@ -15,6 +15,8 @@ In this chapter we'll get started with bitcoin by explaining some of the main co
=== History of Bitcoin
Bitcoin is the culmination of decades of research in cryptography and distributed systems and represents four key innovations brought together in a unique and powerful combination. Bitcoin consists of a de-centralized peer-to-peer network, a public transaction ledger, a de-centralized mathematical and deterministic currency issuance, a de-centralized transaction verification system and a set of powerful APIs.
Bitcoin was invented in 2008 by Satoshi Nakamoto with the publication of a paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System". Satoshi Nakamoto combined several prior inventions such as b-money and HashCash to create a completely de-centralized electronic cash system that does not rely on a central authority for settlement and validation of transactions. The key innovation was to use a Proof-Of-Work algorithm to conduct a global election every 10 minutes, allowing the de-centralized network to arrive at _consensus_ about the state of transactions. This elegantly solves the issue of double-spend, a weakness of digital money, where a single currency unit can be spent twice.
Satoshi Nakamoto's invention is also a practical solution to a previously unsolved problem in distributed computing, known as the Byzantine Generals problem. As such, it represents a breakthrough in distributed computing science and has wide applicability beyond currency. It can be used to achieve consensus on decentralized networks for provably-fair elections, lotteries, asset registries, digital notarization and more.
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The bitcoin network started in 2009, based on a reference implementation published by Nakamoto and since revised by many other programmers. During the first four years of operation, the network has grown to include an enormous amount of Proof-Of-Work computation, thereby increasing in security and resillience. As the network has grown, the exchange rate of a bitcoin has also grown dramatically and with quite a lot of volatility. In 2013, the total market value of bitcoin's primary monetary supply measure (M0) is estimated at more than 10 billion US dollars. The largest transaction processed by the network was a staggering $150 million US dollars, transmitted instantly and processed without any fees.
=== Bitcoin Uses, Users and Their Stories
Bitcoin is a technology, but it expresses money which is fundamentally a language for exchanging value between people. Let's look at the people who are using bitcoin and some of the most common uses of bitcoin through their stories. We will re-use these stories throughout the book to illustrate the real-life uses of bitcoin and how they are made possible by the various technologies that are part of bitcoin.
North American Retail::
Alice lives in Northern California, in the Bay Area. She has heard about bitcoin from her techie friends and wants to start using it. We will follow her story as she tries to spend her bitcoin on a cup of coffee at Bob's Cafe in Palo Alto.
Offshore Contract Services::
Bob, the cafe owner in Palo Alto is building a new website. He has contracted with an Indian web developer, Gopesh, who lives in Bangalore India. Gopesh has agreed to be paid in bitcoin.
Charitable Donations::
Eugenia is the director of a children's charity in the Philippines. Recently she has discovered bitcoin and wants to use it to reach a whole new group of foreign and domestic donors to fundraise for his charity. She's also investigating ways to use bitcoin to distribute funds quickly to areas of need.
Remitances and Reverse Remitances::
Gopesh, the Indian web developer, is supporting his daughter Radhika who is a student in Essex, England. Gopesh is now considering sending Radhika bitcoin to reduce the fees he pays to wire transfer companies and banks.
Import/Export::
Mohammed is an electronics importer in Dubai. He's trying to use bitcoin to buy electronics from the USA and China for import into the U.A.E., to accelerate the process of financing inventory which is very slow.
Mining for Bitcoin::
Jing is an engineering student in Shanghai. He has built a "mining" rig to mine for bitcoins, using his engineering skills to supplement his income.
Peer Lending::
Agnes is a shopkeeper in Kisumu, Kenya and needs a loan to buy new inventory for her shop. With the assistance of a micro-lending organization, she is financing a micro-loan in bitcoin from individual lenders all across the world.
Each of the stories above is based on real people and real industries that are currently looking to bitcoin to create new opportunities.
=== Getting Started
To join the bitcoin network and start using the currency, all a user has to do is download an application. Since bitcoin is a standard, there are many implementations of the bitcoin client software. There is also a "reference implementation", also known as the Satoshi Client, which is managed by a team of developers and is derived from the original implementation written by Satoshi Nakamoto.
Andreas M. Antonopoulos
11 years ago