Happy Birthday Bitcoin

Who is scaring governments, banks and law enforcement, but is only nine years old? That will be Bitcoin.

And so the media's great sinner (or saint) has just celebrated its ninth birthday and some say it will make $100K for every Bitcoin by its tenth birthday (whereas others say it will crash and burn). On 3 Jan 2009, the first block was mined - the genesis block - by Satoshi Nakamoto:

His work was a hotch-potch of differing cryptography methods that could be sourced in the 1970s - such as public key - and also of the cyber punk movement which developed in the 1990s, and was founded by Eric Hughes, Tim May and John Gilmore:

The Genesis Block

The Bitcoin network uses a distributed ledger, and which has no centralised control. It is a peer-to-peer method in that there is no need for a broker to be involved in the transfer of bitcoins from one person to another. Each Bitcoin app then contains all of the transactions made on every coin in the world from the start of the time of the currency (the "Genesis block") and which is stored as a blockchain. Currently, as of 5 January 2018, the blockchain size is around 149GB, and there are 16.5 million coins in circulation. Each Bitcoin, itself, will not contain the full ledger. When a new transaction is created, a new blockchain is added, and every Bitcoin app will update itself.

Bitcoins are not created by any nation, but are "mined" using Bitcoin mining software, and where the miner must create a new block using intensive calculations. Whoever creates this, will win a new bitcoins, and the new block is broadcast to the whole of the network, for Bitcoin app nodes to update their ledgers. This public ledger will be consistent across the whole of the network and store all of the transactions that have been made over the history of the creation of bitcoins. This is equivalent to a bank having the complete record of all the transactions that are made. Each block is like bank statements for each transaction.

Each transaction is added in a sequential order, and each block contains a hash of the previous block so that the ledger can be proven for all of the transactions. Users have a Bitcoin address thus all transactions can be traced to these addresses, and each blockchain will thus know each user's balance of bitcoins at any point in history.

The first steps

Satoshi Nakamoto created Bitcoins, and defined the method on 31 October 2008 with a post to a mail list with: "Bitcoin: A Peer-to-Peer Electronic Cash System". The source code was released as open source in January 2009, and no-one knows exactly who he is. In the same month, he created the first bitcoins (with a genesis block) and was rewarded with 50 bitcoins [paper].

In January 2009, the Bitcoin network came into existence with the release of the first open source Bitcoin client and the issuance of the first bitcoins, with Satoshi Nakamoto mining the first block of bitcoins ever (known as the genesis block), which had a reward of 50 bitcoins (now worth $826K). On the great heroes of the computing industry was Hal Finney, and he immediately downloaded the software and received a 10 bitcoin payment from Nakamoto, and was the first Bitcoin transaction. It is thought that Nakamoto mined one million bitcoins (with a value of $2.4 billion) and that he had never spent many of the bitcoins he mined.

Conclusions

Some said the cyber punks just were out to disrupt, and their legacy lives on. Few can dismiss the disruption that cryptocurrencies and blockchain are making, and, as a Cyber Professor, I hope we can build a more trusted world.

As you might say, "I'd rather be a pirate than join the navy!"