.

How this currency works. “Coins” are produced by a procedure called mining. Mining is when your computer solves complex math problems. Each math problem is generated when a user makes a transaction, and the math problem helps increase the legitimacy of the “block”, a ledger that keeps track of all the accounts. As time goes on and more Bitcoins are mined, the difficulty and time it takes to mine this currency increases. Today, people use specialized kind of chips called AISCs (application specific integrated circuit) chips programmed only to mine “coins”.

The type of currency I shall be mainly referencing is the bitcoin – the highest value and most widespread “coin”, with a net worth of 120 billion dollars worth of “coin” mined so far. However, the features I mention apply to all cryptocurrency.

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The untold history of Bitcoin. (2018, September 04). GradesFixer. Retrieved August 9, 2022, from https://gradesfixer.com/free-essay-examples/the-untold-history-of-bitcoin/
“The untold history of Bitcoin.” GradesFixer, 04 Sept. 2018, gradesfixer.com/free-essay-examples/the-untold-history-of-bitcoin/
The untold history of Bitcoin. [online]. Available at: <https://gradesfixer.com/free-essay-examples/the-untold-history-of-bitcoin/> [Accessed 9 Aug. 2022].
The untold history of Bitcoin [Internet]. GradesFixer. 2018 Sept 04 [cited 2022 Aug 9]. Available from: https://gradesfixer.com/free-essay-examples/the-untold-history-of-bitcoin/
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