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A Brief History of Blockchain:

An Investor’s Perspective

By Cameron McLain (VC @ Hummingbird Ventures)  — 

After many friends and family members asked me to explain my investments in blockchain assets, I decided to write an email. That email turned into this blog post.

The following post is intended for the uninitiated but I hope those familiar with the concepts will benefit from this lucid overview. So here is a (very) brief overview of the history of blockchain with key takeaways that I think are important for investors to understand. I do gloss over some of the more technical aspects for clarity’s sake.

Caveat: Before diving in, please understand that Bitcoin and blockchain though often used interchangeably are not the same thing. We’ll discuss this in more detail.


In 2008, Satoshi Nakamoto (the pseudonym for an as-of-yet unidentified individual) published a white-paper called Bitcoin: A Peer to Peer Electronic Cash System. In this paper, he argued that he had solved the issue of double-spend for digital currency via a distributed database that combined cryptography, game theory, and computer science. Double spend is simply the idea that digital currency can be spent in two places. Satoshi’s creation was a huge innovation because it enabled one entity to confidently transact value directly with another entity without relying on a trusted third party to stand between them.

To illustrate the issue of double-spend, consider purchasing a book from Amazon with a credit card. You are using digital cash to purchase that book. Because digital cash consists of a digital file (like a PDF) it can be duplicated, which is why an institution (often a bank) needs to verify these transactions. Sending a bitcoin is more akin to paying for a hotdog at a hotdog stand with a $20 bill. You hand it over and you no longer possess it. In this sense, Bitcoin was the first native digital medium for the exchange of value. Remember, money is not just coins or banknotes, it’s basically trust. Anything can be used as money, provided that there is mutual trust. The value of money depends on our trust, not on the actual worth of the materials. Money is arguably the most efficient and universal system of mutual trust ever invented.

Below you’ll see a diagram of how a Bitcoin is minted. Please note, there is more than one blockchain. A blockchain is simply a shared, distributed ledger. There is the Bitcoin blockchain, the Ethereum blockchain, and many private blockchains. We’ll get into those shortly.

Investor Opportunity:

Bitcoin was the first killer app of the blockchain, as email was to the web. Bitcoin has had a volatile ride since 2008, experiencing a massive multi-year crash and recovery, from $173 to $2800+respectively.

Most importantly, however, it has survived and the core tenets have been proven out. In countries such as Argentina and Venezuela where inflation is astronomical, Bitcoin is used to pay for some goods. Bitcoin may become a de facto store of value similar to Gold and can be viewed as a hedge against instability and inflation. The way Satoshi set up the protocol, Bitcoin is issued every 10 minutes until the total supply equals 21 million Bitcoins.

There will only ever be 21 million Bitcoins, a hard money rule similar to the gold standard (i.e., a system in which the money supply is fixed to a commodity and not determined by government) and roughly two thirds have been released. Given the set number of bitcoins in circulation and the expected future funds pouring into the asset class, it’s possible that Bitcoin could reach a price 10–20 multiples higher than its current value.

Bitcoin is largely uncorrelated to other asset class, which means a movement in another asset class will not strongly affect Bitcoin. In an era of political uncertainty, this makes Bitcoin an attractive investment. The exhibit below outlines Bitcoin’s correlation in regard to other asset classes:

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