December 3, 2024
Bitcoin white paper turns 15 as Satoshi Nakamoto’s legacy lives on

Today marks 15 years since Satoshi Nakamoto, the anonymous creator of Bitcoin, shared the Bitcoin (BTC) white paper to the cryptographers mailing list on October 31, 2008 – a day that is also celebrated annually as Halloween.

“I have been developing a new electronic cash system that is entirely peer-to-peer with no trusted third parties,” Satoshi said in his opening remarks before linking to the document. The title is: “Bitcoin: A Peer-to-Peer Electronic Cash System.”

Satoshi Nakamoto’s email notified other cypherpunks that he had released the Bitcoin white paper.Source: Satoshi Nakamoto Research Institute

The white paper proposes a decentralized system that can facilitate peer-to-peer transactions, thereby solving the “double spending” problem commonly associated with digital currencies.

It proposed to achieve this goal through a network of nodes, verifying and recording transactions through a proof-of-work consensus mechanism, and launched two months later on January 3, 2009.

How Bitcoin was born

Satoshi Nakamoto’s computer science breakthroughs build on other impressive developments in cryptography and electronic money.

The first reference cited in the Bitcoin white paper is Wei Dai’s invention of b-money, an electronic peer-to-peer cash system that, although never launched, played a key role in Satoshi Nakamoto’s Bitcoin plan.

Like Bitcoin, participants in the b-money proposed system maintain a repository of account balances to track ownership of the currency. Transactions will be initiated and completed by sending a broadcast message to all participants, which will update the account balances of participants involved in a specific transaction.

In many ways, it can be seen as a precursor to the Bitcoin protocol node that chronicles the ever-growing blockchain.

This process requires proof of work—a form of cryptographic proof in which one party proves to the other party that a certain amount of specific computational work has been expended.

Satoshi Nakamoto applied this to Bitcoin, citing Adam Back’s 1997 invention of Hashcash, which incorporated proof-of-work to limit email spam and denial-of-service attacks.

Timestamping is another core property of Bitcoin, successfully implemented by Satoshi Nakamoto.

Bitcoin’s timestamp servers work by taking the hash of a transaction block (similar to a unique sequence number) and timestamping the block when it is added to the Bitcoin blockchain.

Hashes cryptographically link one block to the next, ensuring the integrity of Bitcoin data. Timestamps also prevent double-spending in Bitcoin, making the network tamper-proof and immutable.

Satoshi cited the work of Henri Massias, Scott Stornetta, Stuart Haber, and Dave Bayer in implementing timestamping in the Bitcoin protocol.

At the same time, Merkle trees were introduced into Bitcoin to verify transaction data through digital signatures. Satoshi Nakamoto cited Ralph Merkle’s work in developing public-key cryptosystems.

Bitcoin advocate and cryptocurrency enthusiast Jameson Lopp previously told Cointelegraph that credit should be given to the initial projects that paved the way for Bitcoin.

However, Satoshi’s genius was in combining all these parts into a fully functional system, Lopp said:

“I don’t think any piece of the puzzle is more important than the others. Satoshi Nakamoto’s genius lay not in any of the individual components of Bitcoin, but in the complex way they were put together to breathe life into the system.”

What did Bitcoin do?

Bitcoin was, at the time, one of the first inventions to use cryptography to successfully separate a currency from a state. Satoshi Nakamoto’s invention enables users to effectively bypass banks and financial institutions to conduct transactions with others around the world.

The first real-world transaction paid for in Bitcoin came from Laszlo Hanyecz, who purchased two pizzas for 10,000 Bitcoin in May 2010.

Mainstream media have highlighted the increasing use of Bitcoin by early criminals for activities such as money laundering, but this narrative has been changing.

It has been increasingly adopted globally. It became legal tender in El Salvador in September 2021.

Financial institutions have also recently applied to offer spot Bitcoin exchange-traded funds (ETFs) in the United States, while others have launched their own Bitcoin ETFs in Europe.

Several developments have been implemented to help Bitcoin scale and bring more use cases to the network.

Launched in 2018, the Lightning Network aims to increase Bitcoin transaction speed through off-chain computing.

related: BlackRock’s Bitcoin ETF: How it works, benefits and opportunities

Non-fungible token-like Ordinals were launched on Bitcoin in January, via the Taproot soft fork in November 2021.

The price of Bitcoin has also soared.

In 2009, the price of BTC was just one cent, and has since gone through several bull and bust cycles, with price fluctuations sometimes as high as 88%.

Bitcoin price since April 2013. source: Coin Gecko.

BTC is currently selling for $34,350, down 50% from its all-time high of $69,000 on November 10, 2021.

Magazine: Gary Gensler’s Job at Risk, BlackRock’s First Spot Bitcoin ETF, and Other News: Hodler’s Digest, June 11-17