CHAPTER 1 - BITCOIN, A STAR IS BORN
In October 2008, an anonymous individual, or maybe a group of individuals, published a white paper that heralded the start of a new technological revolution.
Up until that time and following the global mass adoption of the internet, computer programmers had grappled with solving the problems of privacy and security. With the internet, data could now for the first time in the history of humanity, be shared at the touch of a button.
But putting this data online had its problems. Third parties could make unauthorized changes or it could be hacked. Spammers, hackers, phishers, zombie farmers and data nappers who could hold databases hostage in return for a ransom prevailed.
What was missing from this amazing global platform that linked the whole world was one thing: trust.
Prior to 2008, another issue impeding global growth was the fact that many of the world’s population had no access to bank accounts. Instead they’d rely on visiting local branches of money transfer companies to obtain cash sent from a third party, with all the charges and inconvenience that this involved.
What’s more, in some poorer countries local currencies were often (and still are) prone to high inflation, so that when you did manage to obtain a local currency, it would buy less the next day than it had the day before.
What the internet and the world was crying out for was a system that allowed data, particularly ownership data, to be transmitted across the globe in a manner that could not be hacked or changed by a third party.
If you could then apply this process to some type of electronic currency and which could then be accessed through the internet on a mobile telephone, then potentially anyone with a smartphone could have a bank account. Trade and prosperity could be enhanced. In short, a better world.
In October 2008 that anonymous individual, or group of individuals, was called Satoshi Nakamoto and the white paper was entitled, “Bitcoin: A Peer-to-Peer Electronic Cash System.”
At first it was only those people who had an understanding of computer programming that appreciated the paper. But whilst highly complex from a technical perspective, the end result was comparatively simple to grasp.
What the white paper described was a system of storing data in blocks using cryptography so that it was locked. Its design meant that it could not be added to or updated without the agreement of multiple persons so that no one individual could change it.
Since no single person or central authority was being trusted to maintain it, it was described as trustless and the technology became known as Blockchain.
What Satoshi Nakamoto had invented was not only a new type of digital currency but also with the blockchain approach, a new way of creating complete trust in data that would have far-reaching implications for the world
In January 2009, the bitcoin network itself then came into actual existence with Satoshi Nakamoto creating the first ever bitcoin block (known as the Genesis Block number 0). Embedded in the code of this block was some somewhat ominous text from the London Times that day which simply said:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
Initially bitcoin was treated as more of a computer game by its handful of adopters. Programmers could be rewarded in new bitcoin for approving and creating new blocks, and these newly created bitcoins could then be sent to other people in exchange for money or goods.
Then on May 22nd, 2010 a programmer called Laszlo Hanyecz bought two large Papa John’s Pizzas for 10,000 bitcoins, worth about $30 at the time. This was widely believed to be the first purchase of a physical product with bitcoin, proving the new cryptocurrency’s potential as a means of payment.
To this day and to celebrate this momentous occasion, the 22nd May of each year is known in blockchain circles as Pizza Day.
Just eight years later, 10,000 bitcoins would prove to be worth around $80,000,000 US dollars. By summer 2019, approximately 17,000 bitcoins had been created with a total value of around $200 billion* and accounted for almost 70% of the total value of the cryptocurrency market with over 2,000 other currencies in existence.
At the same time, blockchain technology is now starting to be used in a variety of industries and, whilst bitcoin may have its detractors, its future and that of cryptocurrencies like bitcoin in an increasingly unsettled world are perhaps best summed up by two quotations:
“Rising nationalism, rising amounts of currency conflicts, trade wars—these all, obviously, are supportive of a non-sovereign, highly secure digital store of value”. Jeremy Allaire, founder and CEO of Project Circle.
“If the United States were to decide we don’t want cryptocurrency to happen in the United States and tried to ban it, I’m pretty confident we couldn’t succeed in doing that because this is a global innovation” Mike Crapo US Senate Banking Committee Chair.
In the future, it could well be that bitcoin or a similar coin, which has a finite supply and is not controlled by any single party, will become another store of value, just like gold, acting as a hedge against traditional currencies and stocks. It could well be that it will eventually be held by most people in their investment portfolios alongside gold.
But personally, I don't want to own gold. I don't want to have to hide it by burying it in my garden and I certainly don't trust anyone to be there to give it to me when I really need it.
Surely it makes sense to have at least some alternative money somewhere where only you can access it immediately and can be sent to another person in a few seconds?
Personally, I think it does and with bitcoin and all cryptocurrencies, you can own as much as you want and keep your access to it on simply a mobile phone or even just a key ring.