Before Bitcoin, there was an idea…
Firstly, “Bitcoin” is a cryptocurrency, a digital asset designed to function as a medium of exchange that is based on cryptography without any central authority to control its function. But before Bitcoin/BTC, there were many ideas and experiments which finally led to this well-known “digital gold” that is going to transform the financial system forever. The 90s An American cryptographer David Chaum experimented with a form of electronic cash. He created a token that could be transferred between individuals both safely and privately. Chaum developed a “blinding formula” to be used to encrypt information passed between individuals, bearing a signature of authenticity. Chaum founded DigiCash to put his concept into practice several years later. DigiCash went bankrupt in 1998, but the idea was implemented and the change has just started. In 1998, developer Wei Dai proposed an “anonymous electronic cash system” called B-money. Ultimately, B-money was never successful and it was quite different from bitcoin. Nonetheless, it was also an attempt at an anonymous, private, and secure electronic cash system. In the B-money system, pseudonyms would be used in order to transfer currency through a decentralized network. The system even included a means for contract enforcement in-network as well, without the use of a third party. Satoshi referenced elements of B-money in his bitcoin whitepaper, so the impact of B-money on Bitcoin is undeniable. Bit Gold was another electronic currency system that dates back to the same period as B-money. Created by Nick Szabo, Bit Gold came with its own proof-of-work system that in some ways is imitated by today’s bitcoin mining process.
BitGold was the precursor of BitCoin The most revolutionary aspect of Bit Gold was the lack of central authority and third-party. Bit Gold aimed to avoid reliance on centralized currency distributors and authorities. Szabo’s aim was for Bit Gold to reflect the properties of real gold, thereby enabling users to eliminate the middleman entirely. Bit Gold, like B-money, was unsuccessful. Developed in the mid-1990s, Hashcash was one of the most successful pre-bitcoin digital currencies. Hashcash used a proof-of-work algorithm to aid the generation and distribution of new coins, much like many cryptocurrencies. Indeed, Hashcash came across with the same problems as today’s cryptocurrencies today, facing an increased processing power need, eventually becoming less effective and adopted. Milton Friedman about “Digital cash” in 1999 Milton Friedman was one of the leading economic minds of the 20th century and popularized many economic ideas that are adopted today. Friedman’s economic theories became what is known as monetarism, which opposed parts of Keynesian economics. Milton Friedman in 1999: “The internet is going to be one of the major forces for reducing the role of government. The one thing that is missing is a reliable e-cash, a method by which on the internet you can transfer funds from A to B anonymously.” In this interview, Friedman accurately forecasts the need for a reliable e-cash that allows individuals to send money online anonymously. This forecast would come true only a decade later, with cryptocurrencies such as Bitcoin being invented in 2009.
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