The Bitcoin Story · Module 2 · 2008 to 2010 · 35 min
On 31 October 2008 someone using the name Satoshi Nakamoto published a nine-page paper describing digital cash with no bank in the middle, and the network started a little over two months later.
What you will learn
Explain in plain words what the white paper proposed.
Describe the first block and the first transactions.
Say what is known, and not known, about Satoshi Nakamoto.
The lessons
Lesson 1: The white paper in plain words
On 31 October 2008 someone using the name Satoshi Nakamoto sent a nine-page paper to a cryptography mailing list. Its title was Bitcoin: A Peer-to-Peer Electronic Cash System.
Peer-to-peer means directly between people. The paper proposed that instead of a bank keeping the record of who owns what, many ordinary computers would each keep a copy of the same shared record. New entries are bundled into blocks, and the blocks are linked in order into a chain. That is the blockchain.
To keep everyone honest, the computers that add blocks, called miners, must spend real computing effort, which is the proof of work. Changing the past would mean redoing all that work, which quickly becomes impractical.
Remember: The white paper’s idea: a shared record kept by many computers, protected by proof of work, with no bank in the middle.
Lesson 2: The first block and first transactions
The first block, the genesis block, was created on 3 January 2009. A few days later, on 9 January, the first version of the software was released so anyone could run it.
Within the month, in mid-January 2009, the first transfer between two people took place, from Satoshi to the programmer Hal Finney. That mattered because it showed coins could move from one person to another.
In October 2009 the first published exchange rate put one bitcoin at less than one US cent. On 22 May 2010 a programmer paid 10,000 bitcoin for two pizzas, worth about $40 at the time. The date is now celebrated as Bitcoin Pizza Day.
Remember: By 2010 Bitcoin worked, had a price, and had a first real purchase. It was still tiny.
Lesson 3: The mystery of Satoshi
Nobody has proven who Satoshi Nakamoto is. The name is a pseudonym, and it may be one person or a group. Satoshi wrote on forums and by email, worked on the software, and then faded out, with the last messages dating from 2010 and 2011.
Many people have been named over the years and none has been proven. Be careful with any headline that claims to have solved it.
The mystery has a useful side: nobody can be said to run Bitcoin. It is maintained by volunteers and companies who can propose changes, but changes only matter if the people running the network choose to adopt them.
Remember: We do not know who Satoshi is, and Bitcoin has carried on without them.
Key dates
When
What happened
Why it matters
31 October 2008
The white paper, Bitcoin: A Peer-to-Peer Electronic Cash System, is shared with a cryptography mailing list
The idea is public for the first time
3 January 2009
The first block, the genesis block, is created
The chain begins; its message refers to a newspaper headline about bank bailouts
9 January 2009
The first version of the software is released
Anyone can now run it
Mid-January 2009
The first transfer between two people, from Satoshi to the programmer Hal Finney
Proof that coins can move from person to person
October 2009
The first published exchange rate, less than one US cent per coin
The first time Bitcoin has a price
22 May 2010
A programmer pays 10,000 bitcoin for two pizzas, worth about $40 then
The first well-known real-world purchase
Key terms: white paper, block, genesis block, node, miner, pseudonym. Open the glossary
Module quiz
4 questions. Tap an answer to see if you are right and why.
1. When was the Bitcoin white paper shared?
On 31 October 2008 the nine-page paper went to a cryptography mailing list.
2. What is the genesis block?
The genesis block started the chain.
3. Who received the first transfer from Satoshi?
The programmer Hal Finney received coins in mid-January 2009.
4. What do we know about Satoshi Nakamoto’s identity?
Many people have been named, and none has been proven.
Do it yourself
Open the white paper at bitcoin.org and read only the first paragraph, called the abstract. Find the sentence that says what Bitcoin is for, and rewrite it in your own words in one line.
Not financial advice. This lesson is history and education only. Prices are rounded and shown only to explain how big the swings were.