In the previous lesson, we talked about the problems of the Internet as it currently stands. This time, we'll talk about the search for a solution to those problems, a search for what we're calling the Trust Protocol. Internet pioneers have been working with cryptography since 1981. But no matter how they set things up, there were always leaks because third parties were involved. Paying with credit cards over the Internet was never completely secure, and users had to give away too much personal data to third parties. They had to trust these third parties to protect it. Yet time and time again, those third parties proved vulnerable to security breaches. When they were breached, everyone's information was at risk. Also, transaction fees were too high for small payments. In 1993, the mathematician David Chaum came up with a new solution called eCash. eCash was a digital payments system. It made safe anonymous online payments possible, even small payments like pennies, nickels, and dimes. At the time, it looked like a promising solution. Microsoft and Netscape both wanted to include eCash in their browsers. But online shoppers cared more about convenience than about privacy and security back then. In 1998, Chaum's company went bankrupt. Around that time, one of Chaum's colleagues, Nick Szabo, wrote a short paper explaining the problem. He called it The God Protocol. God in this case, was a trusted third party in the middle of all transactions. God would treat everybody fairly, and not reveal anybody's secrets. God was the ultimate trusted intermediary. Szabo's point was powerful. Doing business on the Internet requires a leap of faith. Without the security we all need, we often have little choice but to treat these intermediaries as if they were gods, impartial, and infallible P.S. They're not. So, case in point, the 2008 collapse of the financial markets occurred, and it turns out these intermediaries were not behaving with integrity. They almost brought down the global capital system. And amid the market meltdown, someone named Satoshi Nakamoto outlined the protocol for a new electronic cash system. It was peer-to-peer, no intermediaries, and it introduced a cryptocurrency called bitcoin. So, cryptocurrencies are digital currencies. They're different from traditional money, what we call fiat currencies, because they're not created or controlled by governments. Instead of third parties or central banks, Satoshi's protocol used distributed computations. Many computers around the world all working on the same problem. Satoshi's protocols set up rules to verify the data exchanged among billions of devices without going through a trusted third party. This breakthrough set off a spark igniting the whole computing community. It spread like wildfire to businesses, governments, privacy advocates, and more. With peer-to-peer verification, there's no need for a third party. No need for a mortal, fallible entity to act as God. We're still grappling with what it means to create trust through clever code. We've never had this capability before. So, here are some of the things we know. We can now conduct trusted transactions directly between two or more parties. We can now verify the transaction through mass collaboration rather than through banks. This collaboration is powered by collective self-interests rather than one's company's need for profit. It may not meet the almighty, but we think it's pretty awesome. It's a trustworthy global platform for peer-to-peer transactions. We're calling it the Trust Protocol. The Trust Protocol is the basis of more and more distributed ledgers called blockchains. The Bitcoin blockchain is the best known of these, and the largest by number of users. While the technology is complicated, the main idea is simple. Blockchains let people send assets directly and safely to each other without going through a bank, credit card company, PayPal, or a big social media company. Rather than the Internet of information, it's the Internet of Value. It's also a platform for everyone to know what is true, at least with regard to structured information and assets. At its most basic, Blockchain is open-source code. Anyone can download it for free, run it, and use it to develop new tools for managing transactions online. Because anyone can develop it, it holds so much potential. It can be the basis for countless new applications, many we haven't even thought of yet. Their capabilities could transform just about everything. In the next few videos, we'll dig a little deeper into what a blockchain is and exactly how and why it works.
