Trust Collapses

By late 2008, public trust in financial institutions had collapsed.

Polls showed record levels of distrust in banks. Anger was widespread but directionless — people knew the system had failed them without having a clear alternative to point to. The protests that would eventually become Occupy Wall Street were still three years away, but the grievances were already fully formed.

In cryptography and computer science circles, a different kind of frustration had been building for years. A loosely connected group of researchers, programmers, and privacy advocates — many influenced by the cypherpunk movement of the 1980s and 90s — had been wrestling with a specific technical problem: how do you create digital money that doesn’t require a trusted third party?

Every attempt to solve this had failed. Digital cash required someone to verify that you hadn’t spent the same coin twice — and that someone, inevitably, became the central point of control and failure. You just recreated the bank, with extra steps.

The problem seemed unsolvable. Decades of attempts had produced nothing that could survive without a central authority.

Somewhere — in a location still unknown, under an identity still unconfirmed — someone had been working quietly on a solution. They had been studying the failures of previous digital currencies. Reading the cypherpunk mailing lists. Thinking about game theory, cryptography, and incentive design.

In the last months of 2008, as the financial world burned, that solution was almost ready.

Tomorrow: the question that, once answered, changed money forever.

— The Daily Bit