Bitcoin White Paper Turns 13 Years Old Today — What You Need To Know About The Document That Transformed The Financial World

The idea of Bitcoin BTC/USD was proposed in a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System '' by a psedonymous author or authors named Satoshi Nakamoto exactly 13 years ago. Here is what you need to know about this document.

The Bitcoin Paper: The white paper was published on October 31, 2008, on a mailing list at metzdowd.com. 

In one of the threads, now archived, Nakamoto wrote, “I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party. “

Nakamoto, at the time, also shared a link to the paper, which can be used to read the document even in 2021.

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Notably, the paper was published during a time of great economic upheaval caused by the global financial crisis.

In fact, Bitcoin’s genesis block contains a headline from The Times newspaper, “Chancellor On Brink Of Second Bailout For Banks.”

Why The Paper Matters: The importance of the white paper lies in the fact that it came long before version 0.1 of Bitcoin software was released on SourceForge on January 9, 2009.

The document also described Nakamoto’s ideas on the first-ever blockchain and Bitcoin’s underlying proof-of-work concept. 

“The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work.”

Trustless Network Proposed: One of the key features and a problem the whitepaper  was aiming to solve was the establishment of a trustless network. This is the foundation of today’s cryptocurrency ecosystem.

Nakamoto wrote at the time, “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”

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Additionally, Nakamoto defined Bitcoin as a “chain of digital signatures.” Each owner of a coin transfers it to the next by digitally signing a hash of the previous transaction and the public key of the next owner, and adding these to the end of the coin. This process is verifiable. 

Bitcoin Described As A 'Chain Of Signatures' By Satoshi Nakamoto In Bitcoin: A Peer-to-Peer Electronic Cash System 

Double Spending Solved: A key issue solved by the white paper was double spending. This basically establishes a way for a payee to know that the previous owner of a coin did not sign any earlier transactions.

“The only way to confirm the absence of a transaction is to be aware of all transactions,” as per Nakamoto.

So in order to prevent double spending without an intermediary like a financial institution or another trusted party, transactions must be “publicly announced,” as per Nakamoto.

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“We need a system for participants to agree on a single history of the order in which they were received. The payee needs proof that at the time of each transaction, the majority of nodes agreed it was the first received.”

Nakamoto goes on to lay down the technical nitty-gritty of Bitcoin in the whitepaper including a timestamp server. The Bitcoin creator also explains in detail the Proof-of-Work system, the coin’s network and it's working. Additionally, he also touched on incentives paid to the miners, privacy, and other details related to the world’s first blockchain-based cryptocurrency.

The Aftermath: After Bitcoin’s first block was mined, the first person to receive the cryptocurrency was the programmer and early supporter Hal Finney. He received 10 BTC from Nakamoto, valued at nearly $589,605 at press time prices.

Nakamoto faded away from the Bitcoin landscape beginning mid-2010 and he was last heard from in April 2011, according to a Wired report.

Bitcoin is today the largest cryptocurrency with a market capitalization of over $1.1 trillion. When it first began trading in July 2010 its price ranged between $0.0008 to $0.08, as per Investopedia. Since those days, the coin has appreciated over 7.4 billion percent.

The apex coin is now larger than Tesla Inc TSLA, Facebook Inc FB, and Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), but none of this would be possible had the white paper never been released by Nakamoto.

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