The Evolution of Blockchain Before Bitcoin
It is a common belief that life for blockchain began in October 2008 when Satoshi Nakamoto published the Bitcoin white paper.
Quite the contrary, the technology was conceptualized several decades earlier.
In fact, the origin of the technology can be traced back several millennia when you break blockchain down to components Satoshi joined to build it; cryptography, proof of work, peer-to-peer networks and digital file time-stamping.
What is Cryptography in Blockchain?
Cryptography has undergone centuries of improvement through the hands of hundreds- if not thousands-of cryptographers and mathematicians to reach the state where Satoshi found it ready to use on Bitcoin.
Encrypted messages have been discovered carved on the walls of tombs of the royalty and the noble of the ancient Egypt.
The blockchain uses what is known as public key cryptography, which allows the generation of digital signatures for signing transactions and public addresses, which serve as user accounts to receive and hold value.
The person to first describe in detail how public key-private key cryptography-also known as blind signatures-can be used in electronic cash similar to Bitcoin is the American computer scientist and cryptographer David Chaum in 1981.
As part of his study work for attaining a doctorate in computer science and business administration at the University of California, Berkeley, Chaum wrote and published the paper ‘Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms.’
In the paper he explains how cryptography through digital signatures makes it possible to create and send digital cash anonymously-users not having to reveal their identities.
Just like a physical coin or note can pass from one hand to another on the street without a record, cryptography allows users to pass digital money without recorded personally identifying information.
David Chaum founded DigiCash Company in 1990 through which, in 1994, he released Ecash, a precursor to Bitcoin. He left the company in 1999 and Ecash never achieved a mainstream uptake.
What is Proof Work?
Another important component of blockchain is a consensus protocol. These are rules that independent computers on a peer-to-peer network use to agree on the validity of a transaction. The consensus protocol version Bitcoin uses is known as proof of work (PoW).
Proof of work is designed to make those that want to update the blockchain-miners- incur a cost in the form of electric power before they are allowed to. This stops spammers and those intending to write junk data on the shared ledger.
Miners who follow the consensus rules recoup their cost through the reward blockchain is designed to issue.
The British cryptographer and crypto-hacker Adam Back was the first to implement a proof of work protocol in 1997 through his email antispam system known as Hashcash. The protocol forces email senders to incur a cost in the form of time and computer power to generate signatures to attach.
It was however computer scientists Cynthia Dwork and Moni Naor who in 1992 first described the proof of work concept in their paper titled ’Pricing via Processing or Combatting Junk Mail.’
How a Digital file time-stamping works?
The most critical component of the blockchain, in my estimation, is time-stamping and linking of files in a chain. In fact, the technology gets its name from its structure.
After a specified time-in the case of Bitcoin 10 minutes- transaction data is put into a batch known as a block and hashed to produce a unique value, which serves as its ID.
The hashing process is the work that miners do in accordance to the proof of work protocol. While it takes a lot of energy to hash data, it is very easy to proof that the process was done correctly and the result matches a predefined value.
The data hashed to find a value of a block includes a time stamp and the ID of the block that comes before it.
For that reason all the blocks are linked to form a chain and they are all time-stamped, a feature that makes it almost impossible to change details in a block once it is part of the chain.
While Satoshi Nakamoto was the first to implement a chain of time-stamped data files, the founder of Bitcoin was not the first conceptualize it.
In 1991, Stuart Haber and W. Scott Stornetta became the first ones to describe it in a paper titled ’How to Time-Stamp a Digital Document.’
What is Peer-to-Peer network?
The bedrock of the blockchain technology is a peer-to-peer network architecture, many computers connecting, communicating and sharing data files with one another without having to go through a server.
The Internet itself started as a peer-to-peer network of computers. As it grew, however, the majority of users became reliant on centralized points or servers controlled by major technology companies and institutions.
Most services we use online are therefore centralized and this makes them vulnerable to hacking, compromise and censorship because of single points of failure.
The architecture of peer-to-peer (P2P) networks in the way public blockchains are using it today was first implemented in the late 1990s and early 2000s through file sharing services like Napster and BitTorrent.
The P2P design makes it near impossible to attack and compromise services. It also removes the censorship leverage that servers provide.
Precursors to Bitcoin
When the history of Bitcoin is told, often digital currencies that came before it are mentioned. It is not each of those currencies that was built on blockchain. Only some of them were.
Some of the digital currency ideas that were put forward before Bitcoin that include in their design some form of blockchain include DigiCash’s Ecash, Nick Szabo’s Bit gold and Wei Dei’s Bit money.
Many within the crypto community agree that a blockchain is a platform for managing, storing and authenticating data through the use of time-stamping and cryptography on top of a peer-to-peer network.
When it comes to consensus protocols, many newer blockchains don’t use proof of work, as it is considered wasteful. Most of them are instead opting to use less energy-intensive alternative protocols such as proof of stake (PoS).
DisclaimerThe writer’s views are expressed as a personal opinion and are for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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