The origin of Cryptocurrencies – Part 1/2

Bitcoin (BTC) and other Cryptocurrencies (Altcoins) as we know them today, are the result of long thought processes, and the launching of projects much older than the date of the first mining of Bitcoin (Genesis) Block (January 3, 2009).

The rise of Numeric/Digital Currencies really took off as soon as the Computer became popular, and then the explosion of projects and innovations as soon as the Internet became popular. But a large majority suffered from a gap, which did not allow them to achieve the expected success → Centralization, nevertheless, it is always interesting to discover or rediscover exciting projects, which were the decisive events of our current society.

This exciting history has its roots in the late 1960s.

You will find information on:

• RSA Encryption
• The Programming Language ‘Script’.
• The Cash Digital
• Cryptography
• The principle of Time Stamping
• Smart Contracts
• Proof-of-Work
• BitGold
• The Financial Crisis of 2007
• The advent of Bitcoin (BTC)

And emblematic names such as: 

• Friedrich von Hayek
• Ernest Solvay
• Timothy C. May
• David Chaum
• Scott Vanstone
• Nick Szabo
• John Perry Barlow
• Adam Back 
• Hal Finney
• Wei Dai
• Milton Friedman
• Masashi One
• Ryan Fugger
• Satoshi Nakamoto

Charles H. Moore (who was 30 years old that year), American Physicist and Computer Scientist, who built (in 1958) a ‘Toolbox’ in the form of a ‘Command Interpreter’, to facilitate his daily work, C. Moore was in charge of calculating the trajectory of satellites.

He invented the ‘Stack Programming Language‘, which is roughly the principle: 

• → LIFO – Last In, First Out

Its Command Interpreter was named ‘Forth‘ in 1968, and will then serve as a model for ‘Script‘ which is the Bitcoin (BTC) Programming Language.

‘Script’ will be adapted with the Polish notion of Stacks → First In, First Out.

The Austrian economist Friedrich August von Hayek, published in 1976 a book called: “Denationalisation of Money” where he proposes the creation of privately issued coins. They would be subject to the law of the Market and the principle of Free Trade, and would probably quickly become more stable and reliable than State Currencies.

Long before him, the Belgian Philanthropist Ernest Solvay, in his book “Notes sur le Productivism et le Comptabilism” published in 1900, evoked his Vision of Comptabilism. He wished to abolish the monetary system put in place at the time, because he found it’s

Expensive, an obstacle to production and discriminatory.

He developed the concept of Compatibilism and Productivism more fully in his book:

Comptabilism is a system of accounting that would replace the metallic and fiduciary currency in circulation and would be the means of monitoring and evaluating the acquired wealth of each individual. Productivism would banish capitalist heredity, while integral free socialization would bring social progress to all.

So in conclusion: F. von Hayek proposes the suppression of the currency, to replace it by a legal holding of transactions, a system which resembles appreciably the Blockchain of Cryptocurrencies?.

In 1977, it is a group of 3 people:

• Ronald Linn Rivest – American Cryptologist 
• Adi Shamir – Israeli Mathematician and Cryptologist
• Leonard Max Adleman – American Researcher in Theoretical Computer Science

Who described this year the Asymmetric Cryptography Algorithm, the ‘RSA Encryption‘ (RSA in reference to the initials of its three inventors). 

The patent was filed by MIT (Massachusetts Institute of Technology) in 1983 in the USA.

This encryption uses a Pair of Keys composed of:

• A Public Key, to encrypt data 
• A Private Key, to decrypt confidential data.

Both keys are created by one person. Let’s take this example (simplified for better understanding):

Mike wants another person to send him confidential data, Mike then makes his Public Key accessible. This Key will be used by Smith who will then send him the confidential data in an encrypted way (so that no other person can use his information without having the necessary Private Key). And that is how Mike can use his Private Key (of which he is the sole owner) to decrypt this Data packet.

Just as Mike can use his Private Key to sign data he sends, so any of his correspondents can verify the authenticity of that signature with Mike’s Public Key.

RSA Encryption is considered to be the pillar of modern digital security, and the world of digital currency in particular.

Ralph Merkle invented the ‘Merkle Tree Compression Mechanism‘ in 1979. Mechanism that is used to verify a large volume of data, efficiently and securely, which will also be used later in the Bitcoin Protocol.

Timothy C. May (then an Engineer at Intel) wrote in 1988 his “The Crypto Anarchist Manifesto“, which will become the reference text for Cypherpunk.

Computer technology is on the verge of providing individuals and groups with the ability to communicate and interact with each other in a completely anonymous way.

1995 – David Chaum, American Mathematician and Cryptographer creates in Amsterdam the ‘DigiCash‘, the first ‘Electronic Currency’. It’s centralized and owned by its creator. It’s based on Cryptographic Protocols. (The company ‘DigiCash Inc.’ was founded in 1989).

D. Chaum is the pioneer of research on Anonymous Communications, based on Asymmetric Cryptography (originally intended to be used for email and elections). Long before the creation of the DigiCash company, D. Chaum had already experimented with Electronic Currency on a large scale, with eCash in 1982. He was also the first to conceptualize ‘Digital Cash’.

D. Chaum was already concerned about privacy in the digital world, he published an article entitled: “Blind Signatures for Untraceable Payments” which details a new form of Cryptography, which would allow an automated payment system, where third parties cannot see the payment information. (He invented Blind Signature Technology in 1982, while a student at Berkeley).

In 1994 D. Chaum declared, at the first international conference on the World Wide Web at CERN (Geneva, Switzerland):

You can pay to access a database, to buy software, to receive an email newsletter, to play an Internet game, to get $5 from a friend who owes you money, or just order a Pizza. The possibilities are truly unlimited.

The units exchanged via eCash are “CyberBucks” (Internet Dollars). Unlike a standard payment system, CyberBucks were not indexed to the US Dollar or any other currency, and had a ‘Floating Price’ (the price varies according to supply and demand). In 1995, 100 Cyberbucks (cb$) could be purchased for $5.

That same year DigiCash partnered with the Mark Twain Bank, and it became the first bank to launch Electronic Cash on November 23, 1995.

DigiCash experienced a meteoric rise, and then an inevitable fall, the company went bankrupt in 1998. The public was not yet ready to adopt this method of payment, but also due to the difficulties of its use. (The Mark Twain Bank & Deutsche Bank, were the only 2 banks to support the DigiCash system).

Stuart Haber & W. Scott Stornetta, sent an article entitled “How to Time-Stamp a Digital Document” to the ‘Journal of Cryptology‘ on August 19, 1990 (Document revised October 26, 1990), for publication in 1991. 

S. Nakamoto will use the principles enunciated by Haber & Stornetta, which he will name ‘Time Chain‘ which will then become ‘Block Chain‘ (a concept taken up by H. Finney).

Haber & Stornetta, then decided to publish weekly, in the New York Times, in the column of “Ads and Lost & Found“, a Timestamp of the Digital Footprint of their company’s data ‘Surety’.

This Timestamp is therefore immutable, and forgery-proof, because the Times is a daily newspaper with a large circulation, it would have been necessary to recover and replace (by a falsified version) more than 500,000 daily copies of this newspaper to backdate the Timestamp. This makes forgery almost impossible.

To be continued…

See you soon

Christophe WILHELM

Bitcoin Meister

© Bitcoin Meister