Like most things, Blockchain didn’t just appear out of thin air, it is a combination and extension of already existing ideas. To get some insight in to how Blockchain works and where it came from, we need to go back about a decade before its creation. Back to the late 1990s, to a virtual currency proposal called ‘b-money’ and strangely enough, spam email.
In 1998, engineer and cypherpunk Wei Dai proposed a crypto-currency system called ‘b-money’ in which anonymous individuals exchanged a digital currency using a distributed database in which money was generated by participants solving complex computational puzzles.
Sound vaguely familiar?
Wei Dai readily admitted that the idea relied on an anonymous, uninterruptable, and unrealistic way of exchanging messages. It was more of an interesting starting point for discussion than a blueprint for implementing a digital currency but unsurprisingly, Satoshi Nakamoto, the mysterious man, woman or collective who implemented Bitcoin, referenced Wei’s work in the original white paper.
Going back one more year to 1997, there was a proposal to, among other things, combat spam email put forward by cryptographer Adam Back called HashCash. Despite its name, it has nothing to do with nefarious narcotics that were later to become associated with Bitcoin. HashCash was an idea to make it expensive to generate hundreds or thousands of emails but incredibly cheap to check if each individual email was genuine.
When sending an email through HashCash, its contents are processed using an algorithm that generates a stamp or ‘hash’ that is uniquely related to that email’s content. For that stamp to be valid under the rules of HashCash, it must satisfy certain criteria which take time and computational power to meet.
The very large number of times a spammer would have to go through this process would make it very expensive to generate and stamp their emails, but the maths used also meant it was very simple to verify. So, someone attempting to send the same email to thousands of recipients would spend exponentially more effort creating the emails than the receiving clients would spend checking and potentially blocking them.
What’s so interesting about HashCash? Well, when you hear about mining Bitcoins, the ‘miners’ are using this exact same algorithm to ‘stamp’ blocks in a blockchain that, back in 1997, was proposed to stem the tide of emails announcing unexpected lottery wins and royal fortunes stuck in foreign bank accounts that only the recipient could release.
If the original Blockchain was based on ideas that already existed, what got everybody so excited about it? Well in truth the initial excitement, such as it was, was confined to specialist forums and mailing lists on cryptography. Widespread interest and anything approaching mainstream engagement would take a few more years.
For example, on May 22, 2010, Laszlo Hanyecz offered to pay 10,000 Bitcoins for ‘a couple of pizzas’. This is cited as the first real world exchange of Bitcoins for goods or services. As with all things, the truth is a bit more complex as at the time no business would have accepted Bitcoins as a form of payment. Laszlo posted the request on a forum and Jeremy Sturdivant responded that he would take him up on the offer, Laszlo sent the Bitcoins and Jeremy used a credit card to order the USD 25 pizzas from a Papa John’s near Laszlo who would deliver to him. ‘Bitcoin Pizza Day’ was born
The value of those pizzas as of ‘Bitcoin Pizza Day’ 2017 was USD 20,509,958.
However, Blockchain had done something rather amazing and was about to get people very interested in it. It was a real and applied solution to a complex networking problem called the ‘Byzantine Generals Problem’.
The ‘Byzantine Generals Problem’ describes communicating a battle plan to remote troops and generals in an incorruptible format even with the existence of ‘traitors’ within the messaging network. To solve it, messages and orders must be relayed using a process that ensures that even if they are corrupted or altered, the correct consensus is reached by the network and the ‘real’ orders are still followed.
The problem is usually solved in two ways, first by a signature on each order that cannot be forged and second through a mechanism to ensure orders cannot be dropped, duplicated, or sent out of sequence. In computing terms, the signing of orders is straightforward, the difficult part is making sure nothing gets lost and that messages are reported once and only once in their correct order.
The solution to that difficult part of the problem is Blockchain’s ‘magic trick’, and it did it without requiring a single central authority. Blockchain certainly had no performance advantage over other technologies, quite the opposite. Blockchain isn’t interesting because it added security. Blockchain isn’t interesting because it creates a new way of distributing data. In truth, Blockchain does not do anything new in either of those fields.
However, Blockchain is interesting because it introduced a mechanism that meant you could guarantee the recorded history of events in an untrusted network - without the need for a single source of truth or central authority.
Blockchain applied the HashCash algorithm not to emails, but as a requirement for adding blocks to a chain, where each block contains a calculation representing previous blocks in that chain. Creating valid blocks and adding them is computationally expensive but validating them is simple. As each block contains a representation of the previous block, someone attempting to alter history must work far harder than someone simply adding blocks to the chain.
Even with traitors in the network, the correct consensus of what happened and in what order it happened is reached by the network.
So it is the origin of Blockchain that makes it so interesting. Various implementations and branches of the technology have appeared over the ensuing years since its inception and in the third and final article in this series, we will cover that evolution and the possible future directions of Blockchain.
This is the second piece of Brian's trilogy on blockchain and travel. The first piece is OpenJaw CTO: Blockchain and the travel industry.