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ViewpointSeptember 3 2018

Gary Gensler: How blockchain can solve the payments riddle

Peer-to-peer electronic cash systems could lower costs, risks and economic rents in the financial system – if the technical and security challenges can be overcome.
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Pizza Hut launched PizzaNet and made its first online sale in 1994, but money still changed hands with delivery. Amazon and eBay opened in 1995. Commerce was quickly looking for solutions to move payments across this new network. The internet and World Wide Web are built on open protocols – without trusted central intermediaries – and exchange data in the form of information packets. Efforts to achieve peer-to-peer payments, such as DigiCash and CyberCash, failed. By 1996, new cryptographic protocols such as SSL/TLS secured communications and payments on the internet, but payments still relied on traditional credit card and banking rails.

The riddle – how to move value peer-to-peer on the internet without any trusted central intermediary – would remain until October 31, 2008. Unnoticed at the nadir of the 2008 financial crisis, Satoshi Nakamoto released to a cryptographers' e-mail list a nine-page paper entitled ‘Bitcoin: A peer-to-peer electronic cash system’ (Satoshi Nakamoto is a pseudonym; the identity of the author or authors is still unknown).

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