The number of companies and investors betting on blockchain continues to grow. But how did it come about? What was needed to develop bitcoin, its first practical application? And who were the pioneers of blockchain?
Bitcoin – the first cryptocurrency – and the technology that supports it, blockchain, didn´t appear from one day to the next. They are the result of more than 40 years of research.
Throughout the first half of the 20th century, different initiatives – the majority of them linked to the military – laid the technical foundation for cryptography, a discipline that for a long time was kept in secret by governments. Years later, based on those mathematical advances, a series of algorithms were developed that enabled the creation of “public-key cryptography,” an essential step in the development of blockchain and bitcoin. But it wasn´t until the 1990s that another group of computer projects, linked to freedom of information and the search for a decentralized system, made possible the publication of Bitcoin P2P e-cash, the first milestone in the creation of the cryptocurrency.
This entire historical process is linked to a paradigm change with significant economic consequences: the elimination of the figure of the intermediary to validate transactions. Making it unnecessary to have a third party in an exchange of value supposes an enormous cost savings, a fact that has made this technology particularly attractive for companies.
As the consultant Iñigo Molero, coauthor of the book Blockchain: The Industrial Revolution of the Internet, said during a recent talk at DevAcademy, “To know where we´re going, it’s important to know where we´ve come from.” His presentation served as the basis for this review of the pioneers of blockchain and bitcoin.
Cryptography: the heart of blockchain
Crytpography is essential to blockchain, where information is shared in encrypted format by enormous networks of computers, without any hierarchy. The first sphere of activity to become aware of the power of this discipline –defined by the Royal Academy of Spain as “the art of writing in a secret key, or in an enigmatic manner” – was the military.
During the Second World War, governments became aware of the relevance of crytpography for coding and de-coding information. The story of Alan Turing, a brilliant British mathematician regarded as the father of cryptography, is already part of popular culture. As recounted in the film The Imitation Game, he managed to decipher the codes of “Enigma,” – the machine used by the Germans for their communications during World War II, which gave an enormous advantage to the allies.
The Americans did something similar during the War in the Pacific: they deciphered the Purple Code, the ciphering machine used by Japan during the war. These achievements made cryptography an essential discipline for governments, which preferred to maintain it as a state secret because of the sensitivity of its use during wartime.
The situation began to change in the 1970s, when a group of visionaries moved ahead with their research to make the freedom of communication offered by cryptography more accessible .Without knowing it they were laying the intellectual foundations of blockchain and bitcoin.
A history of algorithms
In 1976 Whitfield Diffie and Martin Hellman created the Diffie-Hellman algorithm, with which they hoped to break encrypted keys in two, so that there would be a public one and a private one. With a public key, it´s possible to encrypt a message but to decrypt it, a private key is necessary.
Another decisive advance was the creation of the Merkle Trees by the American computer scientist Ralph Merkle. Also, at almost the same time that Diffie and Hellman published their algorithm, Merkel discovered his puzzle. The three are considered the creators of public-key cryptography.
Just a year after the Diffie-Hellman algorithm, Americans Ron Rifest, Adi Shamir and Leonard Adleman invented the RSA Algorithm (named for the initials of their surnames) for generating keys, encrypting and decrypting messages.
To prove the strength of their code, they published a test for readers of a magazine, which consisted of deciphering a message in exchange for $100. No one managed to do it until the mid-90s, when Derek Atkins, Michael Graff, Arjen K. Lenstra y Paul C. Leyland decided to put different peoples’ computers around the world to work on the same problem, in order to amass more computing power.
The phrase they deciphered was “The Magic Words are Squeamish Ossifrage.”
The 1990s and cyberpunk
With these technical bases consolidated, during the 1990s another push was given to the trends that would later crystallize into blockchain and bitcoin. Noteworthy are PGP –Pretty Good Privacy by Phil Zimmermann (1991), the first widely-used encryption software, and Electronic Frontier Foundation (EFF, created in 1990), which gave rise to Tim May´s crypto-anarchist manifesto, one of the reference texts in this story.
These phenomena were part of the cyberpunk movement, which defended freedom of expression, access to information and privacy as basic elements that should be protected and promoted by technology and cryptography.
The seeds of bitcoin had by now been sown, but it´s fair to mention that beforehand, there were other precedents that went by the wayside, such as Digicash, Hashcash, Bitgold, by Nick Szabo (who outlined the concept of intelligent contracts), or B-Money, by Wei Dai.
On October 31, 2008, Satoshi Nakamoto published the study he had been working on: Bitcoin P2P e-cash, a system of ‘peer-to-peer’ electronic money without intermediaries. Less than a year later, on January 3, 2009, the first block of the bitcoin blockchain, called the Genesis block, was generated, marking the start of the Bitcoin network.
Finally, five days later, on January 8, 2009, Satoshi Nakamoto, the creator (or creators, as his real identity has not been confirmed) of bitcoin, published Bitcoin v0.1 released, announcing the first transaction with the cryptocurrency.