Yeah, I thought too, that Bitcoin was the first cryptocurrency. It is surprising to find out that it really is not. Among the first cryptocurrencies include DigiCash, Bit Gold, B-money, and HashCash.
1. DigiCash
The first crypto system was called "DigiCash", founded by David Chumm in 1989. The system processed anonymous transactions using a number of cryptographic protocols.
The system used "Blind Signatures" to facilitate transaction anonymity. However, people were not open to the adoption of DigiCash and the company filed for bankruptcy in 1998. It sold its shares to eCash companies later on.
While studying at the University of California, Berkeley, David Chaum observed open access to online payment systems. This public nature made David Chaum write a paper discussing advances in public and private keys technology. In 1989, Chaum then proposed a cryptographic system that would be unable to trace online payments; therefore, DigiCash was born. The company was able to implement the technology fully in 1990.
DigiCash issued secured keys, which prevented third parties from accessing personal information through online transactions. The first bank to adopt DigiCash was the Mark Twain Bank in the US, which was later acquired by Mercantile Bank. The second bank was the Deutsche Bank of Germany.
2. Bit Gold
A second form of Cryptocurrency that preceeded Bitcoin was the "Bit Gold". Founded by blockchain pioneer Nick Szabo, in 1998. However, this project was never implemented; therefore the coin never existed. Bit Gold is the foundation of Satoshi Nakamoto's modern day Bitcoin.
The difference between Bit Gold and Bitcoin
Szabo says that the key reason for creating Bit Gold was to address the limitations of traditional finance systems, for example, fraud, intermediaries. These are the same for Bitcoin. However, there are differences between the two coins, which are,
The Mining Process - Szabo simply stated that mining Bit Gold would vary with time; it would not be necessarily easy or hard. However, Bitcoin has a parameter that mining it would become hard over time.
Supply- Bit Gold would only have fluctuations on the amount of coins mined at a given period, whereas, Bitcoin is limited in supply.
Use - Bit Gold was not designed to be a form of currency but to act like a physical but electronic reserve in the era before fiat, whereas, Bitcoin was designed as a form of currency.
Note: There are two occurrences of Bit Gold, before Bitcoin and after Bitcoin.
Pioneers before the Emergence of Bitcoin. In 2017, Jack Lao created a crypto by the name of Bit Gold, a hard fork of Bitcoin. A hard fork simply means that the new technology is using the old technology as its foundation, only with a few advances of it. Therefore, Bit Gold is an exact copy of Bitcoin with only a few advances. Bitcoin Gold aims to provide miners with an opportunity to mine electronic currency using GPUs instead of ASICs; instead of using the SHA-256 algorithm, it uses Equihash.
3. B-money
This is another crypto inspired by DigiCash. However, like Bit Gold, the coin never launched officially. From the University of Washington, Wei Dai, a computer graduate, published a proposal on a distributed and anonymous e-cash system.
The proposal stated that the system:
Would have computational work.
The work must be verified by a collective ledger.
Dai proposed collective bookkeeping would be necessary, with cryptographic protocols to help authenticate transactions.
Use of Digital Signatures: Public and Privy Keys for transaction authentication ND enforcement.
Satoshi Nakamoto honors Wei Dai's work and even mentions him in the Bitcoin Whitepaper. Even Vitalik Eth went on to call the smallest unit of an ether (in the Ethereum Network) a "Dai".
4. HashCash
Developed in the 1997, it is the immediate cryptocurrency before Bitcoin. Adam Work introduced the "Proof-of-Work" mechanism to validate transactions, prevent DDOS attacks, and reduce email spam. Hashcash inspired Satoshi so much that he quotes Adam Work in his Bitcoin whitepaper. However, HashCash collapsed due to network congestion that caused scalability issues.
What led to Cryptocurrency Advancements?
Spy agencies were among the pioneers of cryptography. Legal and policy developments in the 1980s were contributors to internet money. The two key policies that contributed to encryption technology are the following:
1. Data Encryption Standard.
2. New Directions in Cryptography.
Key Takeaways
Bitcoin was not the first cryptocurrency contrary to popular belief; it is only the first successful Cryptocurrency.
Satoshi Nakamoto used research from early crypto coins.
It is important to always write a proposal when doing research. You might inspire the greatest invention ever even though you might not get a chance to launch your project.
Always honor researchers before you like Satoshi honors Wei Dai and work.
Nothing comes easy. The researchers above tried and failed. They made the publications in their older years. It is never too old or too young to start something. Taking time to do things is worth it.
Comments