Origins of Blockchain¶
The Bitcoin protocol, launched in 2009, established for the first time the viability of transferring value on a peer-to-peer basis over the internet, without the need for a trusted intermediary. Bitcoin was truly the first incarnation of blockchain when Satoshi Nakamoto, the pseudonymous creator of Bitcoin, solved the ‘double spend’ problem: the issue that digital information can easily be copied, and therefore a centralised authority was previously required to reflect where funds were located.
Although Bitcoin is very successful at transferring value and is an effective form of decentralised money, from the outset it was recognized that the same approach could be used to record information of almost any kind on the same shared basis. As well as cash, strings of characters on the blockchain could represent simple messages, ownership of physical or digital assets or securities, voting decisions, and so on.
The rise of Bitcoin and similar protocols was accompanied by a rapid re-evaluation by governments, regulators and the financial services industry of the existing paradigms. Due to Bitcoin’s position outside of the control of state and financial authorities and its potential for misuse as a tool of fraud, money laundering and other illegal activity, as well as other concerns such as its volatility and the unregulated nature of the exchanges on which it traded, the first reactions tended to be skepticism and concern. However, an increasing number of leaders have also recognized the potential of blockchain technology and the broad range of use cases to which the distributed ledger lends itself.