- It's easy to get confused by the terms used
in the crypto world.
For example, what's a double-spend problem?
And is Bitcoin the same as blockchain?
Let's clear some of this up right away.
In 2008, a paper was written and published online
by someone called Satoshi Nakamoto.
Even today, we don't know who this is
or whether it was a cover for a group of people.
The paper proposed a 100% digital monetary system
that could support payments directly between people.
No intermediaries would be required.
Put another way, no banks or governments would be necessary
for it to function.
Called Bitcoin, a peer-to-peer electronic cash system,
the proposal described a novel design that could
manage transactions in digitally distributed ledgers.
The major breakthrough was that the design
enabled individuals to confidently send and receive
digital payments, and the distributed ledgers
that recorded the transactions would all be kept in sync.
This might sound trivial,
but it's a wicked problem to solve.
A core issue lies in the fact that digital items
can be easily copied.
Consider a digital image on your computing device.
If you attach the image to an email and send it to someone,
it doesn't automatically delete from your computer.
You have a copy, and now the recipient has a copy.
You've duplicated the digital item.
Being able to easily create infinite copies of digital items
like images, musics, and files, and documents,
is one of the amazing benefits of digitalization.
There's basically no cost to duplication.
However, if we're going to create digital money,
easy digital duplication becomes a liability.
If I pay someone by copying a unit of digital currency,
the monetary system fails.
Although we might like the idea of infinite money,
a currency can't function if it can be created
through a copy and paste function.
This challenge with digital money
is called a double-spend problem.
Satoshi's paper in 2008 was laser focused on solving it.
What is required to solve the double-spend problem
is a system that keeps track
of how much digital money everyone has.
And the system is kept current at all times.
In other words, if I have five units of digital currency
and I spend three, the system must reflect
that I only have two units left to spend on future payments.
In 2009, the system proposed in Satoshi's paper was built.
Its design included digitally distributed ledgers
that ran on Bitcoin users' computers.
These distributed ledgers
would later become known as blockchains.
In addition, they would incorporate the use of cryptography
and a few other tricks to enable the magic to work.
From day one, Bitcoin succeeded
in solving the double-spend problem
using Satoshi's cryptographic blockchain design.
Cryptocurrency was born, and Bitcoin became a model
for the thousands of cryptos to follow.
It also created the opportunity for blockchain itself
to be an independent enabler of innovation
in a wide range of applications.
You're probably now curious about how blockchain
and cryptography works to enable cryptos.
Well, that's the subject of the next video.