Little did we know that cryptography together with the internet will take over our lives our jobs our social interactions and now our finance. Mysteriously many are still in shock and awe of how technology has taken over the world and it seemed that many cannot live a day without technology.
We all hail inventors of the major life changing technologies, and are always grateful for the kind of transparency and flexibility it brings to the citizens of this universe. During the 20th century the world moved from Monarchism and embraced Democracy or the Self-rule government. And that changed the world for the better and we all agree to the fact that there is no going back to where it was in the centuries past.
But as the times changed so must the ways of activities be. So there were the need to invent cars to travel from one community to the other with ease and that promoted TRADE. There was the need to invent telephone lines to ease on communication and that also promoted SWIFT RESPONSE TRADE. There was the need then to invent the Internet and that also promoted DECENTRALIZATION and taking power away from the 1% and giving it back to the people. Yet we don’t wish to change the one field that controls almost 70% of our lives that is money. Many has asked that the way we transact FINANCIALLY is kept as it is and not tempered with but it has been one of the major difficiency that is affecting many citizens of this planet.
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.
A situation that has been cultivated to rob of the citizen of the planet.
Governments decide to bailout banks who have failed in their quest to spend extravagantly, in their quest to loot funds from their customers. The government then calls it LIQUIDITY INJECTION.
The emergence of the world crisis has seen so many people lose their life time savings, which led to so many untold suicides and deaths.
Chancellor on the brink of second bailout, why bail a company that has killed its customers, why bail a company that has stolen its citizens of their hard earned funds?
SATOSHI NAKAMOTO in an interaction with Sepp Hasslberger and Joreg Baach he explained into details what he seeks to propose.
He mentioned in a Post on P2Pfoundation,
I've developed a new open source P2P e-cash system called Bitcoin. It's completely decentralized, with no central server or trusted parties, because everything is based on crypto proof instead of trust. Give it a try, or take a look at the screenshots and design paper.
“The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.”
The root problem with conventional currency is all the trust that's required to make it work. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.
A generation ago, multi-user time-sharing computer systems had a similar problem. Before strong encryption, users had to rely on password protection to secure their files, placing trust in the system administrator to keep their information private. Privacy could always be overridden by the admin based on his judgment call weighing the principle of privacy against other concerns, or at the behest of his superiors. Then strong encryption became available to the masses, and trust was no longer required. Data could be secured in a way that was physically impossible for others to access, no matter for what reason, no matter how good the excuse, no matter what.
It's time we had the same thing for money. With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.
One of the fundamental building blocks for such a system is digital signatures. A digital coin contains the public key of its owner. To transfer it, the owner signs the coin together with the public key of the next owner. Anyone can check the signatures to verify the chain of ownership. It works well to secure ownership, but leaves one big problem unsolved: double-spending. Any owner could try to re-spend an already spent coin by signing it again to another owner. The usual solution is for a trusted company with a central database to check for double-spending, but that just gets back to the trust model. In its central position, the company can override the users, and the fees needed to support the company make micropayments impractical.
Bitcoin's solution is to use a peer-to-peer network to check for double-spending. In a nutshell, the network works like a distributed timestamp server, stamping the first transaction to spend a coin. It takes advantage of the nature of information being easy to spread but hard to stifle. For details on how it works, see the design paper at http://www.bitcoin.org/bitcoin.pdf
The result is a distributed system with no single point of failure. Users hold the crypto keys to their own money and transact directly with each other, with the help of the P2P network to check for double-spending.
Satoshi Nakamoto
http://www.bitcoin.org
He made this post on the night of February 11, 2009 at exactly 22:27.
Following his post Sepp Hasslberger a member of the P2Pfoundation a day latter queried Satoshi and the conversation ensued;
Reply by Sepp Hasslberger on February 12, 2009 at 14:44
Great stuff.
This is the first real innovation in money since the Bank of England started to issue its promissory notes for gold in the vaults, which then became known as banknotes.
I believe an open source currency has great potential. A bit like Google becoming the default search engine for many of us.
Satoshi Nakamoto on February 15, 2009 at 16:42
Could be. They're talking about the old Chaumian central mint stuff, but maybe only because that was the only thing available. Maybe they would be interested in going in a new direction.
A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990's. I hope it's obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we're trying a decentralized, non-trust-based system.
Joerg Baach on February 17, 2009 at 10:42
Hi Satoshi,
we are actually really talking about the old Chaumian central stuff. That was because a) it was there b) it was patent free (we have to think a bit about the US). I had a read of your paper on the weekend - thanks a lot for doing that work. Interesting read.
What I did not understand about your system - how would you use it for a currency of any sort? Everybody can create a coin as they like, as far as I understood, so therefore there is no trusted supply of tokens / coins.
Or the other way around: if you don't trust the double spending database, because its a central instance, you surely couldn't trust a central issuer to issue and redeem. How would a currency work otherwise? Would you use it for a mutual credit system in which the transactions are shown online?
Cheers,
Joerg
Sepp Hasslberger on February 18, 2009 at 14:41
I have two questions, Satoshi.
The first one ties in with Joerg's doubts about the trusted supply of tokens/coins.
As far as I understand, there will be a limit of the total amount of tokens that can be created, and a changing gradient of difficulty in making the tokens, where the elaboration gets more and more difficult with time. Is that correct?
It is important that there be a limit in the amount of tokens/coins. But it is also important that this limit be adjustable to take account of how many people adopt the system. If the number of users changes with time, it will also be necessary to change the total amount of coins.
Is there a formula to decide on what should be the total amount of tokens, and if so, what is the formula?
If there is no formula, who gets to make that decision and based on what criteria will it be made?
I will keep my second question for later. One thing at a time...
Reply by Satoshi Nakamoto on February 18, 2009 at 20:50
It is a global distributed database, with additions to the database by consent of the majority, based on a set of rules they follow:
- Whenever someone finds proof-of-work to generate a block, they get some new coins
- The proof-of-work difficulty is adjusted every two weeks to target an average of 6 blocks per hour (for the whole network)
- The coins given per block is cut in half every 4 years
You could say coins are issued by the majority. They are issued in a limited, predetermined amount.
As an example, if there are 1000 nodes, and 6 get coins each hour, it would likely take a week before you get anything.
To Sepp's question, indeed there is nobody to act as central bank or Federal Reserve to adjust the money supply as the population of users grows. That would have required a trusted party to determine the value, because I don't know a way for software to know the real world value of things. If there was some clever way, or if we wanted to trust someone to actively manage the money supply to peg it to something, the rules could have been programmed for that.
In this sense, it's more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases. It has the potential for a positive feedback loop; as users increase, the value goes up, which could attract more users to take advantage of the increasing value.
Sepp Hasslberger on February 20, 2009 at 8:53
So in other words, "the early adopter finds the worm" in this system.
This would mean that - the earlier someone gets in on the bitcoin system establishing a node, the more chance they have of becoming lucky and being able to generate coins. Nothing against that, it would work to promote adoption of the system.
However there should also be a method of adjusting the total number of coins extant. I would propose to link the total number of coins to the number of active nods.
This way, you have two parameters that keep a balance. One is the halving of coins given per block, the other is a continual (or periodic?) adjustment of the target total of coins to the number of active users. That should self-balance the system.
The reason balance of the system is important: if it's going to be used for payments, you don't want to have large changes in the value of the coins. It would lead to distortions, I believe, by continually increasing the "purchasing power" of a single coin.
Stability of the coins' value is desirable for long term use.
This happens to be one of several conversations involving Satoshi and his friends with which after he disappeared.
But he sought to explain the background and he did perfectly in this discussion.
The 36 year old talented Cryptographer then took over a year to write the line of code for the software. His action was driven by anger toward the 2007 financial crisis. And he wanted to create a currency that was impervious to unpredictable monetary policies as well as to the PREDATIONS of BANKERS and POLITICIANS.
And yet Nakamoto himself was a cipher. Before the début of bitcoin, there was no record of any coder with that name. He used an e-mail address and a Web site that were untraceable. In 2009 and 2010, he wrote hundreds of posts in flawless English, and though he invited other software developers to help him improve the code, and corresponded with them, he never revealed a personal detail. Then, in April, 2011, he sent a note to a developer saying that he had “moved on to other things.” He has not been heard from since.
Nakamoto solved a problem using innovative cryptography. The bitcoin software encrypts each transaction—the sender and the receiver are identified only by a string of numbers—but a public record of every coin’s movement is published across the entire network. Buyers and sellers remain anonymous, but everyone can see that a coin has moved from A to B, and Nakamoto’s code can prevent A from spending the coin a second time.
Today 31st October 2018, bitcoin has grown more than what Satoshi thought it will be and it has become the biggest innovation in currency and banking after God created Gold and Precious metals.
The world has woken to celebrate this wonderful day. But the question is when Satoshi Nakamoto Reappear will?
This is appealing work =)