In January 2009, Satoshi Nakamoto—the pseudonym of an unidentified computer scientist (or collective of scientists)—mined the first block (or group of transactions) on the Bitcoin network a few months after publishing the “Bitcoin Whitepaper.”1 This Genesis Block—as the first transaction on the Bitcoin network was called—included an encoded message that referred to a newspaper headline published around that time: “Chancellor on brink of second bailout for banks.”2 The article the block referenced described a bailout for English banks in the immediate aftermath of the global financial crisis. While the message was relevant historical context for when the transaction occurred, transactions processed on the Bitcoin network include dates and timestamps, so the reference to the English bank bailout was unnecessary. Instead, Satoshi Nakamoto and commentators have since clarified that this allusion to banking conditions was intended to draw a contrast between the new financial paradigm Bitcoin represented and the traditional financial system.3 These early developers did not want to rely on a financial system dependent on third parties—especially governments and central and commercial banks—but instead created a system to bypass them.

Cryptocurrency’s initial use case was as a combined payment system and unit of account that eschewed intermediaries. Traditional payments systems are composed of various banks, payments processors, credit card networks, central clearinghouses, central banks, and a vast technological infrastructure that supports it. In this system, banks ultimately validate customer transactions and log the details of the transactions digitally in their private ledgers. Banks then submit these details via messaging networks, which authorize transactions to occur, and ultimately facilitate the exchange of funds at banks’ master accounts at a national central bank, which in the United States is the Federal Reserve. As such, transactions between two individuals with accounts at two or more different financial institutions involve at least two commercial bank ledgers and the ledger of at least one central party, which acts as an intermediating agent for the transacting parties. (See Figure 1 for a simplified version of transactions.) In addition to this massive infrastructure, the system requires trust and security, which safeguards deposits regardless of economic conditions. It requires that banks perform their responsibilities effectively and maintain effective risk management controls, including over their payments systems. Moreover, it obligates banks to do their best to safeguard their data and extend services to qualifying customers.