Bitcoin and Cryptocurrencies – What Digital Money in actual means

The fate different from Digital money expected another payment system – E-gold. It was developed in 1995. Douglass Jackson (and he was a fairly successful practicing oncologist), and earned in 1996 when she was officially registered by the American company Gold & Silver Reserve, Inc. One of the most important differences between E-gold and others was the procedure for correspondence of funds – customers’ foreign currency deposits were transferred to a certain amount of precious metals: gold, silver, platinum or palladium. All further calculations were carried out inside the system. All this resembles modern cryptocurrencies secured with real deposits – stable coins. But the main difference that ultimately led to the collapse of the system was the complete anonymity of the participants. Any user could incognito transfer their funds to other people. For its time, the idea was really brilliant.

Value of E- Gold in the market

E-gold users reached about 5 million people, and more than 2 billion transactions were carried out in it over the year.

The system worked perfectly until one specific date – September 11, 2001, when terrorists destroyed the World Trade Center in New York. Immediately after this event, the US authorities radically revised their views on anonymous payment systems and one of the first to get into the regulator’s hot hand was E-gold. Law enforcement authorities have identified several cases of fraudulent use of the payment system, as well as numerous violations of licensing laws.

A long conflict between law enforcement and the Gold & Silver Reserve predictably ended in the collapse of the latter. In 2008, all the top managers of the company went on trial, and the payment system itself almost ceased to exist.

The full-fledged idea of ​​modern cryptocurrencies appeared in 1998. The famous cryptographer Wei Dai offered his vision to create an anonymous, distributed payment system called “Bitcoinmoney”. And although this technology remained theoretical, but it gave modern cryptocurrencies several fundamental ideas: a publicly accessible global distributed register, a scheme for creating new coins, similar to the Proof-Of-Work consensus algorithm, and also the concept of mining. Wei Dai is also a very famous figure in the cipher punk community, so it is not surprising that some of David Chom’s proposals formed the basis of his concept.

Modern bitcoin by cryptographer

A little closer to modern bitcoin is the idea of ​​another cryptographer – Nick Szabo. In 2005, he blogged on the concept of his Bit Gold system. And again, the chain of continuity is clearly traced – it was based on the achievements proposed a solution to some problems regarding distributed network security, as well as his own model of a consensus algorithm based not on computing power – how it works with bitcoin, but on the number of network addresses. Make you bitcoin profitable with online trading. Know how it all began.

But his main merit is the creation of the concept of smart contracts (he formed this idea long before Bit Gold – in 1996), which later formed the basis not only of bitcoin, but also of other cryptocurrencies, for example, ethereum. At their core, smart contracts are reminiscent of ordinary contracts drawn up on paper and describing the relationships of interested parties, they are only written using various programming languages. Without them, there would be no ICO, multi-signatures, Lightning Network, and many other things.

By the way, it was Nick Szabo who for some time was one of the main “suspects” in the creation of Bitcoin. His ideas are too noticeable in the White paper (White paper – a document describing the essence of the project and the ways of its implementation) of the first cryptocurrency.

However, the cryptographer denied his connection with the personality of Satoshi Nakamoto. The final results and answer the following question: does cryptocurrencies come before Bitcoin? Definitely – Bitcoin is the first cryptocurrency. Satoshi Nakomoto (whoever he is) managed to combine many scattered ideas into a single product.

Even PayPal with Visa – they all brought something to the concept of “digital gold”, and without the development of David Chom, Wei Dai, Nick Szabo and other cipherpunk he simply could not earn. Bitcoin has become a real victory for a huge number of incredibly talented people around the world.

This post was last modified on May 16, 2020 6:38 PM