To what extent has bitcoin been a product of knowledge push, demand pull, user-led, design-led or coincidental innovation? How have different innovation triggers been combined to help bitcoin reach the level of technical development and market acceptance that it has today?

Bitcoin: A Peer to Peer Electronic Cash System was created by Satoshi Nakamoto on November 1st 2008.[i]

In his white paper, Satoshi describes his system as a completely new decentralized network protocol allowing any two participants to exchange value directly between each other without the need for a trusted third party.[ii]

Satoshi Nakamoto referenced multiple existing technologies for which bitcoin is dependent on. He also related solutions suggested by other researchers in the space of time. For instance, Hashcash, a proof of work algorithm for spam control, invented by Adam Back (1997), is implemented in the Bitcoin protocol and used as the bitcoin mining function.  In fact, 10 years before Satoshi Nakomoto’s 2008 white paper, Wei Dai computer engineer and cypherpunk, proposed “b-money” (1998). In which he suggests the design for a distributed digital cash system, and described in two separate protocols how money can be created and exchanged by the community on a peer to peer level. Few years later, Nick Szabo in turn proposed bitgold (2005), a protocol whereby fraud-proof costly bits could be created online with least dependence on trusted third parties, and then securely verified, transferred, and stored with similar least trust.

In essence, Satoshi’s white paper did not come out of a vacuum, as it was dependent on the works and knowledge of many before her. The problem of building a purely distributed and trusted network is not a new one in computer science. It is a common challenge in enforcing trust in a distributed system with no central authority, also known as General Byzantine Problem[iii].

Bitcoin uses a mix of technologies that existed in the 1970s, 80s, and 90s, with a few of them combined, it posed to be as the best solution to the General Byzantine Problem recommended to date and has had, by far, the widest adoption. It lead to a fully realizd electronic cash scheme.


Past attempts at solving the currency side of the problem are not limited to the following research:

  • New kind of cryptography / Blind Signature cryptosystems by David Chaum (1982)

  • Secure Property Titles with Owner Authority by Nick Szabo (1998)

  • Triple Entry Accounting by Ian Grigg ( 2005)

The peer to peer decentralized design and open source nature of the Bitcoin protocol played an important role in increased market acceptance.

Users are allowed to be a part of the technology, and empowered to tinker with the protocol creating improvements that will help Bitcoin develop and grow further. Vitalik Buterin founder of Ethereum described it as a smart contract platform stronger than what the Bitcoin protocol allows.[iv] He created a protocol that can do much more than Bitcoin built on Turing-complete programming language.  Ethereum facilitated the creation of Decentralized Autonomous Organizations, and holds big promises in shaping new smart markets without central authority control.

Bitcoin’s peer-to-peer nature existed before in BitTorrent – the protocol designed in 2001 for peer t0 peer file sharing, and it has become the most common protocols for transferring large files. As of early 2009, peer-to-peer networks have been estimated to jointly add up approximately 43% to 70% of all Internet traffic[v]. Distributed version systems as DARCS, Bazaar, and Git share similarity with the Bitcoin protocol in data structures, many of which contain a continuous chain of records that can be confirmed by a series of cryptographic hash verification through peer-to-peer network participants.

The bitcoin clearly leveled-up financial inclusion and broke the monopoly of money and banking by merging distributed consensus, peer to peer reliability, and crypto trustworthiness.

The technologies that allowed these theoretical models to work existed concurrently, but were never combined and put into implementation. Previous knowledge on these subjects, and the communities that existed surrounding them, allowed Satoshi to communicate with other experts on an online public forum[vi]. Satoshi Nakamoto’s first post on the Crypto Mailing List on November 1st 2008 began with “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party”, and his last post retiring from public life and release of Bitcoin 0.3.19 was on Bitcointalk forum on December 12 2010.[vii]

In an economic context of the years 2007 to 2010 the timing was appropriate as the growing distrust of financial institutions – who were once household names – collapsed in the global economic crisis of 2008. Satoshi’s post was suggesting it as a theoretical “e-cash” system and allowed others to discuss and predict potential problems. These discussions were coinciding with the troubling financial systems of the time. Interestingly enough, when Satoshi Nakamoto generated the first “genesis-block” in the bitcoin blockchain network, he embedded a permanent message in the network with it. The message read: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. [viii]

The Bitcoin network could allow millions of the unbanked in the developing world[ix] to store and exchange value using their mobile phones, without the need of a third party like a bank.

Mobile and smartphone penetration worldwide is growing exponentially as devices become cheaper to produce.[x] Bitcoin came into fruition at a time where more people are getting online than ever before, 60% of global mobile phone population access internet through mobile data and GSM networks.[xi] Developments of applications was first done by volunteers through online platforms working on Open-Source applications like Github.

The incentives to work on bitcoin applications grew significantly once venture capital firms were interested in the technology. Based on the Q1 2016 Coindesk report on state of Bitcoin, venture capital firms still increasingly fund hundreds of millions of dollars in bitcoin startups at multiple scopes.

Perhaps the financial exclusion built around WikiLeaks indeed stirred the Hornet’s nest[xii], and the late 2010 PC world article on Bitcoin as haven for the financially isolated WikiLeaks was the spark for further discussions and ideas that resemble today multibillion dollar industry, and wide range of bitcoin services are being offered.

In conclusion, much research and development was needed to happen in different scientific fields before the introduction of bitcoin. The design and nature of the protocol allowed users to propose improvements and even design new platforms. Bitcoin needed the online open-source culture, voluntary participation of people who may have had different visions as developers. Social and economic causes, like transparency in governance and financial inclusion, are motivating start-ups and entrepreneurs to tackle obstacles and compete for Bitcoin’s “killer app”. By combing all these triggers, bitcoin was able to get the market acceptance of financial services and technology world.

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