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In lecture 7.4, we'll talk about the roots
of Bitcoin, how it got started, what

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were the precursors to it, and we'll talk
about the mysterious founder of Bitcoin.

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There are really two precursors to
Bitcoin that are worth talking about.

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First, Bitcoin arose out
of the cypherpunk movement.

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This was a movement that brought
together two trends, or arguments.

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First was, libertarianism and
particularly the idea that society would

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be better off with either no government or
with a very minimal government.

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With government enforcing only the minimum
rule set necessary to allow people to

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coexist at all.

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So together with that strong
libertarian notion, or

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perhaps even anarchist notion,
we had the idea of strong cryptography and

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public key cryptography,
which started in the late 1970s.

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These two ideas came together in the
cypherpunk movement, and this was a group

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of people who believed that, with strong
online privacy and strong cryptography,

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you could rearchitect the way that
people interacted with each other.

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Into a world in which people
could protect themselves and

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their interests more effectively,
and could do so

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with much less activity action or as they
would say, interference from government.

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So that was the cypherpunk movement.

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One of the challenges in the cypherpunk
movement was how you were going to deal

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with money in a future cypherpunk world,
where people were interacting over the net

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and interacting via strong technical and
cryptographic measures.

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And so, a bunch of research came along,

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led especially by early digital cash
work by David Chaum and others,

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that was designed to create new forms
of value that functioned like money.

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Like cash in the sense of being
anonymous and easily exchangeable.

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But also provided stronger
notions of anonymity or privacy.

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And so early work in that area, and
there's a whole interesting story about

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how that developed and
why it didn't sweep the world.

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Early work in that area came together
with the cypherpunk beliefs and

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the desire to have a strong currency
that would be decentralized online and

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relatively private, to create
the world from which Bitcoin was born.

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As well as the philosophy that many of
the early supporters of Bitcoin and

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even many of the supporters
today still follow.

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Bitcoin began in 2008 with the release
of this white paper called

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Bitcoin: A Peer-to-Peer
Electronic Cash System

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that was authored by Satoshi Nakamoto.

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This paper, which you can still get online
easily, is the initial description of what

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Bitcoin is, basically how it works, and
what the philosophy behind its design is.

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And so this is still a good thing to
read if you want to get a quick idea of

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how the technical design of Bitcoin and
how the initial philosophy,

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of its operation was specified.

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So, this was the beginning,
this was released along with

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open source software to implement
the Bitcoin system back in 2008, and

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this is where everything started.

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Now this was written by this
person Satoshi Nakamoto.

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And Satoshi is one of the central
mysteries of Bitcoin.

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What do we know about Satoshi?

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Well, Satoshi is the author of this white
paper and the original Bitcoin software.

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The name Satoshi Nakamoto is
almost certainly a pseudonym,

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that is a fake name that some person or
people have adopted for

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the purpose of doing
things related to Bitcoin.

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The identity of Satoshi is
associated with certain public keys,

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with certain accounts,
and certain systems.

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So that there are certain kinds
of accounts or statements, or

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certain kinds of digital signatures
that would convince the community that

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something was said by or issued by,
or created by the real Satoshi.

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So Satoshi, while being a pseudonym,
is also a person who can speak, and

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who has spoken, especially extensively
in the early history of Bitcoin.

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What do we know about Satoshi?

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Well we know that Satoshi
writes fairly well in English.

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Satoshi uses sometimes American,
sometimes British spellings.

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There has been a lot of attempts to
look at the text, to look at the code,

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and to try to figure out,
what is Satoshi's native language?

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Where is Satoshi from?

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Attempts to look at the hours and times.

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What type of machine does Satoshi use?

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And all these sorts of things, trying
to figure out who is this person, or

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people, and what are they doing?

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Satoshi was fairly active in working on
Bitcoin, on writing about Bitcoin and

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participating in online
forums until around 2010.

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And since that time,
Satoshi has said almost nothing.

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There's one notable exception
that I'll mention in a minute.

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Satoshi owns a lot of
Bitcoins from early mining.

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In the beginning,
Satoshi was perhaps the only miner or

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one of the only few people mining
Bitcoins, and those Bitcoins that were

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accumulated by Satoshi's accounts
early on now are extremely valuable.

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And yet
those accounts are not being cashed out.

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Everybody can see which accounts,

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which Bitcoin addresses
probably belong to Satoshi.

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And so if those coins were to be
cashed in, if they were to be sold and

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the proceeds transferred into any
particular bank account, that would be

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a very notable event and would be
an important clue to Satoshi's identity.

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And, so interestingly, although
Satoshi created the Bitcoin system and

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has on paper made a lot of profit from it,

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Satoshi is unable to cash in that profit
without identifying him or herself.

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Something that, for whatever reason,
Satoshi doesn't want to do.

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The real identity of Satoshi,
still unknown.

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The question of who's really Satoshi is

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a favorite parlor game at
Bitcoin oriented conferences.

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It's also something that a lot
of reporters have tried to do.

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People have done all sorts of things,
they've looked at text,

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the text written by Satoshi,
tried to compare it to other things.

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They've tried to look at other pieces
of software, patent applications.

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They've looked at who was writing
papers about things that seemed like

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technical precursors to Bitcoin
before Bitcoin came along, etc., etc.

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In a well-known incident last year,
a reporter from Newsweek

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found a guy whose birth name was
literally Satoshi Nakamoto and

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fingered him as the founder of Bitcoin,
as the Bitcoin Satoshi.

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That was almost certainly incorrect
as we've since figured out.

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In fact, one of the few times, if any,
that Satoshi, that the original,

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real Satoshi has spoken since 2010 was
to issue a short statement saying nope,

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I'm not that guy.

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So as of today and probably or

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perhaps forever,
we don't really know who Satoshi is.

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And in some sense it
doesn't matter because of

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the notable feature of Bitcoin that it is
decentralized and with nobody in charge.

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Satoshi's not in charge,

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to some extent it doesn't really
matter what Satoshi thinks anymore.

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Any special influence that Satoshi has
is only because of respect that Satoshi

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would have within the Bitcoin community,
should Satoshi become active again.

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So it's possible that we'll
never know who Satoshi is.

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So Bitcoin was started in 2008 by Satoshi,
whoever he she or

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they are, and has grown since then.

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If we look at a graph of
the transaction volume,

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the number of transactions per day,

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this starts on the left at the beginning
of 2009 and goes up to the summer of 2014.

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What you see is something roughly
like an exponential growth.

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And indeed,

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this is pretty much what you'd expect from
something that's spread by word of mouth.

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Like the internet,
like other popular technologies,

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Bitcoin has grown in
a roughly exponential way.

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And when there are jumps, they typically
correspond to bursts of publicity.

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Moments when Bitcoin become
known in the popular press, for

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example, or
when there were newsworthy events.

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Transaction volume has gone up over time.

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The total value of Bitcoin also has
gone up, perhaps in a similar way.

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What you see is this looks like zero,
but in fact, it's just very low and

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you see a relative, a rise, starting here,
maybe beginning in the middle of 2012.

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This looks roughly like
an exponential growth, but

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with two spikes superimposed on it.

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One here in roughly April of 2013,
March or April of

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2013 it spiked up, and then relaxed back
down to the underlying exponential curve.

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And then arguably here,
around the beginning of 2014,

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it spiked up to about this value and then
relaxed back down again to something near

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the exponential growth,
which has happened since then.

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So arguably, Bitcoin has grown in
a way that is relatively organic and

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at a relatively constant
exponential rate since it was born.

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And those who believe that Bitcoin has
a bright future ahead of it believe that

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this exponential growth will continue.