Looking at the structure of molecules can be intimidating
But complication is the glue that holds reality together
That being said, trying to explain something complicated in an uncomplicated way is not a always easy
Below you will find as good an explanation as any
The following written content from Marina Manoukian
Considering the global phenomena that Bitcoin has become, with Bitcoin mines popping up in Kazakhstan, Iran, Malaysia, Russia, and the United States, you’d think that the inventor of Bitcoin would be well-known and rushing off to space with every other billionaire. Instead, the identity of the creator of Bitcoin remains a secret. And it’s unclear if anyone outside the creator knows the truth.
Some claim that the invention of Bitcoin was inspired by the 2007-2008 financial crisis. Others have tried to figure out the identity of its creator by following linguistic patterns. And at least one person has come out to claim the invention of Bitcoin as their own, although this has been cast into serious doubt.
But then what’s the real story behind this enigmatic inventor and the currency that has been described as both the “savior of global economy” and simply a reproduction of current inequalities? This is the mystery behind Bitcoin explained.
In 1998, a computer engineer named Wei Dai published an essay on an “anonymous, distributed electronic cash system” he referred to as “b-money.” But although b-money was never officially created, on August 22, 2008, Dai received an email expressing interest in the idea from someone who called themselves Satoshi Nakamoto. That month, Nakamoto had also registered the domain name bitcoin.org for the first time.
Nakamoto wrote that he was also working on a paper “that expands on your ideas into a complete working system,” per CoinMarketCap. A little over two months later, on October 31, 2008, Nakamoto posted a message on a cryptography mailing describing an “electronic cash system that’s fully peer-to-peer, with no trusted third party.” This paper, titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was the very first description of Bitcoin.
In the whitepaper, Nakamoto outlines how the electronic payment system would work using “cryptographic proof instead of trust” and would get rid of the need to use a financial institution. Nakamoto also claimed that by operating on cryptographic proof, “transactions that are computationally impractical to reverse would protect sellers from fraud, and routine escrow mechanisms could easily be implemented to protect buyers.” The whitepaper also outlined how blockchain would be used to maintain the ledger of transactions.
Blockchains were invented in 1991 by cryptographers Stuart Haber and Scott Stornetta and were originally used to verify whether a digital document had been altered or not. Using a cryptographic hashing algorithm, they essentially created a digital notary, according to Vice, which was then posted in the New York Times rather than a public digital ledger.
Nakamoto was clearly inspired by Haber and Stornetta’s work, considering that almost half the papers cited in Nakamoto’s Bitcoin whitepaper were written by Haber and Stornetta, and described a similar process for recording Bitcoin transactions. But according to The New York Times, Nakamoto didn’t even use the term “blockchain” at the time. The name comes from the fact that transactions are maintained in “blocks” of data and “chained” together with cryptographic hashing algorithms. “That makes it hard to go back and rewrite or monkey with the older records.”
On January 3, 2009, Bitcoin was launched and the first 50 Bitcoins were mined, also known as the genesis block, setting the blockchain in motion. CoinMarketCap also notes that the first block’s data included a headline from The Times of London that read “Chancellor on brink of second bailout for banks.” Nakamoto fixed the supply of Bitcoins at 21 million. Before long, 0.00000001 of a Bitcoin (BTC) was known as “Satoshis.” And according to New Scientist, it’s estimated that every Bitcoin will be in circulation by 2140.
On August 6, 2010, a member of the Bitcointalk forum posted about some concerns they had regarding the energy input needed to sustain Bitcoin. In a post titled “Bitcoin minting is thermodynamically perverse,” the user gridecon wrote that there is a “fundamental perversity of wasting large amount of energy and computations in generating the winning blocks for the minting process,” per CoinCapMarket. Essentially, in a very simplified sense, in order to earn Bitcoins, people have to add to the blockchain, which requires “comput[ing] the correct random numbers that solve a complex equation the blockchain system has generated” (via PCMag). With more computation energy, the easier this process, now known as Bitcoin mining, becomes.
But the energy needed to power this mining doesn’t come out of thin air. The New York Times reports that China recently banned Bitcoin mining because the energy needed for mining was “ultimately responsible for the revival of coal mines.” The hardware equipment used for Bitcoin mining also quickly becomes outdated and creates more waste.
In their original post, gridecon went on to point out that “bitcoin may actually be ‘destroying wealth’ in the sense of wasting energy producing a digital object less than the resources invested in it.” And in 2021, the amount of energy needed to mine one BTC was a $12,500 electricity bill.
The first Bitcoin transaction took place between Nakamoto and computer scientist Hal Finney on January 12, 2009. According to Decrypt, Nakamoto sent Finney 10 BTC as a test, and although Bitcoin was still worth practically nothing at the time, as of January 2022 those 10 coins are worth over $412,000. Finney is also known for having made the “first-ever tweet” about Bitcoin on January 10, 2009. The first Bitcoin exchange occurred on December 5, 2009, where $1 was equivalent to 1,309.03 BTC.
Initially, the Bitcoin usage was slow and mostly through barters, but in June 2010, software developer Gavin Andresen launched The Bitcoin Faucet, which gave five Bitcoins to anyone who visited the site. Nakamoto was impressed and reportedly responded in a forum saying, “Excellent choice of a first project, nice work.” And by July 2010, BTC was priced between $0.0008 to $0.08 per coin.
Over the following year, Nakamoto started stepping back from the Bitcoin project, and CEF writes that by mid-2011, Nakamoto had given over control of the source code repository and network alert key to Andresen. Nakamoto’s “final confirmed correspondence” to Andresen reads, “I wish you wouldn’t keep talking about me as a mysterious shadowy figure, the press just turns that into a pirate currency angle. Maybe instead make it about the open source project and give more credit to your dev contributors; it helps motivate them,” per CoinMarketCap. Read more from Grunge
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