Devising Bitcoin

I don't believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can't take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can't stop. — F.A. Hayek, 1984.

By the 1980s, foreseeing the curtail of freedoms that digital mass surveillance could bring, some people decided to defend privacy in communications through the use or development of encrypted systems, they were the so-called cypherpunks.

The computer can be used as a tool to liberate and protect people, rather than to control them— Hal Finney (1992) 

Privacy is necessary for an open society in the electronic age.  —  A Cypherpunk's Manifesto by Eric Hughes (1993)

 

Cypherpunks decided to apply computer science to minimize vulnerability to strangers through the design of digital systems that penalize fraud, without using any central power. Their main goals were to privatize money and to non-violently protect property.

 

​The first attempts to create private monetary systems failed due to lack of decentralization: Hashcash by Adam Back (1997), B-Money by Wei Dai (1998), Reusable Proof of Work by Hal Finney (2004) and Bit Gold by Nick Szabo (2005).

The idea of an unofficial and completely decentralized currency was very fringe both economically and scientifically, but a mysterious cypherpunk behind the pseudonym Satoshi Nakamoto figured it out.

He published the Bitcoin White Paper titled Bitcoin: a Peer-to-Peer Electronic Cash System at bitcoin.org on October 31, 2008. The paper described a private form of money with superior monetary attributes that could enable to perform monetary functions minimizing users' vulnerability to the potential harmful behaviour of third parties. 

Satoshi sent the proposal to one of the main mailing lists focused on cryptography.

“I had to write all the code before I could convince myself that I could solve every problem, then I wrote the paper” wrote Satoshi 9 days later. The code was ready.

The software was announced and released as an open source project.

On January 3, 2009 the Bitcoin Network started operating.

The headline for the same day's edition of The [London] Times was "Chancellor on brink of second bailout for banks", message that is included in block 0 of the Bitcoin transaction ledger.

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Since then, and for the first time in history, financial self-sovereignty is possible thanks to the appearance of a digital and easily verifiable scarce good integrated in a decentralized network that secures its ability to be freely stored and transferred globally.

*Click here for a deeper immersion in Bitcoin technology. 

Nobody showed much interest except for Hal Finney, who was the first person to join the network.

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https://twitter.com/halfin/status/1110302988

He was also the first person to receive a transaction, Satoshi sent him 10₿.

The computer can be used as a tool to liberate and protect people, rather than to control them.  Hal Finney.

Interest on the project grew very slowly. 

 

Although "The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime" as Satoshi posted, new developers joined in and new contributions made possible for the software to improve in security. 

On May 22, 2010, the first commercial exchange of bitcoin occurred:

Laszlo Hanyecz, a Florida programmer posted a thread on Bitcointalk forum with the title "Pizza for bitcoins?" offering 10,000₿ for 2 pizzas. Another user agreed, and just after receiving the bitcoins, he ordered 2 pizzas by phone with charge to his own credit card and delivery to Laszlo home.    

On April 23, 2011 shortly after a frequent contributor told Satoshi he was going to speak to the CIA, Satoshi stated in an email "I've moved on to other things"and he disappeared. 

Bitcoin had an immaculate conception.

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Appreciation for Bitcoin grew steadily. 

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https://twitter.com/GregSchoen/status/70261648811761665

Unlike previous attempts to digitize scarcity mainly consisted in businesses like E-gold that ended up being declared ilegal and being easily shut down due to their centralization; by 2020s had become the most reliable and secure monetary base and financial network in the world, with a transaction history that was distributed in over 10,000 of copies located in more than 100 countries. 

Bitcoin was the only trend away from a legacy financial system that is progressively used to restrict peaceful behaviour. 

Every time somebody gets censored, Boom! they become a Bitcoin fan. It’s almost a binary thing: 

if you haven’t been censored, or have never been strongly sympathetic with somebody who has been censored by the financial system, then you don’t understand the biggest early use cases of Bitcoin. If you have, nobody needs to “convert” you. —  Nick Szabo.​

Its monetary properties greatly improve those of fiat money and gold:

 

-Verifiable scarcity: the excellence on it enables monetary sovereignty.

Bitcoin's authenticity and scarcity is mathematically verifiable just by running a node.  

Unlike fiat money that does not have a creation cost nor any limit of supply, Bitcoin's issuance rate is constantly decreasing and its total supply is mathematically limited to 21 million units.

Physical gold is difficult to verify.

-Storability: bitcoin's ownership is enforced through possession of a small piece of data, so it is extremely difficult to confiscate. It is the first nonviolently securable property in history.

Gold physicality makes it difficult to protect.  

Fiat monetary base consists both of Central Bank's reserves and paper bills: Central Bank's reserves can not be stored individually, while paper Bills are even more difficult to protect than gold.

 

-Transferability: bitcoin can be transferred from person to person globally without intermediaries in a pseudo-anonymous way. Its decentralization makes it censorship resistant. 

Physical wealth, like paper bills or gold, is difficult to transfer over long distances.

Central Bank's reserves can not be transferred directly by the individual, and there are restrictions to its indirect use, like AML laws. 

 

The excellence of Bitcoin on storability and transferability enables financial sovereignty.

-Saleability: the excellence on it enables universal accessibility. 

Bitcoin does not require permission to be adopted. Unlike digital fiat money, no third-party is required for granting approval. Having access to Central Bank's reserves requires a commercial bank's license, and there are restrictions to its indirect use, like KYC laws.

During the monetization process, a superior form of money becomes more widely distributed among people.

Bitcoin is the first good in history that is being monetized in real time.​

As any revolutionary innovation, Bitcoin transgresses established regulations; so its adoption confronts challenges and the expectations about it may vary quickly, which implies high volatility of its purchasing power.

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Terms:

Sovereign: One that is above the rulership of another (not ruled, not a subject or slave). From latin: super = above, regnam = rulership or control.

Ownership: rightful or legal claim to a property.

Possession: custody or control of a property.

Privacy: the power to selectively reveal oneself to the world.

Encrypt: the word has a Greek origin, it meant "to hide". "Cypher" is a synonym with a Latin origin.

Cryptography is the science that creates protocols to configure secrets that only the receiver of the message will be able to reveal. 

Peer-to-Peer: with the ability for 2 people to interact directly with each other, without anyone in the middle.

Cash: bearer money, that is, not in the custody of a third party.