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Satoshi Nakamoto and Bitcoin

You must read the original paper Bitcoin: A Peer-to-Peer Electronic Cash System. The general context and motivation is given in the Satoshi's post.

History of blockchain

(from Gavin Wood Yellow paper

Dwork and Naor [1992] provided the first work into the usage of a cryptographic proof of computational expenditure (“proof-of-work”) as a means of transmitting a value signal over the Internet. The value-signal was utilised here as a spam deterrence mechanism rather than any kind of currency, but critically demonstrated the potential for a basic data channel to carry a strong economic signal, allowing a receiver to make a physical assertion without having to rely upon trust.

Back [2002] later produced a system in a similar vein. The first example of utilising the proof-of-work as a strong economic signal to secure a currency was by Vishnumurthy et al. [2003]. In this instance, the token was used to keep peer-to-peer file trading in check, ensuring “consumers” be able to make micro-payments to “suppliers” for their services. The security model afforded by the proof-of-work was augmented with digital signatures and a ledger in order to ensure that the historical record couldn’t be corrupted and that malicious actors could not spoof payment or unjustly complain about service delivery.

Five years later, Nakamoto [2008] introduced another such proof-of-work-secured value token, somewhat wider in scope. The fruits of this project, Bitcoin, became the first widely adopted global decentralised transaction ledger. Other projects built on Bitcoin’s success; the alt-coins introduced numerous other currencies through alteration to the protocol. Some of the best known are Litecoin and Primecoin, discussed by Sprankel [2013]. Other projects sought to take the core value content mechanism of the protocol and repurpose it; Aron [2012] discusses, for example, the Namecoin project which aims to provide a decentralised name-resolution system. Other projects still aim to build upon the Bitcoin network itself, leveraging the large amount of value placed in the system and the vast amount of computation that goes into the consensus mechanism.

The Mastercoin project, first proposed by Willett [2013], aims to build a richer protocol involving many additional high-level features on top of the Bitcoin protocol through utilisation of a number of auxiliary parts to the core protocol. The Coloured Coins project, proposed by Rosenfeld [2012], takes a similar but more simplified strategy, embellishing the rules of a transaction in order to break the fungibility of Bitcoin’s base currency and allow the creation and tracking of tokens through a special “chroma-wallet”-protocol-aware piece of software.

Additional work has been done in the area with discarding the decentralisation foundation; Ripple, discussed by Boutellier and Heinzen [2014], has sought to create a “federated” system for currency exchange, effectively creating a new financial clearing system. It has demonstrated that high efficiency gains can be made if the decentralisation premise is discarded.

Early work on smart contracts has been done by Szabo [1997] and Miller [1997]. Around the 1990s it became clear that algorithmic enforcement of agreements could become a significant force in human cooperation. Though no specific system was proposed to implement such a system, it was proposed that the future of law would be heavily affected by such systems. In this light, Ethereum may be seen as a general implementation of such a crypto-law system.

Buterin [2013a] first proposed the kernel of this work in late November, 2013. Though now evolved in many ways, the key functionality of a blockchain with a Turing-complete language and an effectively unlimited inter-transaction storage capability remains unchanged.


Vitalik Buterin. Ethereum: A Next-Generation Smart
Contract and Decentralized Application Platform.
2013a. URL {}.

Cynthia Dwork and Moni Naor. Pricing via processing or
combatting junk mail. In In 12th Annual International
Cryptology Conference, pages 139–147, 1992.

Satoshi Nakamoto. Bitcoin: A peer-to-peer electronic cash
system. Consulted, 1:2012, 2008.

Nick Szabo. Formalizing and securing relationships on
public networks. First Monday, 2(9), 1997

Vivek Vishnumurthy, Sangeeth Chandrakumar, and
Emin Gn Sirer. Karma: A secure economic framework
for peer-to-peer resource sharing, 2003.