In Lecture 7.4 we'll talk about the roots of BitCoin, how it got started, what were the precursors to it and we'll talk about the mysterious founder of BitCoin. There were really two pre-cursors to BitCoin that are worth talking about. First, BitCoin arose out of the Cypherpunk movement. This was a movement that brought together two trends or arguments. First was libertarianism, and particularly the idea that society would be better off with either no government or with a very minimal government. With government enforcing only the minimum rule set necessary to allow people to coexist at all. So together with that strong libertarian notion, or perhaps even anarchist notion, we had the idea of strong cryptography, and public key cryptography which started in the late 1970s. These two ideas came together in the Cypherpunk movement, and this was a group of people who believed that with strong online privacy and strong cryptography, you could re-architect the way that people interacted with each other, into a world in which people could protect themselves and their interests more effectively. And could do so with much less activity action or, as they would say, interference from government. So that was the Cypherpunk movement. One of the challenges on the Cypherpunk movement was, how you were going to deal with money in a future Cypherpunk world, where people were interacting over the net and interacting via strong, technical and cryptographic measures. And so, a bunch of research came along, led especially by our early digital cash work by David Chaum and others. That was designed to create new forms of value that functioned like money, like cash in the sense of being anonymous and easily exchangeable, but also provided stronger notions of anonymity or privacy. And so early work in that area, and there's a whole interesting story about how that developed and why it didn't sweep the world. Early work in that area came together with the Cypherpunk beliefs and the desire to have a strong currency that would be decentralized online and relatively private, to create the world from which BitCoin was born as well as the philosophy that many of the early supporters of BitCoin, and even many of the supporters today, still follow. BitCoin began in 2008 with the release of this white paper called BitCoin, A Peer-to-Peer Electronic Cash System, that was authored by Satoshi Nakamoto. This paper which you can still get online easily is the initial description of what BitCoin is, basically how it works and what the philosophy behind its design is. And so this is still a good thing to read if you want to get a quick idea of how the technical design of BitCoin and how the initial philosophy of its operation was specified. So this was the beginning, this was released along with open source software to implement the BitCoin system back in 2008 and this is where everywhere everything started. Now this was written by this person Satoshi Nakamoto, and Satoshi is one of the central mysteries of BitCoin. What do we know about Satoshi? Well, Satoshi is the author of this white paper and the original BitCoin software. The name Satoshi Nakamoto was almost certainly a pseudonym, that is a fake name that some person or people have adopted for the purpose of doing things related to BitCoin. The identity of Satoshi is associated with certain public keys with certain accounts and certain systems. So that there are certain kinds of accounts, or statements, or certain kinds of digital signatures, that would convince the community that something was said by, or issued by, or created by, the real Satoshi. So, Satoshi while being a pseudonym, is also a person who can speak and who has spoken especially extensively in the early history of BitCoin. What do we know about Satoshi? Well we know that Satoshi writes fairly well in English. Satoshi uses sometimes American, sometimes British spellings. There's been a lot of attempts to look at the text, to look at the code and to try to figure out what is Satoshi's native language? Where is Satoshi from? Attempts to look at the hours and times and what type of machine does Satoshi use, and all of these sorts of things. Try to figure out who is this person or people and what are they doing? Satoshi was fairly active in working on BitCoin, on writing about BitCoin, and participating in online forums until around 2010. And since that time Satoshi has said almost nothing. There's one notable exception that I'll mention in a minute. Satoshi owns a lot of BitCoins from early mining. In the beginning, Satoshi was perhaps the only miner, or one of the only few people mining BitCoins, and those BitCoins that were accumulated by Satoshi's accounts early on now are extremely valuable. And yet those accounts are not being cashed out. Everybody can see which accounts, which BitCoin addresses probably belong to Satoshi and so if those coins were to be cashed in, if they were to be sold and the proceeds transferred into any particular bank account, that would be a very notable event and would be an important clue to Satoshi's identity. And so, interestingly, although Satoshi created the BitCoin system and has, on paper, made a lot of profit from it, Satoshi is unable to cash in that profit without identifying him or herself. Something that for whatever reasons, Satoshi doesn't wanna do. The real identity of Satoshi is still unknown. The question of who is really Satoshi is a favorite parlor game at BitCoin oriented conferences. It's also something that a lot of reporters have tried to do. People have done all sorts of things, they've looked at text, the text written by Satoshi, try to compare it to other things. They've tried to look at other pieces of software, to patented applications. They've looked at who is writing papers about things that seemed like technical precursors to BitCoin before BitCoin came along, etc., etc. In a well-known incident last year a reporter from Newsweek found a guy who's birth name was literally Satoshi Nakamoto and fingered him as the founder of BitCoin, as the BitCoin Satoshi. That was almost certainly incorrect as we have since figured out. In fact, one of the few times, if any, that Satoshi, that the original real Satoshi has spoken since 2010 was to issue a short statement saying, nope I'm not that guy. So as of today and probably or perhaps forever we don't really know who Satoshi is. And in some sense it doesn't matter because of the notable feature of BitCoin that it is decentralized and with nobody in charge. Satoshi's not in charge. To some extent it doesn't really matter what Satoshi thinks anymore. Any special influence that Satoshi has is only because of respect that Satoshi would have within the BitCoin community should Satoshi become active again. So it's possible that we'll never know who Satoshi is. So BitCoin was started in 2008 by Satoshi, whoever he, she, or they are and has grown since then. If we look at a graph of the transaction volume, the number of transactions per day, this starts on the left at the beginning of 2009 and goes up to the summer of 2014. What you see is something roughly like an exponential growth. And indeed this is pretty much what you'd expect from something that's spread by word of mouth. Like the Internet, like other popular technologies, BitCoin has grown in a roughly exponential way, and when there are jumps they typically correspond to bursts of publicity. Moments when BitCoin became known in the popular press for example or when there were newsworthy events. Transaction volume has gone up over time. The total value of BitCoin also has gone up perhaps in a similar way. Now what you see is this looks like zero but in fact it's just very low. And you see a relative rise starting here, maybe beginning in the middle of 2012. This looks roughly like an exponential growth but with two spikes superimposed on it. One here in roughly April of 2013, March or April of 2013. It spiked up and then relaxed back down to the underlying exponential curve. And then arguably here around the beginning of 2014, it spiked up to about this value and then relaxed back down again to something near the exponential growth which has happened since then. So arguably, BitCoin has grown in a way that is relatively organic and at a relatively constant exponential rate since it was born. And those who believe that Bitcoin has a bright future ahead of it believe that this exponential growth will continue.