2.2 The History of Bitcoin - Video Tutorials & Practice Problems

Now to put things into context, let's look at the history of Bitcoin, because you might wanna think, why is it so important that you're able to do a peer to peer transfer of an asset of value, and to do so we have to look back at where Bitcoin began and why Bitcoin even exists. To do so, we have to go back to the 2008 financial crisis. Now if you recall, at the time, the banks were going under, the economy was in shambles and people were really dealing with a lot of like uncertainty as to what's gonna happen with the economy. Now key things you need to understand is that at the time many people were basically losing their shirt, they were losing all of their assets and yet banks were actually getting bailouts, and that's a key thing you need to understand, because when you think about it, the banks were a key component as to why the financial crisis happened. Many of the banks were carrying assets that they were not supposed to carry and maybe some of the things were actually tampered records, so there was a lot of uncertainty on what was gonna happen with the economy. So from the bottom of all of this, we're talking in the depths of the 2008 financial crisis on October 31st, 2008, a Whitepaper was written and published called Bitcoin, a peer-to-peer electronic cash system, and that Whitepaper was written by someone called Satoshi Nakamoto. Now it's important to say that nobody knows who Satoshi Nakamoto is, and notice that I say Nakamoto, Nakamoto, if you go to the Japanese approach it's Nakamoto, in the US they say Nakamoto, but the key thing is Satoshi Nakamoto, nobody knows who Satoshi Nakamoto is, and yet we now have Bitcoin and everything that Bitcoin is, was spelled out in this Whitepaper that was created in and published on October 31st, 2008. In that Whitepaper, Satoshi Nakamoto described the following: "A purely peer to peer version of electronic cash would allow online payments to be sent directly from one party to another, without going through financial institution." In a nutshell, what that really pointed out is the concept of disintermediation and if you noticed Satoshi Nakamoto had hidden a message inside the Bitcoin Blockchain on that first transaction, and what he said was that the chancellor was on the brink of a second bailout for banks. Bitcoin was designed to eliminate the role of banks, it wanted to just take over and dis-intermediate the transfer of money, and that's why Bitcoin was created. Now, Bitcoin wasn't the first attempt at this, in fact, there was a whole movement of many different cryptographers and different people trying to create electronic cash. So Bitcoin was not the first ever. In fact, in 1983, David Chaum created one called Ecash. Now Ecash was not successful, it actually was, it pushed itself out, but it had some challenges to the point that it never gained mass adoption. But think how far back we're talking, we're talking 1983, David Chaum was already doing this. Furthermore 1997, Adam Back created what is known as the Proof of Work, which is used in Bitcoin today, in fact, it's called Hashcash and Hashcash was originally done as a way to prevent spam, but it has been retooled and now it's used in Bitcoin as a way of securing the Bitcoin network. But notice these are all individual pieces that have been built on and leading into what is now Bitcoin. In 1997, a man named Wei Dai published something called b-money, now b-money was another attempt, just like Ecash was, and it never really caught on, but think of it, we're going all the way back to 1997. And one that's really important to point out is Bitgold and Bitgold was created by Nick Szabo, we will talk again about Nick Szabo further in this course, but a key thing you need to understand about Bitgold, is that Bitgold had many, many of the elements that today form Bitcoin. In fact, it's almost like a predecessor of what was now Bitcoin. In fact, many people wonder if Nick Szabo is in fact Satoshi Nakamoto, that's never been proven, but some people believe so, but it's very important for you to know that all of these are previous attempts to what is now Bitcoin, and in many ways, Bitcoin borrows and builds upon many of these earlier attempts. In fact, if we wanna go really far back, we look at 1991, there is a document that was published called "How to Time-Stamp a Digital Document" and it was published by Stuart Haber and W. Scott Stornetta and that was the first attempt and presentation of using cryptography and building a chain of digital documents that would use hash cryptography to timestamp. In fact, many people credit this as being the source of Blockchain. This would be what is now Blockchain, so the first attempt at Blockchain was described in this document as far back as 1991, but it was not called a Blockchain back then. In fact, it started being called a Blockchain or in fact, a chain of blocks when Bitcoin was born.