Blockchain Advanced: The History of Blockchain

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Forerunners of today’s  blockchain  already existed in 1991. The two researchers Stuart Haber and W. Scott Stornetta developed the forerunner of today’s blockchain – “Absolute Proof”.

The blockchain technology only came to prominence (of course it could still be expanded) with the growing popularity of Bitcoin. But the idea of ​​a “chain” of transaction blocks that is cryptographically secured and managed in a decentralized manner predates the mother of cryptocurrencies. 

As early as 1991, 17 years before the publication of the  Bitcoin White Paper  by  Satoshi  Nakomoto ,  the two researchers Stuart Haber and W. Scott Stornetta conducted basic research on the cryptographic chaining of individual transaction blocks. In their  work  “How to time-stamp a digital document” they dealt with the problem of authorship in the age of digitization:  

“The prospect of a world where all text, audio, image and video documents reside in digital form on easily alterable media raises the question of how to confirm when a document was created or last modified. The problem is that the data, not the medium, needs to be timestamped.”

Blockchain history – 3 questions, 3 answers

Who Invented Blockchain?

The two researchers Stuart Haber and Scott Stornetta wrote a paper on blockchain technology before Satoshi Nakamoto.

When was the blockchain invented?

Haber and Stornetta’s paper was published in 1991.

Was blockchain always called blockchain?

No. What Haber and Scott published they called “Absolute Proof”.

The digital fingerprint

In the introduction, the forefathers of the blockchain, Haber and Stornetta, use an example to explain their solution: 

“An accepted method of time-stamping a scientific idea is to make daily notes of one’s work in a laboratory notebook. The dated entries are entered into the notebook one after the other, with no page left blank. The notebook’s sequentially numbered, sewn-in pages make it difficult to manipulate the record without leaving telltale marks. If the notebook is then regularly stamped by a notary or checked and signed by a managing director, the validity of the claim is further increased.” 

Here you can already see some properties of what later became known as the “blockchain”. Block by block – or in this case page by page – you can trace when someone wrote something down in the book.

The first blockchain idea

Haber and Stornetta designed the first blockchain. They compared their idea to a book. You staple your notes side by side in a book. The whole thing is then numbered and sewn in such a way that nothing can be changed afterwards without someone noticing.

The individual pages of the laboratory journal correspond to the blocks. As with the blockchain (just analog) they are sewn in. There is also a third authority that regularly approves them. Here again there is a comparison to the consensus mechanisms in the blockchain.

In fact, Stornetta and Haber anticipated further developments in blockchain technology. On the one hand, there is the use of  hash functions  to encrypt data and verify its authenticity. Another key aspect is the decentralization of the network:  

“The framework for our problem is a  distributed network  of users, who may represent individuals, different companies, or departments within a company; we refer to users as clients. Each client has a unique identification number.”  

AbsoluteProof – probably the oldest blockchain in the world

The two researchers brought their ideas to business maturity and founded “Surety” in 1993, one of the first companies that would have deserved the name “blockchain company” – and that in 15 years before Bitcoin. 

With “AbsoluteProof”, Surety offers a digital time stamp service that enables the tracking of the creation and modification time of digital documents. Users can cryptographically “seal” data on their computer.

This creates a kind of digital fingerprint, which is sent to the AbsoluteProof database in the form of a hash and archived there. The “fingerprints” stored in the database form a chain of  hash values ​​in which the manipulation of an entry would inevitably lead to the invalidity of the entire chain and is therefore practically impossible. 

A special trick is the way Surety makes the integrity of its database publicly verifiable: By publishing the current hash value weekly in the world’s largest daily newspaper – the New York Times. 

Verifiable for everyone

In order to make their blockchain concept verifiable for everyone, Haber and Stornetta regularly published the digital fingerprint in the New York Times. In this way, they secured the authenticity of the information and created the oldest blockchain in the world.

The  data sheet  for AbsoluteProof states:  

“Surety’s unique ‘sealing’ process is extensively monitored, making it impossible for anyone to alter previously ‘sealed’ content without detection. Surety publishes an integrity score once a week in the […] New York Times. The value represents the combined digital fingerprints of each electronic record or object ‘sealed’ by Surety since its creation.”  

Despite all the similarities to the blockchain as we know it today, the company cannot do without a central server.

Haber and Stornetta have meanwhile retired to research. However, the ball that they set in motion with their basic research remained in motion.

Nick Szabo and Bit Gold

Haber and Stornetta’s work made an important contribution to the creation of the Bitcoin White Paper in 2008.

However, the research of the US programmer and cypherpunk Nick Szabo had another influence on the emergence of the blockchain that was at least as great. As early as 1998 (and 2005) he had considered a digital “gold substitute” called Bit Gold and wrote it down in a white paper entitled “Bit Gold: Towards Trust-Independent Digital Money” – which is still incomplete and unpublished. Archived versions  of the draft can  still be found on the Internet  .

He considered the existing financial system to be inefficient and prone to abuse, such as misappropriation of funds.  

Bit Gold – the precursor to Bitcoin

The American programmer Nick Szabo created the first concept for digital gold back in 1998. Its Bit Gold already had many properties that Bitcoin now has.

As with Bitcoin, the transfer of wealth should be done without a middleman. Bit Gold should be able to be used as a reserve currency, for example to carry out cross-border transfers. A proof-of-work (PoW)  -based consensus mechanism , which involved solving cryptographic puzzles, also played a central role at Bit Gold.

Nick Szabo proposed the proof-of-work algorithm already in use at Hashcash. Hashcash was created by Adam Back in 1997 and is not only used to combat spam emails and DDoS attacks, but also forms the core of the Bitcoin PoW. 

The solutions to these tasks should be sent to a peer-to-peer network, where a cryptographic hash chain is created by combining the solution to the last puzzle with the result of the following one.  

Bit Gold and Bitcoin: Same same but different

This hash chain proposed for Bit Gold is already very similar to the Bitcoin blockchain. With both methods, a decentralized network decides on the validity of the blockchain.

However, there is an important difference. With Bitcoin, the computing power of the network decides on the latest version of the blockchain. In Bit Gold’s network, the majority of network addresses determine which version of the hash chain is valid. This made Bit Gold potentially vulnerable to creating false identities and thus unable to solve the problem of double spending.

Bitcoin versus Bit Gold – the double spend problem

Szabo’s bit-gold concept still had a decisive disadvantage. So it couldn’t guarantee that the digital gold wouldn’t be spent twice. Satoshi Nakamoto was supposed to solve this problem with the Bitcoin blockchain.

Due to the many parallels to Bitcoin in terms of vision and technical solution, Bit Gold is traded as a direct predecessor of the cryptocurrency. There are also a number of indications that Nick Szabo was directly involved in the creation of the Bitcoin White Paper, which is why he is also seen as a potential Satoshi Nakamoto.

The Birth of the Bitcoin Blockchain

The year is 2008. The global banking and financial crisis reached its climax on September 15th when US financial giant Lehman Brothers filed for bankruptcy. Generous bailout packages are being set up by governments around the world to protect banks that are supposedly “too big to fail” from going under. Confidence in financial institutions has been badly shaken. It is the birth year of Bitcoin.

On November 1st, 2008, Satoshi Nakamoto publishes a white paper destined to go down in history: “ Bitcoin: A Peer-to-Peer Electronic Cash System ”. Whoever is hiding behind the pseudonym Satoshi Nakamoto – he, she or the group has managed to solve the double spending problem and to create a fully operational, decentralized and cryptographically almost watertight digital payment system for the first time.  

The bitcoin blockchain

What Haber, Stornetta, Szabo and other technical developers prepared, Satoshi Nakamoto has completed. The person or persons hiding behind the pseudonym published the technical blueprint (white paper) for the Bitcoin Blockchain – a decentralized financial system – in 2008.

Nakamoto has bundled the insights of Haber, Stornetta and Co. and thus managed to make Nick Szabo’s vision of a financial system that can do without a middleman (aka banks) a reality. The technical implementation of the Bitcoin blockchain began just two months after the publication of the white paper.

On January 3rd 2009 the first block  was mined . 

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