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Bitcoin Funding Rate Cools Down, Traders Predict BTC Bull Run to Continue.

 

Bitcoin today registered one of its largest price crash in a single session when its price fell from above $34,000 to a daily low of $28,772 registering a fall of over $5,000 within a few hours. The top cryptocurrency has recovered well in the past hour and currently trading just below $32,000. While many were quick to call the recent all-time-high of above $34,608 as short term top, primarily because of the significantly high funding rates on Binance.

When the price of BTC started to crash the funding rate across major exchanges was near an all-time-highs.

Many would wonder what does funding rate has to do with Bitcoin’s price, well there is a correlation that suggests,

if funding is positive, longs are paying shorts. if it is very high (>.1%) it means the market is disproportionately long and there is a lot of incentive to be short, so generally, you’d expect a correction of some sort. but none is given and the price could continue to go up a lot.

Funding Rate Cools Down As the US Market Opens.

Today’s market meltdown was largely attributed to Korean whales selling in heaps to take away the profit made over the past week. However, as soon as the US market opened the funding rates have come down to their average of around 0.02. This has also prompted many to predict the current bull rally to continue for another leg.

The top cryptocurrency is currently trying to breach the $32,000 mark again to solidify its position and make it strong support, as it has done throughout this bull run. Bitcoin has managed to surpass most of the critical resistance despite numerous flash crashes owing to the ongoing institutional buying spree. Microstrategy bought nearly $650 million worth of bitcoin during the last dip at $21,925 showing the growing appetite for bitcoin.

Monday has also become quite significant for bitcoin during this bull rally as institutions such as Grayscale, Square Inc and PayPal start buying bitcoin after the two-days pause during the weekend. These incisions have helped bitcoin overcome most of the price correction within a day. Even the current $5,000 crash which might seem quite big but it was not even 20% of the current bitcoin market. Bitcoin has managed to recover from a 50% crash this March, thus bitcoin proponents were not fazed by this one either and called it another opportunity to buy the dip.

Information source: CoinGape

Bitcoin Blasts Through $20,000 as US Dollar Hits Two-Year Low.

 

Bitcoin has pierced above the $20,000 

level for the first time in history.

The flagship cryptocurrency logged a surprising upside rally in the pre-market New York trading session Wednesday, hitting an all-time high of $20,822 before turning lower modestly. Analysts said it got the bullish boost from institutional capital’s arrival into the crypto space as mainstream investors looked for alternative hedging assets against fears of long-term inflation.

Bitcoin Fundamentals.

The cryptocurrency was on a tear after the Federal Reserve announced a set of accommodative fiscal policies to cushion the US economy from the impact of the COVID-19 pandemic. Their measures included a near-zero lending rate tool alongside a commitment to purchase governments and corporate debts indefinitely.

Bitcoin is maintaining its intraday gains near $20.7K. Source: BTCUSD on TradingView.com.

While the framework did help contain the damage caused by the pandemic, it left the bond market oversold, pushing their short-term yields into negative territory. In simple words, investors who purchased short-dated Treasurys risked losing a portion of their investments at the time of bond maturity.

That marked Bitcoin’s rise as an alternative hedging asset, the same as gold and silver.

Between March 2020 and today, the cryptocurrency rose by 439 percent (data from Coinbase). Meanwhile, it received further bullish support from the US government’s $2.3 trillion COVID-19 stimulus package that sent the US dollar index lower.

US Dollar Index has fallen by 12.48% from its mid-March high. Source: DXY on TradingView.com.

Factors at Play This Week.

On Wednesday, both the Fed and the government stimulus factors are at play.

The central bank will share its futures guidance at 1430 EST, with experts noting that it would keep buying Treasurys at the same pace while maintaining rates near zero. On the other hand, the US Congress is also close to finalizing the second stimulus package to aid an ailing labor market amid the rising coronavirus cases.

The US dollar index fell to its two-year low on Wednesday as a result.

Information source: NEWSBTC

Ten Years Ago Satoshi Nakamoto Logged Off - The Final Message from Bitcoin's Inventor.

 

Ten years ago today, the pseudonymous programmer (or programmers) Satoshi Nakamoto logged into the forum bitcointalk.org one last time, and left the Bitcoin community for good. The day prior Nakamoto wrote a final message to the crypto community by offering a quick build and telling developers that there’s more work to be done on denial-of-service (DoS) attacks.

“More Work to Do”

When Satoshi Nakamoto was around, Bitcoin’s inventor was a mysterious enigma and often led developers in the right direction from 2008 to 2010. Bitcoin’s creator also left a final message to the community when he/she or they added to the thread on bitcointalk.org called: “Added some DoS limits, removed safe mode.” The message was written over a decade ago on December 12, 2010, and Nakamoto stressed that “there’s more work to do.”

“There’s more work to do on DoS, but I’m doing a quick build of what I have so far in case it’s needed, before venturing into more complex ideas,” Nakamoto said at the time. “The build for this is version 0.3.19. Added some DoS controls. As Gavin and I have said clearly before, the software is not at all resistant to DoS attack. This is one improvement, but there are still more ways to attack than I can count. I’m leaving the -limitfreerelay part as a switch for now and it’s there if you need it. Removed “safe mode” alerts, ‘safe mode’ alerts was a temporary measure after the 0.3.9 overflow bug,” Bitcoin’s creator added.

Nakamoto further wrote:

“We can say all we want that users can just run with ‘-disablesafemode,’ but it’s better just not to have it for the sake of appearances. It was never intended as a long term feature. Safe mode can still be triggered by seeing a longer (greater total PoW) invalid block chain.”

‘Wikileaks Has Kicked the Hornet’s Nest, and the Swarm Is Headed Towards Us’

While bitcoin (BTC) was swapping for $0.20 per coin, Nakamoto left a great number of technical replies on the forum that month, which addressed the current Bitcoin build at the time. In fact, during the first two weeks of December 2010, Nakamoto was very active on the forum.

No one knows why the inventor left so abruptly, but Nakamoto had shown he was a bit upset the day before his very last bitcointalk.org forum message. This was because bitcoin was mentioned in a viral pcworld.com article called: “Could the Wikileaks Scandal Lead to New Virtual Currency?”

At the time, Wikileaks was blocked by a U.S. financial blockade and because Paypal, Mastercard, and Visa stopped servicing the nonprofit whistleblowers, Wikileaks leveraged bitcoin donations.

From Nakamoto’s responses to the Wikileaks subject, one can assume the crypto inventor was very annoyed by the attention the small little network was getting at the time.

“It would have been nice to get this attention in any other context,” Nakamoto stressed. “Wikileaks has kicked the hornet’s nest, and the swarm is headed towards us.”

Bitcoin was changing fast, and Nakamoto seemed to know that he was steadily losing some of the control and people were making up their own minds on how the cryptocurrency should be back then. The same day the Wikileaks article from pcworld.com published, Nakamoto also thanked Hal Finney in a post called: “minimalistic bitcoin client on D language?”

Six days prior to Nakamoto speaking about the pcworld.com editorial, he responded to someone who said “bring it on,” after hearing that Wikileaks was considering cryptocurrency acceptance. Again, Nakamoto seemed flustered and wasn’t a big fan of onboarding the nonprofit whistleblowing organization led by Julian Assange.

“No, don’t ‘bring it on,’” Nakamoto insisted. “The project needs to grow gradually so the software can be strengthened along the way. I make this appeal to Wikileaks not to try to use Bitcoin. Bitcoin is a small beta community in its infancy. You would not stand to get more than pocket change, and the heat you would bring would likely destroy us at this stage,” the inventor added.

‘I Am Not Dorian,’ Self-Proclaimed Satoshis, and Logging Off

Nakamoto’s appeal did not sway Wikileaks and soon after, the nonprofit began accepting bitcoin donations. Bitcoin’s inventor has not been heard from in over a decade, but there are a number of ostensible emails and messages from the creator that many assume stem from his legitimate accounts. For instance, when Newsweek published a story about Dorian Nakamoto being Bitcoin’s creator, a post published to p2pfoundation.ning.com on March 7, 2014 says: “I am not Dorian Nakamoto.”

Moreover, ever since Nakamoto left, there have been many self-proclaimed Satoshi Nakamotos and even clues and messages that have been widely debunked. There are tales from individuals like Craig Wright, a man who has claimed to be Bitcoin’s inventor for the last five years. Although, Wright’s stories have been widely dismissed and debunked by the greater cryptocurrency community.

There was also that time when Bloomberg columnist, Matthew Leising, told people about a so-called Satoshi and published an alleged tell-all about the nakamotofamilyfoundation.org and an individual dubbed: ‘Duality.’ The patent holder and Hawaiian resident named Ronald Keala Kua Maria said he is Satoshi on a variety of website domains bearing the name “Bitcoin” and “Satoshi.”

A man with intense hair like Fabio believes he is Satoshi Nakamoto, but nobody believed Jörg Molt’s absurd story. In mid-August 2019, a PR firm called Ivy McLemore and the Pakastani Bilal Khalid said he was Bitcoin’s inventor. Of course, Khalid’s story was considered ridiculously unfathomable as well. A Belgium native called Debo Jurgen Etienne Guido has told the crypto community he is Satoshi Nakamoto on numerous occasions.

It has also been said that the 47-year-old cartel boss Paul Le Roux could have been Satoshi as well. Still, none of these suspects and self-proclaimed individuals have ever provided a smoking gun pointing in their direction and have always failed to sway the greater crypto community.

As far as recorded history is concerned, Satoshi Nakamoto left the Bitcoin community ten years ago on December 12, 2010, with his final message about adding some DoS controls. Almost everything else from that point forward has been suspect and lacking evidence of legitimacy.

After Bitcoin’s inventor published the post, the creator must have been curious about the responses and may have been prepared to write one last message. Nakamoto logged into bitcointalk.org on December 13, 2010, logged off, and has not been seen on the forum since then.

Information source: Cointelegraph

Bitcoin Is on Its Way to Becoming the World’s Reserve Currency.

Morgan Stanley’s global strategist has made a case that bitcoin is making progress towards replacing the U.S. dollar as the world’s reserve currency. “Do not assume that your traditional currencies are the only stores of value, or mediums of exchange, that people will ever trust,” he warned governments.

Bitcoin Is on Its Way to Becoming the World’s Reserve Currency.

Morgan Stanley Investment Management’s chief global strategist and head of emerging markets, Ruchir Sharma, published an opinion piece in the Financial Times on Wednesday. He explained how bitcoin is making progress towards replacing the U.S. dollar and becoming the world’s reserve currency.

The Indian investor began by recalling that when the coronavirus pandemic hit, the U.S. dollar was the world’s “reserve currency,” noting that it has been one for 100 years while other previous reserve currencies lasted about 94 years on average. “That would have been reason to question how much longer it could continue, but for one caveat: the lack of a successor,” Sharma described, noting some contenders that fall short, such as the euro or China’s renminbi.

“US officials were thus confident that, in response to the Covid-19 lockdowns, they could print the dollar in limitless quantities without undermining its reserve currency status, allowing the country to keep running large deficits without apparent consequences,” the strategist continued, elaborating:

“But a new class of contenders is emerging: cryptocurrencies … cryptocurrencies such as bitcoin are being pitched by their champions as decentralised, democratic alternatives.“

While pointing out that there are bitcoin skeptics, including those who prefer gold, Sharma said, “many people have bought bitcoin in bulk,” as they fear that “central banks led by the US Federal Reserve are debasing the value of their currencies.” This has boosted the price of bitcoin which has “more than quadrupled since March, making it one of the hottest investments of 2020.”

He proceeded to describe that after decades of mounting, U.S. debts to the rest of the world surpassed 50% of its economic output last year, citing that this is “a threshold that often signals a coming crisis,” according to the International Monetary Fund (IMF). Sharma added that since then, those liabilities have spiked to 67% of output as the government continued to borrow heavily under lockdown.

“The dollar’s reign is likely to end when the rest of the world starts losing confidence that the US can keep paying its bills. That is how dominant currencies fell in the past,” the strategist claimed, asserting:

“Bitcoin is also starting to make progress on its ambition to replace the dollar as a medium of exchange … Money printing is likely to continue, even when the pandemic passes. Trusted or not, bitcoin will gain from widening distrust in the traditional alternatives.”

Sharma believes that bitcoin is gaining mainstream acceptance. “Today, most bitcoins are held as an investment, not used to pay bills, but that is changing,” he opined, noting that small businesses are starting to use the cryptocurrency for international trade, “particularly in countries where dollars can be hard to come by (such as Nigeria) or the local currency is unstable (Argentina).” He further pointed out that large companies such as Paypal and its subsidiary Venmo are planning to allow 28 million merchants to accept bitcoin next year.

Sharma then warned governments that “Bitcoin’s surge may still prove to be a bubble, but even if it pops, this year’s rush to cryptocurrencies should serve as a warning to government money printers everywhere, particularly in the US.,” elaborating:

“Do not assume that your traditional currencies are the only stores of value, or mediums of exchange, that people will ever trust. Tech-savvy people are not likely to stop looking for alternatives, until they find or invent one.”

The strategist concluded, “And stepping in to regulate the digital currency boom, as some governments are already considering, may only accelerate this populist revolt.”

Information source: Cointelegraph

Bitcoin’s Model Value Based on Fed and ECB Balance Sheets Is More Than $500,000.

The Bitcoin (BTC) price is moving around $19,000 for a while as everyone is excited about the next move. Global investors and institutions have shown willingness to enter into Bitcoin, in recent times. The health of the global economy seems concerning, as central banks are pumping massive stimulus money into the system.

PlanB, the popular crypto analyst and the author of the stock-to-flow (S2F) model, shows an interesting comparison between central bank balance sheets and BTC price movement over the last 10 years. Before 2020, the chart shows that the central bank money printing and the BTC goes hand-in-hand.

However, the equation has changed drastically this year as there have been trillions-of-dollars flushed into the global economy by central banks worldwide, as part of the COVID-19 stimulus packages. Interestingly, based on the current balance sheets of the Federal Reserve and the European Central Bank (ECB), the BTC price stands anywhere close to half-a-million dollars.

It clearly means that Bitcoin has the potential to explode by 25x from the current levels. Note that $500,000 is exactly the price required for BTC to move past Gold’s existing market cap of $9 trillion. As per PlanB’s Stock-to-Flow- model, Bitcoin can easily achieve this milestone in the period between 2021-2024. He further adds that Bitcoin can approach the real estate market value between 2024-2028.

PlanB’s S2F model simply treats Bitcoin as a commodity and looks at the stock-to-flow ratios for evaluating the current stock of the commodity against the flow of the new production.

The Death of Macros Can Push Bitcoin Higher.

Interestingly, PlanB is not alone to expect a 25x jump in the BTC price over the next ten years. Bitcoin billionaires and Gemini exchange founder Winklevoss Twins also believe that this is very much possible. On the other hand, formed Goldman Sachs hedge-fund-manager Raoul Pal in a podcast interview with Anthony Pompliano said that the global macro factors are falling all apart.

Pal further adds that the currency markets are also not holding a convincing future. As per him, this gives Bitcoin considerable leverage ahead. Pal has recently liquidated all his gold holdings and moved it to Bitcoin and Ethereum.

Information source: Cointelegraph

Citibank analyst seemingly predicts $318K Bitcoin price for 2021.

 

However improbable this seems, it would represent the “weakest” major rally so far, at a 102 times increase from low to high.

A recent Bitcoin (BTC) technical analysis reportedly prepared by CitiFX for its institutional clients points to a potential high of $318,000 sometime in December 2021.

In a supposed note to clients seen by Twitter commentator Alex on Nov. 14,  Citibank managing director Tom Fitzpatrick looks at the long-term trend of Bitcoin price, characterized as it has been by “unthinkable rallies followed by painful corrections.”

Notably, the three major bullish periods of BTC so far have been increasing in length. Initially, there was a 10-month run from 2010–2011, followed by a two-year run from 2011–2013, and finally a three-year run covering 2015–2017.

Conversely, Fitzpatrick posits that the period of correction following the last two bull runs has remained stable at around 12 months.

This, according to the analysis, places us squarely in the middle of a bull run which started in early 2019 and is potentially set to run for four years until late 2022.

It could be argued that such an extended bull run would lead to even higher levels, and charting “what looks like a very well defined channel” over the past seven years gives Fitzpatrick his prediction of a $318,000 Bitcoin price in December 2021.

While conceding that this figure may seem highly improbable, he points out that this “would only be a low to high rally of 102 times (the weakest rally so far in percentage terms) at a point where the arguments in favour of Bitcoin could well be at their most persuasive ever.”

These arguments include a change in the United States Federal Reserve’s monetary policy which occurred when the coronavirus pandemic hit. This was characterized by a vast and sustained increase in new money production, with less intention to constrain this once the economy and employment pick up again.

Cointelegraph has reached out to Citibank for further comment on the report but has not received a response as of publishing time.

Information source: Cointelegraph

What’s Happened to Bitcoin Since its Whitepaper Appeared 12 Years Ago?

Since Satoshi Nakamoto published the Bitcoin whitepaper on this day 12 years ago, a lot has happened to the first cryptocurrency.

In brief

On October 31, 2008, Satoshi Nakamoto published the Bitcoin whitepaper.

Since then, Bitcoin's journey has taken in highs and lows, from the Mt. Gox hack to an all-time high price of $20,000.

In 2020, it's seen renewed growth in the face of the coronavirus pandemic, as institutional investors take a growing interest in the cryptocurrency.

October 31, 2020 marks the 12th birthday of the Bitcoin whitepaper. There will be no party, no cake: Bitcoin’s friendship network is decentralized, and its creator anonymous. Yet, since its release, the whitepaper has had a profound impact on the world. What’s happened? Let’s go year by year:

2008: the birth of Bitcoin 

On October 31, 2008, our story began. Satoshi Nakamoto, a pseudonym of Bitcoin’s anonymous creator—or team of creators—releases the whitepaper for Bitcoin: A Peer-to-Peer Electronic Cash System. In it, Nakamoto sketches a plan for a system that allows “online payments to be sent directly from one party to another without going through a financial institution.”

The previous month, Lehman Brothers, one of the largest investment banks in the US, collapsed as a result of the 2008 financial crisis. This was Bitcoin’s raison d'être—as the centralized US financial system ran into trouble, a gap in the market opened for a decentralized system that bypassed its burning wreck. 

2009: Bitcoin’s first year 

2009 marked the release of Bitcoin. In January, its code was released as open-source software, and the genesis block—Bitcoin’s first block—was mined. Nakamoto mined the first 50 bitcoins, though they weren’t worth anything at the time. A few weeks later, Nakamoto sent Hal Finney 10 Bitcoin in the first Bitcoin transaction between two individuals. As Bitcoin turned one, Wikileaks published 400,000 documents about the Iraq war, and the Times Square Bomber—who failed to detonate in the New York City tourist hotspot—was sentenced to life in prison.

2010: Bitcoin Pizza Day 

Bitcoin shared its 2010 birthday with Instagram; the photo-sharing app launched on October 6. In 2010, Bitcoin was worth around $0.20, and hit highs of $0.39 during the year. Nakamoto, who had mined around one million Bitcoins at the time, passed over the keys for Bitcoin’s code repository to Gavin Andresen. 2010 also marked Bitcoin Pizza Day: on May 22, Laszlo Hanyecz paid 10,000 Bitcoins for two pizzas from Papa John’s. At current prices, that’s over $137 million.

Years later, Hanyecz was sanguine about his multimillion-dollar purchase, telling the New York Times that, “It wasn’t like Bitcoins had any value back then, so the idea of trading them for a pizza was incredibly cool ... No one knew it was going to get so big.”

2011: The first Bitcoin bubble 

Bitcoin took off in 2011—and it didn’t take long for the black market to take note of its supposed anonymity, with Silk Road, the dark net market which traded Bitcoin for guns, drugs, and other illegal contraband, opening for business.. 

2011 was also Bitcoin’s first bubble: Bitcoin skyrocketed in price, rising to $31.50 on June 8, but  by Bitcoin’s third birthday, its price sunk to $3.12; an early sign of the volatility that continues to affect the cryptocurrency to this day.

Bitcoin was also met with competition on its third birthday:  Litecoin, the “silver to Bitcoin’s gold,” launched in October 2011. Elsewhere in the world, Libyan dictator Muammar Gaddafi was killed as part of the Arab Spring uprising.

2012: Blackout, schmackout 

October 31, 2012 marked something of a triumph for Bitcoin; on that day, the New York Stock exchange opened up again after closing for two days as a result of Hurricane Sandy. Bitcoin remained operational throughout, providing ample evidence of the power of its decentralized network.

Bitcoin’s price continued to grow throughout the year: by October, it reached highs of $12.4. Its price, which averaged $5.27, was a 1,656 percent increase from 2011.

In September, the Bitcoin Foundation was started, headed by Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Schrem, and Peter Vessenes. BitPay, the Bitcoin payments service, announced that 1,000 merchants started accepting payments through Bitcoin.

2013: Silk Road seized 

In February 2013, Coinbase reported sales of over $1 million, and in March, Bitcoin’s market capitalisation surpassed $1 billion. Silk Road, which opened in 2011, was seized by the FBI in October, along with 26,000 Bitcoin; its founder, Ross Ulbricht, is now serving a double life sentence without parole; in 2020, he marked his seventh consecutive birthday in prison. Prosecutors said that, from 2011-2013, sellers on Ulbricht’s site made over $214 million.

By its third birthday, Bitcoin’s market cap had surpassed $2 billion and the price for a single Bitcoin was over $200. Elsewhere in the world, Peter Higgs and Alice Munro win Nobel Prizes.

 2014: Mt. Gox collapses 

By Bitcoin’s sixth birthday, its market cap is over $4 billion, the price of a single Bitcoin is $329, and its daily volume is over $13 million. But not all is well in Bitcoin world: back in February, the cryptocurrency exchange, Mt. Gox stopped accepting withdrawals after 744,000 Bitcoins went missing; around $473 million, or 6 percent of the Bitcoin supply. Around 200,000 of those Bitcoins have been recovered, though the rest are gone. 

 2015: Volume up 

By the end of October 2015, Bitcoin’s market cap was $4.6 billion, and the price of a single Bitcoin was $312. Though the price and market cap stagnated, Bitcoin’s daily volume skyrocketed to $52 million. Outside of Bitcoin, China started to build islands in the South China Sea, and Russia got involved in the Syrian war. 

 2016: Bitcoin goes mainstream 

In 2016, the price of Bitcoin begins to grow. On its whitepaper’s birthday, its 24 hour volume hit $93 million, its market cap $11 billion, and the price of a single Bitcoin, $703. Many more high profile businesses start accepting Bitcoin, including Valve’s Steam video games store and ride-sharing service Uber.

In October, Colombia signed a peace agreement with FARC rebels, and Kim Kardashian had $10 million stolen from her in a hotel room in Paris. If only she’d kept it in Bitcoin...

 2017: The Bitcoin bubble 

2017 ushered in a new US President in Donald Trump, but for cryptocurrency holders, it was the year of the Bitcoin bubble.

On the birthday of the Bitcoin whitepaper, one Bitcoin was worth $6,131, and its market cap was over $100 billion—a figure that some attribute to the Chicago Mercantile Exchange’s listing of Bitcoin futures contracts, which made it far easier for the world to bet on Bitcoin. CME traded $460 million in its first week. This price was to skyrocket to over $20,000 in December. On December 7, almost $50 billion worth of Bitcoin was traded. 

 2018: Down, but not out 

In 2018, everything came crashing down. The market, based purely on speculation, flipped, and Bitcoin fell to $6,538 in February. The cryptocurrency muddled through a tough year: on the 10th anniversary of its whitepaper, the price of Bitcoin was $6,325. While its market cap remained strong, at $109 billion, the crypto crash prompted a backlash from mainstream publications and social media.

Twitter, Facebook, and Google duly banned advertisements for cryptocurrencies, including Bitcoin. Google and Facebook have since lifted the ban, with Facebook going all-in on crypto as it tries to get its own digital currency, Libra, off the ground. 

2019: Bitcoin’s back, baby 

In 2019, the market came rushing back, following further price drops in 2018. Bitcoin started the year at $3,764, and its price skyrocketed to $13,796 in July. Since then, its price waxed and waned, but held relatively strong, boosted by Chinese President Xi Jinping's endorsement of its underlying technology, blockchain.

On its 11th birthday, Bitcoin cost around $10,000, and its market cap was around $165 million. By that point, the Bitcoin network comprised over 55,000 nodes, while over 820,000 addresses had traded Bitcoin.

2020: New heights

 Ah, 2020. Bitcoin started off strong, as excitement mounted for the imminent Bitcoin halving. But few could have foreseen how the year would pan out, as the coronavirus pandemic gripped the world in March. The chaos initially throttled the price of Bitcoin, with the cryptocurrency dropping to lows of $4,000.

But as massive stimulus packages followed lockdowns around the world, Bitcoin began to come into its own, with investors seeking it out as a hedge against inflation. Bitcoin’s price reached around $10,000, and stayed there for the remainder of the summer. The series of financial shocks endured by the world economy seemed to prove the case that Bitcoin is antifragile—not only resistant to shocks and stresses, but stronger for them.

Then the big money started to pour in; institutional investors such as Grayscale and Square scooped up vast amounts of Bitcoin, and digital payments giant PayPal introduced crypto buying and selling features, opening the door to mass adoption of the cryptocurrency.   

The news sent the price of Bitcoin soaring past $13,000; on the 12th anniversary of the Bitcoin whitepaper, it reached its highest price since 2018. Those who'd previously bashed Bitcoin, from Grayscale CEO Michael Saylor to JP Morgan, fell over themselves to sing the cryptocurrency's praises.

One thing's for certain: whatever happens next, Bitcoin is in a very different place from when it first emerged into the world, 12 years ago.

Information source: Decrypt

Bitcoin White Paper – 11 Years Since Satoshi’s Vision Was Brought to Life.

The evolution of key industries have been historically driven by groundbreaking technological innovations that leave an indelible mark on society.

The printing press led to the scientific revolution, the discovery of electricity brought light to the world, radio waves changed the way information was delivered to the masses, and the internet completely overhauled the way we communicate and interact with information.

In the same vein, over the short space of a decade, Bitcoin has had a similarly disruptive and innovative effect on the financial world and the technology underpinning cryptocurrency has gone on to influence a number of sectors in the global economy.

October 31 marks the 11 year anniversary of the release of Bitcoin’s white paper, which described the way in which the Bitcoin protocol would work.

Bitcoin: A Peer-to-Peer Electronic Cash System was published on a cryptography mailing list in November 2008 following the initial publication of the work. It was written by Satoshi Nakamoto, the anonymous creator of Bitcoin whose identity could be that of a single person or a group of people.

The white paper proposed a system that replaces the need for central authorities like banks and financial institutions to facilitate transactions:

“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”

With that being said, the Bitcoin protocol could not have been developed without the foundations laid by previous electronic systems that pioneered decentralized, peer to peer networks using cryptography.

One need look no further than the reference list in the Bitcoin white paper to identify the main influences that led to the development of the protocol.

Influences of Bitcoin’s protocol.

Wei Dai’s b-money, Dr. Adam Back’s Hashcash, and Dr. Ralph Merkle’s work on cryptographic hashing have long been credited for having vital influences on the Bitcoin protocol.

It must be noted that these three influencers are just part of an extensive body of work on cryptography, timestamping, and consensus protocols that influenced the way in which the Bitcoin protocol works.

Timestamps.

Arvind Narayanan, an associate professor of computer science at Princeton, and Jeremy Clark, authored an insightful summary of the various works that influenced Satoshi’s Bitcoin white paper.

First and foremost, as Bitcoin primarily acts as an electronic ledger, and transactions are recorded chronologically in blocks using digital timestamps. The work of Stuart Haber and Scott Stornetta on digital timestamps, "How to time-stamp a digital document," published in 1991 is directly referenced in the Bitcoin white paper.

Haber, Stornetta, and Dave Bayer’s paper "Improving the efficiency and reliability of digital time-stamping” was published two years later and is also listed by Satoshi as a reference. Both bodies of work are mainly focused on creating timestamps for electronic documents using cryptographic hashes.

Satoshi made use of the data structure from Haber and Stornetta’s original work so that Bitcoin’s timestamp server takes the hash of a block of transactions and timestamps it before it is broadcast to the network.

The timestamp is crucial, because it provides proof that the data existed before the hash can be created. Every block’s timestamp includes the previous timestamp in its hash, in order to form a temporally linear chain of blocks.

B-money.

Wei Dai’s b-money described a protocol that would allow participants to transact and enforce contracts in an electronic system in an untraceable way.

B-money’s first protocol proposed that participants of the system maintain a database of account balances, which keep track of the ownership of money. Transactions would be initiated and completed by a broadcast message to all participants, which would update the respective account balances of those involved in a specific transaction.

The second protocol proposes a certain subset of all participants being responsible for updating the account balances of participants.

In its simplest form, the broadcasting of transactions and updating of account balances by users of the network, could be seen as a precursor to the nodes of Bitcoin’s protocol which keep a record of the constantly growing blockchain.

Hashcash.

Hashcash has had a far more marked impact on Bitcoin’s protocol, in that it has formed the basis for the cryptocurrency’s proof-of-work algorithm.

Renowned cryptographer Dr. Adam Back, who now resides in Malta, invented Hashcash in 1997. The proof-of-work algorithm is primarily used as a tool to prevent email spam and denial-of-service attacks. The algorithm requires a selected amount of work to be computed before a hash stamp is created, and that proof can then be quickly verified by the receiver of information.

Put simply, a sender needs to complete a certain amount of computational work before it can send any sort of message across a network. When it comes to preventing email spam and denial-of-service attacks, this works exponentially as the sender would have to complete an enormous amount of computational work in order to send a multitude of messages in order to flood the resources of the intended recipient.

In the Bitcoin white paper, Satoshi directly refers to Back’s Hashcash system as a reference to the Bitcoin proof-of-work algorithm.

“To implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof-of-work system similar to Adam Back's Hashcash, rather than newspaper or Usenet posts.”

Whether or not it was directly intended, the proof-of-work system created by Nakamoto established a mining economy that is highly competitive. The reward for solving the proof-of-work algorithm and unlocking a new block is a certain amount of newly minted BTC.

Not only does the proof-of-work create an incentivized system to keep the network running, it also protects the network against attackers.

If a group of attackers wanted to successfully change or reverse previous transactions in the Bitcoin blockchain, they would have to re-do the proof-of-work of that specific block, and then all the blocks in the chain after that. Even with today’s hardware, this feat is theoretically impossible, unless the attackers control enough computational power to override the honest nodes in the network.

Merkle trees.

Another vital part of Bitcoin’s protocol was directly influenced by the work of Dr. Ralph Merkle, who is credited with co-inventing public key cryptography.

Merkle signatures and trees were invented and named after Merkle as well. Merkle trees are pictographic trees which contain leafs, and are labelled with hash signatures that contain data of transactions.

In its simplest form, Merkle trees are used to organize and verify stored data which has been transferred on a network.

As the diagram below shows, the Merkle root is a hash of all the hashes of transactions in a specific block in the blockchain. This Merkle root is included in the block header, which allows nodes to verify that any given transaction has been accepted by the network by downloading a block header and a Merkle tree.

Simply put, the Merkle root provides a single hash that verifies the integrity of all transactions under it. This also means that a single transaction within that merkle tree can also be verified by the network, given that the merkle root contains the data of that specific hash as well.

Satoshi’s genius - amalgamating crucial components.

With so many critical influences playing different roles in the creation of the Bitcoin white paper, it is difficult to identify the most crucial component of the protocol.

The crux of Satoshi’s brilliance is being able to use these different methodologies and technologies to create a working electronic payment system.

Cointelegraph reached out to a number of respected figures within the cryptocurrency and blockchain community to get a sense of how the Bitcoin white paper shaped the space as we know it today.

Cypherpunk and software engineer, Jameson Lopp, recalls his first encounter with Satoshi’s white paper which spoke to him on a practical level.

“It was about 6 years ago. I kept hearing Bitcoin come up in various tech news sites and figured maybe there was a reason it hadn't died off. Once I read the white paper I realized that it actually solved a fundamental computer science problem and it was then that the project caught my attention.”

Lopp is also of the opinion that no single preliminary project can be credited for having the most influence in the workings of the Bitcoin protocol. It is the coming together of these different methodologies that make Bitcoin work:

“There's no single piece of the puzzle that I think is more important than the others. Nakamoto's genius was not any of the individual components of Bitcoin, but rather the intricate way in which they fit together to breathe life into the system.”

Emin Gün Sirer, associate professor of Computer Sciences at Cornell University, has fond memories of his first experience of the Bitcoin white paper:

“I read the white paper in around 2010 or so. It's like your first kiss, you don't ever forget. The clarity of vision, and the aggressiveness of the dream of replacing the dollar, stuck with me.”

Much like others’ assertion, Gün Sirer believes that Satoshi’s ability to coalesce these different influences into a properly working electronic cash system is what sets the Bitcoin white paper apart from previous projects:

“Those are just citations. They did play a role in the definition of the protocol, but the core contribution lies in the consensus protocol based on following the longest/hardest chain, which was where Satoshi's unique contribution shone through.”

While Bitcoin’s white paper can be seen as the preeminent blueprint for existing cryptocurrencies today, its most influential predecessors have looked to improve on certain shortcomings that have affected Bitcoin.

When asked if Bitcoin's white paper is the most comprehensive, “fool-proof” methodology for a blockchain payment system, Gün Sirer objected. As the professor explains, projects like Ethereum look to provide technical innovations to Satoshi’s original work:

“Absolutely not. Satoshi has been outclassed in every direction. Ethereum took the vision further to build smart contracts.”

Vinny Lingham, blockchain entrepreneur and industry advisor, also offered Cointelegraph some insightful comments on the legacy of Bitcoin.

Lingham, who founded Bitcoin-based digital gift card platform Gyft, said he was initially skeptical of the cryptocurrency in its infancy and struggled to see it becoming a global currency.

That seemingly changed when he realized that Bitcoin could solve problems they were having with the company, relating to fraud and chargeback problems.

“The initial rise and fall of Bitcoin immediately reminded me of how the internet had ‘died’ in 2000. By using our infrastructure at Gyft, we were able to allow Bitcoin users to spend their Bitcoin at over 50,000 physical locations, using gift cards. No other way to put it, but the results were spectacular, and Gyft eventually sold to First Data for over $50 million. This exit changed my life, and I really believe that I owe it all to Bitcoin.”  

Reflecting on the various projects and technologies that shaped the Bitcoin white paper, Lingham echoed the sentiments of Lopp and Gün Sirer, who credited Satoshi for creating a fully working digital money system:

“Satoshi Nakamoto’s innovation was that it fixed all the broken thinking with all the projects that came before it, where they were unable to solve the problem of creating digital money. The previous work that was done was incremental thinking at best and flawed, independently. Satoshi brought it all together in a single stroke of brilliance. Ironically though, the mindset that went into the prior projects, seems to be creeping back into Bitcoin, for better or worse, now that Satoshi is gone.”

What do the next 10 years hold for Bitcoin?

As we celebrate a decade since the inception of Bitcoin in Satoshi Nakamoto’s white paper, there is a lot to be cognisant of. As the history of Bitcoin shows us, it certainly hasn’t been plain sailing and the challenges that faced cryptocurrency have also shaped what it has become today.

The original protocol, as set out in Nakamoto’s white paper, has remained largely the same, but it is the technological advances that have occured around Bitcoin that are likely to shape what it becomes in the next ten years.

As Lopp tells Cointelegraph, the next decade should see Bitcoin become even more accessible and user-friendly – as developers and software engineers create different applications that improve the way we use Bitcoin and interact with the blockchain:

“I expect that the fundamental aspects of the protocol will remain the same, but that implementations will look far different as they evolve and the system will continue to become more complex technically. But I also expect that the user experience will become less complex as we are able to abstract away more of the aspects of Bitcoin that have a high learning curve. Much like as internet based technology has improved over the years, mainstream Bitcoin users will understand very little of how the underlying protocols operate – they will simply follow the guidance of the applications they run on their machines.”

Gün Sirer offers a similar view, suggesting that the next decade will see a period of innovation that will overhaul systems we’re currently using today:

“In another 10 years, Bitcoin will still be around close to its current form, but it will be a side show. The actual systems that people will use to transact value and to execute contracts will bear no resemblance to today's systems.”

Lingham produced a more measured outlook for the future of Bitcoin. Seemingly disconcerted with a focus on ideological opinions over technological solutions, he hopes that the community can look for ways to make Bitcoin attainable in the years to come.

“It’s clear that decentralization is part of the future, but how decentralized is the more significant question. It’s clear that ideology has become more important than the technology when it comes to Bitcoin, and I’m skeptical on the outcomes, but happy to be proven wrong.”

Casting market speculation aside, Satoshi Nakamoto’s Bitcoin white paper paved the way for cryptocurrencies to challenge conventional financial systems and banks. For this reason, its 11th birthday is a special one, and there is no doubt that Bitcoin will forever be hailed as the original cryptocurrency.

Information source https://cointelegraph.com