Thursday, May 9, 2024

Crypto Pioneers - part two

User avatar of Dominik Nawracaj

Dominik Nawracaj

4 min read·44 Reads
Crypto Pioneers - part two

Cryptocurrency genesis

To carry on the story of early cryptocurrencies, another, very interesting example of a cryptocurrency prototype is Bit Gold created by a with Hungarian sounding name Nicholas Szabo, a computer scientist, legal scholar, and cryptographer ( He graduated with a Juris Doctor degree from George Washington University Law School. He also holds an honorary professorship at the Universidad Francisco Marroquín).

His concept of digital money has a lot in common with the most famous cryptocurrency, namely – Bitcoin.
It was based on the decentralized network, and to process and secure transactions Bit Gold (found in 1998 – a decade before Bitcoin) combined elements of cryptography and mining to accomplish decentralization, including time-stamped blocks that are stored in a title registry and are generated using proof-of-work (PoW) strings - a user must solve a cryptographic puzzle using computing power, and then all solved puzzles are sent through a Byzantine Fault Tolerant peer-to-peer network and finally assigned to the public key of the puzzle solver.
And like Bitcoin Blockchain, all details relating to the transaction were stored in a title registry, a chain that links the most recent puzzle’s solution to the outcome of the following one, thereby validating blocks of transactions.

However, there are some differences between the two cryptocurrencies, for example, the mining difficulty approach: unlike the rising over time difficulty in the Bitcoin case, the Bit Gold difficulty would be varying all the time (fluctuating between easier and harder).
Another difference (what appears to be a similarity) is that Bit Gold was designed as rather a reserve currency to back another form of digital currency, not as a means of payment – which Bitcoin was supposed to be…. but, in my opinion, Bitcoin becomes kind of reserve for other cryptos, and their prices are strictly depended on BTC capitalization.

Szabo’s concept was to avoid reliance on centralized currency distributors and authorities, and Bit Gold was invented to reflect the properties of real gold, thereby enabling users to eliminate the middleman. Unfortunately, like other early cryptocurrency attempts, was ultimately unsuccessful.
pic. Nicolas Szabo (

From the same University background (George Washington University) comes another computer scientist - Wei Dai.
elaborated an "anonymous, distributed electronic cash system" called B-money (also in 1998).

  1. pic.

It was based on two different protocols, including one which required a broadcast channel that was both synchronous and unjammable (not comparable).
In the payment system, digital pseudonyms would be used to transfer currency through a decentralized network, and it included a means for contract enforcement in-network without using a third party.
In this case, the project also didn’t gain enough attention to achieve success, however many of its solutions appeared in Bitcoins whitepaper a decade later.

During searching sources for these articles, I found an interesting, common factor, which connects most early cryptocurrency investors… most of them were associated with Extropians and Cypherpunks movements, and I think it will be a fine source for future articles.
Anyway, I hope you enjoyed this one,
Have a good day, bye.





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