What is Bitcoin?

There have been many attempts (especially in the early 90’s) to create digital cash or a digital currency, but with no sustainable success.  DigiCash, founded in 1989 by David Chaum (a computer scientist and cryptographer), was an example of this when it finally filed for bankruptcy in 1999.  Chaum felt that it had failed because, at that time, e-commerce was not fully integrated within the internet.

Ten years passed before Bitcoin was created by Satoshi Nakamoto.  In an announcement in late 2008, Satoshi said in a forum that he had developed "a peer-to-peer electronic cash system." He had found a way to decentralise the trust by building a peer-to-peer technology which is very similar to common file sharing systems today.

Satoshi Nakamoto is actually a pseudonym for the mysterious inventor of Bitcoin – no one really knows how he is.  He published a paper on a cryptography mailing list at the metzdowd.com website explaining the principles of block chain and released the first version of Bitcoin.

Reference url: http://www.metzdowd.com/pipermail/cryptography/2009-January/014994.html

The snippet above provides some detail to explain the transfer of coins along with the distribution of coins.

Satoshi must have spent time thinking about and applying economic mechanisms to support demand for the coins – a diminishing supply should lead to an increase in demand.

He worked with other developers in maturing the Bitcoin software until about mid-2010 when he handed control of the system to Gavin Andresen, a 3D Graphics and Virtual Reality software developer.  Gavin had worked with Satoshi on Bitcoin and was declared lead developer on the software once Satoshi had left.

In developing the technology, Satoshi left a text message in the first mined block of Bitcoin which reads “The Times 3 January 2009 Chancellor on brink of second bailout for banks”.  This shows that the first block was mined on or after that date.  This block is referred to as the genesis block and is unlike all other blocks since it does not have a predecessor. 

For being the initial miner of Bitcoin, he was awarded Bitcoin at the genesis and for the next 10 days afterwards.  His public Bitcoin address for Satoshi shows that he owns roughly one million Bitcoins.

Bitcoin has flourised online and more and more people are becoming comfortable with the different approach technology has provided for providing electronic mechanisms of exchange.  As a result, many Altcoins have been created that attempt to differentiate themselves from Bitcoin through enhancements or other elements of perceived increased value.