B-money

What Is B-Money?

First revealed in 1998 by computer scientist Wei Dai, b-money was intended to be an anonymous, distributed electronic cash system. In this way, it endeavored to provide many of the same services and features that contemporary cryptocurrencies today do as well.

Although digital currencies have risen to new levels of prominence around the world in the last several years, it's important to remember that cryptocurrency has a history dating back decades. While the oldest of the current generation of virtual tokens is Bitcoin (BTC), there were many important predecessors to Bitcoin. B-money was one of these early, proposed cryptocurrencies. B-money was never officially launched.

Understanding B-Money

Wei Dai, a computer engineer and graduate of the University of Washington, published an essay in 1998 introducing the concept of b-money. The paper provided the general outline for the currency, which in many ways predates the modern-day digital currency world. Dai described b-money as "a scheme for a group of untraceable digital pseudonyms to pay each other with money and to enforce contracts amongst themselves without outside help."

Dai's concept for b-money included a number of specific features that have become common to cryptocurrencies today, including the requirement for computational work in order to facilitate the digital currency, the stipulation that this work must be verified by the community in a collective ledger, and rewarding workers for their input. To ensure that transactions remained organized, Dai proposed that collective bookkeeping would be necessary, with cryptographic protocols helping to authenticate transactions. This proposal is very similar to present-day blockchain technology. Further, Dai suggested the use of digital signatures, or public keys, for authentication of transactions and enforcement of contracts.

Dai's concept for b-money included two proposals. The first was seen as largely impractical and relied on a proof-of-work (PoW) function in order to generate b-money. The second proposal more closely predicts the structure of many modern-day blockchain systems.

While Dai's work with b-money has perhaps been overshadowed by more recent and successful cryptocurrency projects, he remains a primary figure in the early development of the industry. Indeed, the smallest unit of ether, the digital currency of the Ethereum network, is called a "wei" in honor of Dai's work and the b-money concept.

How Is B-Money Different From Bitcoin?

B-money was never officially launched; it remained in existence only as a proposal (the equivalent of a white paper). However, Dai's work did not go unnoticed. Indeed, when Satoshi Nakamoto was developing Bitcoin roughly a decade after Dai produced the proposal for b-money, the pseudonymous founder of the largest cryptocurrency in the world reached out to Dai before any other developers. Along with other cryptocurrency pioneers like Nick Szabo and Hal Finney, Dai supported Nakamoto's plan.

While there are many similarities between the b-money proposal and Bitcoin (and, in turn, many other subsequent digital tokens and coins as well), the exact relationship between b-money and Bitcoin is difficult to identify. Dai has stated in recent years that "my understanding is that the creator of Bitcoin...didn't even read my article before reinventing the idea himself. He learned about it afterward and credited me in his paper. So my connection with the project is quite limited."

Beyond that, there are many within the cryptocurrency community who suspect that, because of the similarities between b-money and Bitcoin, that Wei Dai may someday be revealed as the true identity of the mysterious Satoshi Nakamoto.

Goals of B-Money

By creating b-money, Dai dreamed of a community where there would be little to no violence because the physical locations and real identities of people would be obscured from public knowledge. Because there would be no violence, this community would have no need for a government.

However, Dai knew that in order for the institution of government to become permanently unnecessary, a community would need to communicate and transact in a peer-to-peer way. Dai said, "Until now it’s not clear, even theoretically, how such a community could operate. A community is defined by the cooperation of its participants, and efficient cooperation requires a medium of exchange (money) and a way to enforce contracts. Traditionally these services have been provided by the government or government-sponsored institutions and only to legal entities."

B-money's protocol was conceived of in such a way that it could preserve the privacy of all participants while still acting as a medium of exchange and providing executable contracts to a community.

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