Bitcoin was revolutionary, no question. Of course, he is not without precursor. We’ll explain why archaeologists suspect the ancestor of the cryptocurrency in the Western Pacific, what cryptic hashes have lost in the classified section of a newspaper, and how the first digital money failed.
On October 31, 2008, Satoshi Nakamoto’s White Paper Bitcoin: A Peer-to-Peer Electronic Cash System was the template for an unprecedented technology. The invention of the cryptocurrency Bitcoin and the blockchain came at a good time: people were just starting to do more business over the Internet. At the same time, the financial crisis gave reason to doubt the stability of the economic system. So why not give the digital reinvention of money a chance? In the ten years that have passed since then, the Bitcoin has experienced ups and downs – and could even conquer Wall Street now.
But actually the history of Bitcoin and other digital currencies goes back more than ten years. The idea behind it is already much older.
Even the tedious mining of money that nobody can pocket but anyone can do without banks has been around for hundreds of years.
The stone money on Yap could be the original Bitcoin
Should really man-sized limestone chunks with a hole in the middle be the forerunners of today’s cryptocurrencies? Archaeologists have at least found a number of interesting similarities between the stone currency on a small Micronesian island and the workings of Bitcoin and Blockchain. Long before Europeans crossed the Western Pacific, there was an economy on the island of Yap that was not based on coins, but on circular stones up to four meters high, called Rai. The Rai stones were created in quarries on distant islands and were transported by the Yapesen under great efforts over land and water. Once in the home village, the residents exhibited the Rai at public gatherings. Each stone was judged on the basis of its shape, size and the stresses associated with transport. Tribal leaders, family clans or individual residents could claim ownership of a stone. Everyone in town then knew who owned which Rai. If the owner changed, the stone did not even have to be moved. Finally, the change of ownership was announced in public meetings. The Rai still have a monetary value on Yap and are given away at weddings.
Rai versus Bitcoin
Looking more closely at the Rai economy, comparison with cryptocurrencies is not at all outlandish. Archaeologist Scott Fitzpatrick and economics professor Stephen McKeon at the University of Oregon have worked that out. Just like Rai-Steine Bitcoin must be mined, only not with manpower, but by complex computing processes. For both currencies, everyone can understand how much work has been required for a unit and how high the value is. The custody of Rai takes place under the eyes of all, just like Bitcoin, where they are also visible at any time thanks to the digital registration on the Blockchain. Once the value has been publicly verified, both currencies can be freely exchanged for services and goods. On Yap, the inhabitants carry on oral transactions so that everyone knows at all times who the Rai Stone is and what they have exchanged for it. Transparency and trust are created at Blockchain by capturing the transactions in inseparably connected and viewable data blocks.
The similarities between an ancient, obscure stone currency traded exclusively on a tiny island in the middle of the ocean and the rapidly spreading, highly complicated cryptocurrencies are fascinating. They look deeply into the human understanding of values and trade. But only with the advanced development of cryptography could the digital currencies of today arise.
The crypto-tools of the blockchain
With secret keys coded messages transmissions existed long before the modern era. But only with the invention of the asymmetric cryptosystem was one of the most important technical requirements for the blockchain created. Previously, sender and receiver needed a common key or password to encode and decode a message. The asymmetric system, on the other hand, is based on the public and private key principle. In this case, the sender encodes his message with the recipient’s public-access key. He can then decode the message with his private secret key. The most popular method with this system was developed by Ronald L. Rivest, Adi Shamir, and Leonard M. Adleman in the 1970s and christened according to their initials according to RSA procedures.
Further cryptographic breakthroughs in this time scored the scientist Ralph Merkle. With its Merkle tree, many hash values can be combined into a single value according to a tree diagram. This method is used in blockchain mining to collect multiple transaction values in a check value. This serves to verify the corresponding data block.
eCash: the father of digital money
The invention of RSA encryption made it possible to create the first digital currency. The cryptographer David Chaum wrote in 1982 the paper Blind Signatures for Untraceable Payments, in which he explained his principle for eCash. The currency units here consist of lines of code. Unlike the Bitcoin, the transfer is centralized via an eCash provider, such as a bank. A customer can create an online account, make a deposit, and withdraw money digitally with their eCash software. Then the coins can be forwarded to a seller. At the seller, the money goes first to the software and then automatically forwarded to the bank. This has a database in which all issued coins are stored. This guarantees that the same coin does not pay twice.
To protect users’ privacy, the RSA encryption-based Blind Signature is used in the transmission. A coin is not generated by the bank, but by the customer’s software. This then comes in a cryptographic “envelope”, which is sent to the bank. The bank sees only the monetary value, but not the coin itself. It posts the corresponding value from the customer account, verifies with a digital seal, how much is exactly in the crypto-envelope and sends it back. Unpacked again, the customer can spend the verified coin without anyone but the seller knowing who it is coming from. eCash was marketed in 1989 under the name DigiCash. However, the e-commerce boom came much later, leaving a great success of the first digital money. In 1998, DigiCash went bankrupt.
image by shutterstock
Virtual currency is in many countries not legal tender, or is not backed by the government, and accounts and value balances are not subject to consumer protections. The information does not constitute investment advice or an offer to invest.
VoiceofBitcoin.com is is not responsible for the content of external sites and feeds. Guest posts, articles or PRs are not always flagged as this!