In this article, we explore the need for an alternative financial currency and ultimately who created bitcoin.
Digital currencies are not new. They have existed way before cryptocurrencies like bitcoin. However, none of them ever became too popular. Bitcoin- is the first digital currency which has generated waves in the financial ecosystem. In this article, we look at some of these events which translated into the mega-giant bitcoin creation
The Need for an Alternative Currency
Internet has changed the world in innumerable ways. From writing letters to Skype calls, from using paper map to using google maps- it has made the world faster. From having to go to stores for your smallest needs; to receiving anything and everything at your doorstep just by few clicks- the internet has indeed managed to make the world a much smaller place.
However, when you look into the advancements made in financial sector, is the world really such a small place? It still takes anywhere between 3-9 days for migrants to send money from one nation to another. Most of the population in almost any country still rely on brick and mortar physical banks, to perform any kind of financial transaction. Despite modern advancements, there are 2 billion unbanked population living on Earth. The technology has managed to digitize a lot of financial operations but there still is a long way to go!
Why Was Bitcoin Created?
The financial crisis of 2007-08 left people feeling devalued and helpless. A series of irresponsible lending by banks in the US, initiated a sequence of catastrophic banking crisis worldwide. It even led to the collapse of reputed investment banks like Lehman Brothers. Moreover, the government using tax payer’s money to save these huge banks and the fiscal policies implemented in favor of banks did not help the matters.
People around the globe started feeling betrayed by their governments. This even led to a devaluation in the value of fiat currency in countries like Europe. Countries like Greece were on the edge of bankruptcy. Furthermore, rising levels of unemployment and inflation continued to dishearten people around the globe. Such disappointing handling of crisis led to a loss of trust of people on their banks and government.
Who Created Bitcoin?
For the first time, people felt trapped in the current financial model. In such desperate times, a person or a group of people by the name of Satoshi Nakamoto presented an alternative financial model: Bitcoin. In October 2008, this mysterious person/group of people released a white paper on a website known as bitcoin.org. In this white paper, he described an electronic cash which is decentralized, peer to peer, non-trust-based system, hence, eliminates the need of any intermediary party.
To date, the true identity of this mysterious person by the name of Satoshi Nakamoto remains unknown. In his white paper, he describes bitcoin as a digital currency, which is not operated by any central entity such as the government or banks. The core protocol of bitcoin is a peer-to-peer entity. There are no hierarchies and each computer or node has equal rights over the network.
Many of the features presented in bitcoin are in stark contrast to the present financial model of the world.
How is Bitcoin Different?
Unlike our traditional currencies, which are issued by central banks as legal tender, Bitcoin is completely decentralized. This means that no central government or banks, either issue or control it. Rather they are issued by a process called ‘Mining’ using computers (nodes). These nodes are at equal peers to each other. Hence, there is no hierarchy, meaning all the nodes on the bitcoin software have equal power. In fact, these nodes or the computers on which the software is run, are used for storing the bitcoin network.
The network does not have a centralized server, which means it is impossible to shut it down. The other fundamental thing about bitcoin is that the entire system is based on solving mathematical equations in order to verify the legitimacy of each transaction. Hence it eliminates the need for any intermediary party like banks to verify and approve the transaction, in turn making the system trustless. Unlike our current financial ecosystem, you don’t need to trust bitcoin in order to make bitcoin work.
Ultimately, a series of catastrophic events in the financial ecosystem gave rise to the need and importance of having an alternative financial system