Bitcoin was invented in 2008 with the publication of a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,”
1 written under the alias of Satoshi
Nakamoto (see Appendix A). Nakamoto combined several prior inventions
such as b-money and HashCash to create a completely decentralized
electronic cash system that does not rely on a central authority for currency
issuance or settlement and validation of transactions. The key innovation was
to use a distributed computation system (called a “Proof-of-Work” algorithm)
to conduct a global “election” every 10 minutes, allowing the decentralized
network to arrive at consensus about the state of transactions. This elegantly
solves the issue of double-spend where a single currency unit can be spent
twice. Previously, the double-spend problem was a weakness of digital
currency and was addressed by clearing all transactions through a central
clearinghouse.
The bitcoin network started in 2009, based on a reference implementation published by Nakamoto and since revised by many other programmers. The implementation of the Proof-of-Work algorithm (mining) that provides security and resilience for bitcoin has increased in power exponentially, and now exceeds the combined processing power of the world’s top supercomputers. Bitcoin’s total market value has at times exceeded $35 billion US dollars, depending on the bitcoin-to-dollar exchange rate. The largest transaction processed so far by the network was $150 million US dollars, transmitted instantly and processed without any fees.
Satoshi Nakamoto withdrew from the public in April 2011, leaving the responsibility of developing the code and network to a thriving group of volunteers. The identity of the person or people behind bitcoin is still unknown. However, neither Satoshi Nakamoto nor anyone else exerts individual control over the bitcoin system, which operates based on fully transparent mathematical principles, open source code, and consensus among participants. The invention itself is groundbreaking and has already spawned new science in the fields of distributed computing, economics