On October 31, 2008 at 7:10pm French time, a person calling himself Satoshi Nakamoto posted An email on a mailing list dedicated to cryptography. The subject of this email is:” Bitcoin P2P e-cash paper ”. This message starts with the now famous phrase:” I worked on a new electronic payment system that was entirely peer-to-peer, without a trusted third party. ” (French translation). In this email, a quick description of some of the properties of the Bitcoin protocol follows, as well as a summary of the White Paper, a scientific document that describes its fundamental principles.
After this historic event, it was no longer possible to turn back. Even if the effective launch of the network will only take place on January 3, 2009, the workings required to create a peer-to-peer monetary protocol were already revealed in broad daylight.
In retrospect, we can legitimately ask ourselves what motivated the creation of a peer-to-peer monetary system such as Bitcoin. This is what we are going to study in this article.
Bitcoin is the latest cryptocurrency
First of all, let's remember that the idea of developing a peer-to-peer electronic money system is much older than Bitcoin. The latter is the result of various cryptographic research studies. Moreover, the creation of Bitcoin is not an isolated event. Rather, it is part of a line of attempts to create electronic money without a trusted third party.
Cryptography has played an important role in this research. As early as the end of the 1970s, advances in asymmetric cryptography, in particular with the invention of the first public-key encryption algorithms, allowed the development of secure exchanges on public networks. In 1976, the Diffie-Hellman algorithm was published. Then, it followed the invention of RSA the following year and of Merkle-Hellman in 1978.
Unlike other crypto applications, decentralized digital currency has taken much longer to emerge. However, the idea has existed since the beginning of the 1980s. In 1982, David Chaum designed eCash, the first anonymous electronic money system. The objective of this protocol was to reproduce the properties of cash on electronic media. However, it still required the involvement of trusted third parties such as banks.
Other solutions came later. Among the most notable was b-money, by Wei Dai, a system proposed in 1998, cited as a reference in Satoshi's White Paper. I could also mention RPOW, created by Hal Finney in 2004, or of course BitGold, designed by Nick Szabo in 2005. These systems came up with the idea of interpreting the solution to a cryptographic problem (i.e. proof of work) as an object that could be put a monetary value on.
But these solutions did not yet have all the workings needed to create a true decentralized electronic money system. The main obstacles encountered in this research were the decentralization of the system, the prevention of double spending, and above all, the resistance to Sybil attacks. The Bitcoin protocol solved all these problems, allowing for the first time the establishment of a fully peer-to-peer electronic cash system.
Bitcoin is therefore the result of all these experiments. Satoshi's work is based on foundations that have been gradually laid since the 1980s for electronic cash, and since the 1970s for public-key cryptography.
Peer-to-peer electronic money: a desire of Cypherpunks
Even if one does not know the identity of Satoshi Nakamoto, one can recognize that in the creation of Bitcoin, as well as in the research that precedes it, there is a cypherpunk thought. This collective of activists, developers, and especially cryptographers, played a role in forming the ideas that would eventually take shape with Bitcoin.
One of the key documents that shaped this thinking is The Cypherpunk Manifesto, written by Eric Hughes in 1993. This document focuses on the importance of privacy as a fundamental right in an open society in the electronic age. Cypherpunks believe that the only way to enforce this right is by using robust cryptographic methods. This ideal is deeply rooted in the philosophy of Bitcoin and its community.
The Cypherpunks' drive to develop an electronic money system was motivated by a distrust of centralized financial systems and a desire to reduce government control over individual transactions. They were worried about how these entities could use transaction data to monitor and control individuals. Cypherpunks also recognized that traditional monetary systems were vulnerable to censorship and manipulation.
Eric Hughes mentioned this electronic cash system as early as 1993 in his manifesto:
We defend our privacy with cryptography, with anonymous mail transfer systems, with digital signatures, and with electronic money.
Bitcoin responds to the motivations of the cypherpunk movement. It is a monetary system that escapes the supervision and control of financial institutions and states. It is a peer-to-peer payment network that, if used well, can be confidential and resistant to censorship. Finally, the governance of its protocol and the management of its money supply cannot be changed arbitrarily, unlike other current monetary systems.
Ultimately, the creation of Bitcoin can be seen as the implementation of the goals that the cypherpunk movement has defended for decades. Bitcoin is a response to calls for the defense of privacy, freedom, and individual sovereignty in the face of a world that is increasingly interconnected, but also subject to government surveillance and control. It basically represents a tool for financial liberation, based on cypherpunk thinking.
Satoshi Nakamoto's explanations in the White Paper
In A previous article, I already provided you with an analysis of the concepts mentioned in the White Paper. But beyond these technical resources, this document published by Satoshi is also full of explanations about what motivated the creation of Bitcoin.
In the version of October 31, 2008, from the first sentence, Satoshi emphasizes the need for a peer-to-peer monetary system to avoid, in his opinion, the “burden” of having to go through a financial institution.
📌 Did you know that? The version of the White Paper released today only dates from March 2009, and is not identical to the original document. It is a slightly modified version of the first paper published in October 2008.
In the introduction, Satoshi Nakamoto criticizes the costs and the need for trust that traditional financial transactions require. He explains to us that this trust and these costs are eliminated when it comes to cash, but alas, this payment method is not suitable for internet commerce.
At the end of the introduction, he explains to us that the need that Bitcoin meets is that of having a payment system based on cryptographic evidence, rather than on trust in financial institutions. This need for trust includes the risks of censorship, violation of individual privacy, and arbitrary dilution of the value of the currency by states. In these few sentences, we find the ideological foundations of the cypherpunk movement.
Conclusion
Bitcoin is the result of research that began in the 1980s on decentralized and anonymous electronic payment systems. All these tests were made possible by the rapid advances made in asymmetric cryptography beginning in the 1970s.
It is part of the cypherpunk ideology. This thought advocates the use of cryptography to enforce one's fundamental right to privacy and ensure individual freedoms in the face of government surveillance and control.
Finally, if we study the explanations in Satoshi Nakamoto's White Paper, we discover that Bitcoin aspires to annihilate the need for trust in our monetary exchanges. This need brings with it its share of risks for the user's privacy, for the free movement of capital, and above all, for maintaining the value of money in the face of money printing by central banks. So that's why Bitcoin was created.
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