<aside> đź’ˇ Blockchain = digital private property + decentralization
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In 2008, the latest advances in cryptography, and a situation of mistrust in public institutions, served as the backdrop of the invention of cryptocurrency. A group of cypherpunks gathered around an internet forum and discussed ways to use technology to circumvent the abuse of power by governments and banks and to create a private version of finance. This was the context for the birth of blockchain technology.
Blockchain was born after Satoshi Nakamoto’s white paper, where the anonymous forum contributor shared his vision of A Peer-to-Peer Electronic Cash System.
One sentence in the paper’s abstract contains the problem and solution Nakamoto came up with.
Digital communications can create infinite copies of an asset. For example, a simple process of sending a photograph of your cat to a friend can end up with four copies of the original image scattered around many devices.
We propose a solution to the double-spending problem using a peer-to-peer network.
Say you took the photo with your phone (copy #1) and decided to send it. You click on SEND, open up a blank email, type in some silly message (”Jenipurr Catniston looking stunning”), and hit send. Copy #2 now lives in your Sent Messages inbox, and Copy #3 ends up in your friend’s mailbox. Once they open it, their phone might even save one copy in the phone’s memory. Copy #4
If this were money being transferred instead of a picture, the most basic rule of the economy would break: scarcity is what gives assets value.
Most money nowadays is just information on a database, and payments are only changes on that database. But for those changes to be safe and trustworthy, we used to need a trusted third party as an intermediary. For example, a credit card payment, behind the scenes, is merely a communication between banks who agree on changes made in the accounts of a pair of customers.
https://www.youtube.com/watch?v=SzAuB2FG79A
Nakamoto’s contribution was to design a complex system of processes and incentives that would help create and grow a community of participants interested in positively contributing to the system by managing data autonomously without the need for a central authority. Just through the power of incentives.
In blockchain technology, a community of validators replaces previous intermediaries like banks. They are the miners who manage and verify transactions in exchange for incentives paid in bitcoin.
The result was the invention of decentralized digital property- the creation of valuable digital assets that do not need a trusted third party to be verified, created, or transacted.