Bitcoin

In his paper, Satoshi Nakamoto pioneered a way to integrate several key ingredients and develop an electronic payment application. This application offers a more efficient and low-cost solution to fulfill a payment through the removal of intermediaries. These key ingredients include digital money, encryption, decentralization, consensus mechanism, chained blocks, and a peer-to-peer network. Many people responded to Satoshi's idea. They formed the core team to implement the idea.

In January 2009, Satoshi Nakamoto released the first software and blockchain platform. This blockchain platform is referred to as bitcoin, which minted the first coins of the bitcoin cryptocurrency—BTC coins. Many of the key ingredients have evolved. Satoshi's main contribution is to put them together to address the pain points of the existing business model, such as high cost and long execution time for facilitating cross-border payments.

When relying on an existing business solution, it usually takes three days to complete a cross-border payment transaction. With Satoshi's proposed solution or its variations, it takes a few minutes or seconds to finish the same transaction at a tiny fraction of the costs of non-blockchain-based solutions.

For the rest of our discussions, we will use the term blockchain industry to refer to both cryptocurrency and blockchain technology. The word blockchain refers to a sequence of encrypted blocks chained linearly. Bitcoin's platform shares many of the same characteristics as a genealogy tree. They are summarized as follows:

• Like a clan consisting of many related families, a blockchain network (a clan) consists of nodes. Each node is like a family.
• While every family keeps a copy of the clan's genealogy, each bitcoin node maintains a copy of all transactions that occurred on the chain, starting from the very beginning. The collection of all these transactions is a distributed ledger. Since every node keeps a copy of the ledger, blockchain is essentially a decentralized data repository.
• A genealogy starts with a common ancestor of the clan. The ancestor has offspring. The equivalent of a common ancestor is called the genesis block. The genesis block is followed by one child block, which, in turn, is followed by its own child block, and so on. The collection of all blocks is the blockchain (or in business terms, the ledger). Each block contains one or multiple transactions.
• Adding a new name to a genealogy requires a consensus of families within a clan. Similarly, bitcoin relies on a consensus mechanism to decide whether a newly built block is valid, and can be added to the chain.
• Like a genealogy, after a block is added to a chain, it is difficult to change. This is the immutability feature of bitcoin.
• Genealogy provides transparency regarding a clan's history. Similarly, a blockchain allows a user to query the ledger on BTC transactions. This is bitcoin's transparency feature.

The bitcoin blockchain design is restricted to resolve one specific business problem—the cash payment. Its value is therefore limited. A generic blockchain platform, called Ethereum, is then implemented by adding new ingredients such as smart contracts, as well as generic programming languages.