Where did digital money come from?
When Bitcoin is written and talked about, previous attempts to create digital currencies that made Bitcoin possible are often overlooked. Attempts to create digital currencies had been undertaken numerous times since the late 1980s that pioneered some of the underlying technologies that make Bitcoin work, such as proof of work mechanisms and permissionless transactions. Here’s three of the most important.
Devised by Chinese computer engineer Wei Dai in 1998, b-money featured publicly announced transactions to allow participants to agree on previous transactions, as featured in Bitcoin’s whitepaper in its first footnote, showing that Satoshi was aware of the project. Although ultimately unworkable, b-cash is credited as a significant influence on Bitcoin’s conception and development.
Digitcash, which first emerged in the late 1980s, pioneered the idea of public and private keys — a fundamental aspect of how blockchains and digital wallets operate. This project also failed and declared bankruptcy in 1998. David Chaum, Digicash’s creator, claimed this was due to internet infrastructure not yet being developed enough to effectively grow the project’s user base.
Despite Bit Gold only being outlined in its whitepaper and never implemented, the project has some striking similarities to Bitcoin. This has led to some speculating its creator Nick Szabo is the actual person behind the Satoshi Nakamoto identity. The most prominent similarity is the proposal for the Byzantine Fault Tolerance (BFT) mechanism, based on the Byzantium General’s Problem. BFT is a key component of how Bitcoin mining works and is now widely used in the mining processes for many other cryptocurrencies, such as Ethereum.