DEFINITION of B-money
Although digital currencies have risen to new levels of prominence around the world only in the last few 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 BTC as well. One of these early proposed cryptocurrencies was called B-money. First revealed in 1998 by computer scientist Wei Dai, B-money aimed at being 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.
BREAKING DOWN B-money
Wei Dai, a computer engineer and graduate of the University of Washington, published a paper in 1998 introducing the concept of B-money. The paper provided the general outline for the currency, which in many ways mirrors (or predates) the modern-day digital currency world. For instance, 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 B-money concept included a number of specific features that have become common to cryptocurrencies today, including the requirement that computational work be done in order to facilitate the digital currency, the stipulation that this work must be verified by the community in a collective ledger and that workers will be rewarded for their input. To insure that transactions remained organized, Dai proposed that collective bookkeeping would be necessary, with cryptographic protocols helping to authenticate transactions. This will be familiar to present-day cryptocurrency enthusiasts by its similarities to the blockchain. Further, Dai suggested the use of digital signatures, or public keys, for authentication of transactions and enforcement of contracts.
Dai's concept included two proposals. The first was seen as largely impractical and relied on a proof-of-work function in order to generate B-money. The second proposal more closely predicts the structure of many modern day blockchain systems.
B-money was never officially launched. Rather, it remained in existence only as a proposal (the equivalent of today's 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 BTC 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."
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. 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.
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