- Let's talk about the origin of blockchain.
The fact that the blockchain emerges
as the essential supporting mechanism
for a new digital currency will play an important role
in our understanding of this technology.
The first mention of Bitcoin,
a new form of electronic money,
showed up in a proposal paper
written by Satoshi Nakamoto in 2008.
Turns out this was not a real person's name.
Speculation is that it was a group of writers
who used the pseudonym.
However, to this day, the mystery is still unresolved.
At the heart of this proposal
was a solution to the double-spend problem.
We can all recognize this problem through how easy it is
to make unlimited copies of digital items.
If a digital currency can be simply copied, it will.
For obvious reasons, it's never going to be viable as money.
Satoshi solved this double-spend problem.
I'll describe the basics of how later on.
In 2009, the proposal for Bitcoin was built
and became real as an open source software project.
Open source so far permits anyone
to inspect, modify and enhance it.
This important decision has enabled thousands
of other cryptocurrencies to be created
from the original Bitcoin code.
Bitcoin enabled a digital currency
that could be used person-to-person
without the need for any intermediaries.
It was the opposite of all other forms
of typical currency we're used to.
Specifically, the currency was built
to exist outside the banking system, completely independent
and free of any government or regulator
and unconcerned with borders
and other traditional financial system limitations.
As a currency, Bitcoin does not exist in a physical form.
There are no coins or paper notes.
It's made of bits, ones and zeros,
and resides and operates natively
on computer devices and networks.
When a transaction takes place,
it is recorded in identical copies of a blockchain database
that live on computers in a distributed network.
These transactions are validated
and stored through a set of innovative
and unique blockchain processes,
which I discuss later.
Top of mind for those curious about Bitcoin
is how it functions as a currency
and how it acquires value.
Traditional money, that which is backed
and maintained by the government,
and we call it fee currency,
must meet four criteria to have function and value.
Supply, demand, utility and trust.
Supply and demand will typically determine value.
Utility means it can be used to buy
and sell products and services.
And trust means having the confidence
that it will actually store value
and be accepted for transactions.
Let's look at those dimensions as they relate to Bitcoin.
When it was launched in 2009,
a finite number of 21 million Bitcoins was established.
These Bitcoins are introduced gradually for use
via a process of mining.
An important concept I'll explain later.
As time passes, mining is becoming
increasingly difficult and costly,
much like harvesting silver or gold and oil.
Bitcoin therefore has limited supply, a cost to mine
and a demand that is relative to its market value.
Something determined by how much each person
is prepared to pay for it.
Now can Bitcoin be used to buy anything?
Well, absolutely.
For example, all types of products and services
can be purchased using it.
This means it has utility.
Finally, over the course of the past 10 years,
Bitcoin has gained credibility as more people participate,
greater uses have been adopted
and the technology has matured.
Trust has been established.
Bitcoin and the thousands of cryptocurrencies
that have followed
have succeeded beyond most people's expectations.
They have stunned our global financial systems
and perplexed governments and economists.
They have become the basis
for new innovation in organizations.
Acknowledging the incredible achievements of Bitcoin,
the underlying blockchain technology,
may be an even more surprising success story.
Without Bitcoin, blockchain as we know it today
would either have never emerged as it has
or would have come about later
in a completely different way.
In this way, we must recognize and give credit to Bitcoin,
a project that introduced a viable cryptocurrency
for giving birth to the version of blockchain we know today.