The history of cryptocurrency, part I: from the creation of Bitcoin blew up the world market!!

 

The Internet is one of the most underrated inventions. At the very moment when it seems that he is ready to offer us something new, it appears. The Internet is evolving gradually and we don't even notice many small changes, until they suddenly realize that Wikipedia was the main source of information that we communicate via Skype and began to store documents not on the computer and in the Google storage Drive.

We start to use some tool because it is interesting and promises something new. At some point it becomes part of our daily lives, and we think that he was always with us. I went to the city, peeping into the paper map, and now I use Google services and can't even remember when and how I moved.
At some point the money started to become “digital”. They evolved into the Internet deeper, until they are completely virtual, and in particular cryptocurrency. However, the transition from Visa and PayPal to crypto-currencies was not so easy as we hoped. Traditional payment services and crypto-currencies vary so much that some people still can not understand the essence of new money and their benefits over traditional Fiat money.

As web services, crypto-currencies are becoming more widespread. Every day there are new cryptoservice and merchants that accept the cryptocurrency. Sooner or later we will begin to accept cryptocurrency as a given — it is only a matter of time.

Beginning

Around cryptocurrencies for six and a half years of their existence formed a mythology. It includes the mysterious Creator of Bitcoin, Satoshi Nakamoto, historic pizza, the cost of which at the current exchange rate is comparable with the budget of a small country, a giant leap and subsequent fall in the exchange rate of Bitcoin, the collapse of the infamous exchange Mt.Gox, a multimillion-dollar thefts and at least a major loss of bitcoins stored on discarded hard drives. Any subculture includes such cases, but they do not form a story. In this first part, we recall the real history of cryptocurrency since the creation of Bitcoins to cryptobium, which began in 2013.

 2009-2010 - the birth of Bitcoin 

 Bitcoin 0.1 was released 9 Jan 2009. Version 0.1.0 for 0.1.5 supported only on Windows 2000, Windows NT and Windows XP. Shortly after the first release of Satoshi started to bring the client to mind. He corrected a few small errors of the network and the communication Protocol units and in collaboration with several other developers have made the client easier to use.

Almost a year later, in December 2009, Bitcoin was released 0.2, which is supported by Linux. The community began to take a more active part in the development of Bitcoin. In addition, this release took advantage of multithread processing for generating blocks (until then used only one thread). This greatly increased the efficiency of mining on multi-core processors such as Intel Core Duo or Quad. Another important achievement was the development of API, JSON-RPC, which allowed third party services to interact with the Bitcoin network, on which it is based.

During this period, Bitcoin has been known only to a very small group of developers and early users. In November 2009 at bitcoin.org with a forum, which later turned into Bitcointalk. This caused the growing popularity of the Bitcoin community began to grow with new participants that have started to offer new ideas, and create groups for their implementation.

Along with the enthusiastic responses of the Bitcoin received a lot of critical reviews. For example, the analysis of how it works, it was discovered a few defects. Around the same time was presented the idea of transaction fees, and people began to discuss the possibility of tracking coins.

In the summer of 2010 was released on Bitcoin 0.3. The number of users grew and with it grew and the complexity of mining. Then there were suggestions for more efficient use of computer resources for mining — for the use of graphical processors of video cards. The user ArtForz created based on OpenGL hash GPU farm, and generated its first bitcoin block.

6 August 2010 was discovered a serious vulnerability in the Bitcoin Protocol: transaction not passed proper screening before inclusion in the blockchain, allowing you to bypass the economic constraints of the Protocol and to create an unlimited number of bitcoins. On 15 August, the vulnerability was attacked in one of the transactions was generated more than 184 billion bitcoins that were sent to two addresses. In a few hours the transaction failed to track and remove from the blockchain, after which the bug was fixed and the network was translated into an updated version of the bitcoin Protocol. This is the only serious vulnerability in the entire history of Bitcoin, which has actually been used by hackers.

Meanwhile, more and more miners joined the struggle for the right to add a block to the blockchain. Some of them found that months can not find a block and get at least some reward. This has made mining in some semblance of gambling. To make your income more stable, the miners started to band together into pools with the distribution of rewards for found blocks between all participants proportionally to their contributions.

27 Nov 2010 appeared first mining pool, Bitcoin Pooled Mining (BPM), better known as Slush''s Pool. He used enough sophisticated algorithm, which, as it turned out, it was easy to cheat. Since then, the idea of mining-pools have significantly evolved, but its essence remains the same: shared mining is more profitable than the individual.

In December 2010 the user doublec has compiled the first mobile bitcoind client for the Nokia N900, and the next day the user ribuck sent him 0,42 BTC in the first mobile bitcoin transaction.

2011 — first experiments 

 At the end of 2010 Satoshi released his “farewell” version of Bitcoin (0.3.9) and left the project. The disappearance of the Creator could not have become a serious nuisance — the development of Bitcoin continued other community members. For the sake of more effective cooperation was adopted format of proposals for improving Bitcoin (Bitcoin Improvement Proposal, BIP), which defined a standard way of presenting promising ideas, since Bitcoin has no formal structure. The first sentence of BIP (BIP 0001) sent Taak Amir (Amir Taaki) on 19 August 2011. In it he described what the BIP.

By that time, there have been many proposals for improving Bitcoin, but not all of them can be implemented, therefore some members of the community began to create their own projects. The first implemented idea was the linking Bitcoin with DNS that allowed the creation of Namcol. After that, developers started to experiment with the interval to generate the blocks, the reward per block and other parameters, the result of which was created GeistGeld, iXcoin, SolidCoin and other Alt-currencies.

The complexity of mining continued to grow, and users began to move to the farm of FPGA and GPU. The community attended to the weaknesses of the hash function SHA256, which marked the beginning of new experiments. The first project, which the developers refused SHA256, was the currency Tenebrix “with reliable protection from hashing on the GPU”. The mechanism of confirmation work (Proof-of-Work, PoW) for the currency was based on the scrypt algorithm, which was introduced in 2009 to generate passwords, but did not become popular. Soon after that there was a GPU miner for scrypt.

Later developed the cryptocurrency Litecoin, which was accepted by the community with more enthusiasm than Tenebrix, which was released with premining. Litecoin mining was carried out on conventional processors, as GPU mining has become the prerogative of Bitcoin.

In the summer of 2011 was presented to the principle of proof-of-possession (Proof-of-Stake, PoS) as a response to the unequal distribution of “votes”. Instead of including the share of computing resources belonging to the person, the “voices” in the history of the transaction in such a system are calculated proportionally to the number of coins, the possession of which the user can confirm using private keys. A year later, was released the cryptocurrency PPCoin (Perkin) with a hybrid proof of work and possession.

In this period also began the development of mobile apps the cryptocurrency. In July 2011, the company Intervex Digital has released a Bitcoins Mobile, the first bitcoin application for iPad. In August 2011 established the first decentralized peer to peer pool (P2Pool), and at about the same time was published an “Analysis of anonymity in the bitcoin system”, marked the beginning of serious research of the anonymity of Bitcoin, as the bitcoin-mixers. The first “bitcoin Laundry” was directed by Mike Gogulski (Mike Gogulski).

In the summer of 2011 was declared a mining-device ASIC-based, which destabilized the infrastructure of mining (although it took another six months before they appeared in reality). The main problem with ASIC equipment is that it helps consolidate computing power, which is contrary to the philosophy of Bitcoin.

In 2011 also, there are alternative cryptocurrency Ripple. The Ripple Protocol was first implemented in 2004 by Ryan Fargerom (Ryan Fugger, a web developer from Vancouver. In 2005, Fugger began to develop financial service Ripplepay for secure online payments in the global network. Some people understand that, as a system of exchange of debt Ripple can provide the power of cryptocurrency and at the same time to resolve some urgent problems of the bitcoin community (the use of centralized exchanges, high electricity consumption and a great time of the transaction). This prompted McCaleb jed (Jed McCaleb) to develop in 2011 a new system Ripple.

In may 2011 McCaleb started in parallel to develop a digital currency in which approval of the transaction based on the consensus of the participants, not by mining as in Bitcoin.

In late 2011, Alan Reiner (Alan Reiner) proposed BIP 0010, describing the transaction multipoles. So the transaction that sends funds from 'with multipoles, i.e.' which is associated with more than one ECDSA private key. Transaction multipoles described by the formula “m of n”, which means that the address is associated with n private keys, with to send bitcoins from this address requires at least m signatures.

This proposal has been implemented and tested in old versions of Armory in scenarios with transaction signing in offline wallets. 30 Mar 2012 multiporpose was added to Bitcoin.

2012 — infrastructure development 

At this stage, on the horizon loomed the problem of the size of the blockchain, and community members began to offer it solutions that guarantees the safety of important data.

In April 2012, was implemented transaction fee hash of the script (Pay-to-script-hash P2SH) as defined in BIP-0016. They were designed to shift the responsibility for setting conditions of receiving money from the sender to the recipient. The advantage of this approach is that the sender may perform random transaction of any complexity, using the 20-byte hash that is short enough so you can scan the QR code or copy and paste.

In the bitcoin community began to expand with specialists from related fields, including economists, academics and lawyers, as well as programmers in different languages. This helped to develop BitcoinJ library, which allowed developers to Java to begin creating applications that interact with the bitcoin network.

By 2012 it became obvious that Bitcoins have many fundamental limitations, so some developers have begun to establish currency with enhanced functionality. This year was presented to the CryptoNote technology, which includes ring signature and one-time keys, making it impossible to trace transactions. Was invented by alternative the principle of proof of work in order to protect the currency from mining on ASIC hardware, and soon came the first currency based upon the principle of Bitcoin. Due to the complex cryptographic algorithms it originally attracted the attention of the academic community. The first CryptoNote forks have also been established in universities.

In August 2012 McCaleb jed hired Chris Larsen (Chris Larsen), and they turned to Ryan Fagger with its idea of digital currency. After discussions with Machalaba and long-standing members of the community Ripple Tagger gave them the rights to the concept and the name. In September 2012, Larsen and McCaleb founded the Corporation OpenCoin, which has begun to develop the Ripple Protocol (RTXP) and the Ripple payment network. Of the 100 billion originally generated tokens (XRP) are the creators of the original participants, representatives of venture funds and the other founders received 20 billion. The remaining 80 billion were in the hands of Ripple Labs.

In the fall of 2012, the majority of developers of the bitcoin community have been busy creating and improving purses. The idea of deterministic wallets was introduced in 2011 and 5 November 2011 was released the program Electrum — the first lightweight bitcoin client based on a client-server Protocol. In 2012, comfortable and secure wallets are available to users. At this time began to appear lightweight browser-based wallets, offline wallets, making it easier to migrate and backup data. Was also presented paper wallets that allow you to save a key pair on a sheet of paper, and even physical bitcoin coins with stored keys.

2012 prepared the conditions for the subsequent boom alithinou. 2013 was a very productive and eventful, including a review of the basic principles of Bitcoin and the active search for new ways of development of cryptocurrency. In 2013 was created PoW-currency Primcount focused on mining with the search for Prime numbers. - CryptoNote originally developed in Java, was rewritten in C++, and there are several forks of it. Also developed the currency Dojcin with a fork, which quickly gained popularity due to the imageboard. Were are the currency of the Quark, which developers experimented with several hashing algorithms. As already mentioned, in 2013, was created the first PoS currency Perlin, and later appeared on her forks. In the same year was presented NXT is another PoS currency that is based on a completely new algorithm, different from Bitcoin. And, of course, work continued on Ripple.

In 2013, appeared and gained popularity of the new technology creating a cryptocurrency that has led to the emergence of new applicants. Of course, Bitcoin is far bypasses all of its potential competitors, but some alternatives also deserve attention. In the second part of this article we will discuss this topic in more detail.

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