In lecture 7.4, we'll talk about the roots
of Bitcoin, how it got started, what
were the precursors to it, and we'll talk
about the mysterious founder of Bitcoin.
There are really two precursors to
Bitcoin that are worth talking about.
First, Bitcoin arose out
of the cypherpunk movement.
This was a movement that brought
together two trends, or arguments.
First was, libertarianism and
particularly the idea that society would
be better off with either no government or
with a very minimal government.
With government enforcing only the minimum
rule set necessary to allow people to
coexist at all.
So together with that strong
libertarian notion, or
perhaps even anarchist notion,
we had the idea of strong cryptography and
public key cryptography,
which started in the late 1970s.
These two ideas came together in the
cypherpunk movement, and this was a group
of people who believed that, with strong
online privacy and strong cryptography,
you could rearchitect the way that
people interacted with each other.
Into a world in which people
could protect themselves and
their interests more effectively,
and could do so
with much less activity action or as they
would say, interference from government.
So that was the cypherpunk movement.
One of the challenges in the cypherpunk
movement was how you were going to deal
with money in a future cypherpunk world,
where people were interacting over the net
and interacting via strong technical and
cryptographic measures.
And so, a bunch of research came along,
led especially by early digital cash
work by David Chaum and others,
that was designed to create new forms
of value that functioned like money.
Like cash in the sense of being
anonymous and easily exchangeable.
But also provided stronger
notions of anonymity or privacy.
And so early work in that area, and
there's a whole interesting story about
how that developed and
why it didn't sweep the world.
Early work in that area came together
with the cypherpunk beliefs and
the desire to have a strong currency
that would be decentralized online and
relatively private, to create
the world from which Bitcoin was born.
As well as the philosophy that many of
the early supporters of Bitcoin and
even many of the supporters
today still follow.
Bitcoin began in 2008 with the release
of this white paper called
Bitcoin: A Peer-to-Peer
Electronic Cash System
that was authored by Satoshi Nakamoto.
This paper, which you can still get online
easily, is the initial description of what
Bitcoin is, basically how it works, and
what the philosophy behind its design is.
And so this is still a good thing to
read if you want to get a quick idea of
how the technical design of Bitcoin and
how the initial philosophy,
of its operation was specified.
So, this was the beginning,
this was released along with
open source software to implement
the Bitcoin system back in 2008, and
this is where everything started.
Now this was written by this
person Satoshi Nakamoto.
And Satoshi is one of the central
mysteries of Bitcoin.
What do we know about Satoshi?
Well, Satoshi is the author of this white
paper and the original Bitcoin software.
The name Satoshi Nakamoto is
almost certainly a pseudonym,
that is a fake name that some person or
people have adopted for
the purpose of doing
things related to Bitcoin.
The identity of Satoshi is
associated with certain public keys,
with certain accounts,
and certain systems.
So that there are certain kinds
of accounts or statements, or
certain kinds of digital signatures
that would convince the community that
something was said by or issued by,
or created by the real Satoshi.
So Satoshi, while being a pseudonym,
is also a person who can speak, and
who has spoken, especially extensively
in the early history of Bitcoin.
What do we know about Satoshi?
Well we know that Satoshi
writes fairly well in English.
Satoshi uses sometimes American,
sometimes British spellings.
There has been a lot of attempts to
look at the text, to look at the code,
and to try to figure out,
what is Satoshi's native language?
Where is Satoshi from?
Attempts to look at the hours and times.
What type of machine does Satoshi use?
And all these sorts of things, trying
to figure out who is this person, or
people, and what are they doing?
Satoshi was fairly active in working on
Bitcoin, on writing about Bitcoin and
participating in online
forums until around 2010.
And since that time,
Satoshi has said almost nothing.
There's one notable exception
that I'll mention in a minute.
Satoshi owns a lot of
Bitcoins from early mining.
In the beginning,
Satoshi was perhaps the only miner or
one of the only few people mining
Bitcoins, and those Bitcoins that were
accumulated by Satoshi's accounts
early on now are extremely valuable.
And yet
those accounts are not being cashed out.
Everybody can see which accounts,
which Bitcoin addresses
probably belong to Satoshi.
And so if those coins were to be
cashed in, if they were to be sold and
the proceeds transferred into any
particular bank account, that would be
a very notable event and would be
an important clue to Satoshi's identity.
And, so interestingly, although
Satoshi created the Bitcoin system and
has on paper made a lot of profit from it,
Satoshi is unable to cash in that profit
without identifying him or herself.
Something that, for whatever reason,
Satoshi doesn't want to do.
The real identity of Satoshi,
still unknown.
The question of who's really Satoshi is
a favorite parlor game at
Bitcoin oriented conferences.
It's also something that a lot
of reporters have tried to do.
People have done all sorts of things,
they've looked at text,
the text written by Satoshi,
tried to compare it to other things.
They've tried to look at other pieces
of software, patent applications.
They've looked at who was writing
papers about things that seemed like
technical precursors to Bitcoin
before Bitcoin came along, etc., etc.
In a well-known incident last year,
a reporter from Newsweek
found a guy whose birth name was
literally Satoshi Nakamoto and
fingered him as the founder of Bitcoin,
as the Bitcoin Satoshi.
That was almost certainly incorrect
as we've since figured out.
In fact, one of the few times, if any,
that Satoshi, that the original,
real Satoshi has spoken since 2010 was
to issue a short statement saying nope,
I'm not that guy.
So as of today and probably or
perhaps forever,
we don't really know who Satoshi is.
And in some sense it
doesn't matter because of
the notable feature of Bitcoin that it is
decentralized and with nobody in charge.
Satoshi's not in charge,
to some extent it doesn't really
matter what Satoshi thinks anymore.
Any special influence that Satoshi has
is only because of respect that Satoshi
would have within the Bitcoin community,
should Satoshi become active again.
So it's possible that we'll
never know who Satoshi is.
So Bitcoin was started in 2008 by Satoshi,
whoever he she or
they are, and has grown since then.
If we look at a graph of
the transaction volume,
the number of transactions per day,
this starts on the left at the beginning
of 2009 and goes up to the summer of 2014.
What you see is something roughly
like an exponential growth.
And indeed,
this is pretty much what you'd expect from
something that's spread by word of mouth.
Like the internet,
like other popular technologies,
Bitcoin has grown in
a roughly exponential way.
And when there are jumps, they typically
correspond to bursts of publicity.
Moments when Bitcoin become
known in the popular press, for
example, or
when there were newsworthy events.
Transaction volume has gone up over time.
The total value of Bitcoin also has
gone up, perhaps in a similar way.
What you see is this looks like zero,
but in fact, it's just very low and
you see a relative, a rise, starting here,
maybe beginning in the middle of 2012.
This looks roughly like
an exponential growth, but
with two spikes superimposed on it.
One here in roughly April of 2013,
March or April of
2013 it spiked up, and then relaxed back
down to the underlying exponential curve.
And then arguably here,
around the beginning of 2014,
it spiked up to about this value and then
relaxed back down again to something near
the exponential growth,
which has happened since then.
So arguably, Bitcoin has grown in
a way that is relatively organic and
at a relatively constant
exponential rate since it was born.
And those who believe that Bitcoin has
a bright future ahead of it believe that
this exponential growth will continue.