Back to Basics – The History of Bitcoin

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Bitcoin continues to make headlines thanks to its sensational gains and ever-evolving technology. According to CoinMap, there are nearly 13,000 merchants accepting Bitcoin worldwide. Some say Bitcoin – and the crypto world in general – is very difficult to understand. For this reason, many people shun the crypto market, deeming it to be a place for illegal and illicit transactions. Knowledge is power, and sometimes to understand something you need to know its history. Last week we brought you an introduction to Bitcoin through our “Back to Basics” series, now it’s time to take a look at the history of the world’s leading cryptocurrency.

The Pre-Bitcoin Years

Believe it or not, there were a few digital currencies around before Bitcoin. Two of the most popular digital currencies – if you can call them popular – were Bit Gold and B-Money, both were created by developers that went on to work within the crypto sphere. Nick Szabo developed Bit Gold and outlined a globally distributed asset registry to store and transfer blocks that have been cryptographically sealed. This is essentially the blockchain. However, this was only theoretical for now and had not been created – but it was this that formed the building blocks for Bitcoin and arguably the crypto sphere we see today.

… Along Came Satoshi Nakamoto

On August 18th 2008, the domain was registered, then just over two months later on October 31st a paper published by Satoshi Nakamoto titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. This paper explained the detailed workings of Bitcoin and was the beginning of the future. On January 3rd 2009 the Bitcoin network went live and Satoshi mined the first block – known as the genesis block. He went on to mine an estimated 1 million Bitcoin before vanishing from the network. Satoshi Nakamoto’s true identity is still unknown, however a few people have come forward claiming to be him, most notably Craig Wright – an Australian businessman. While he hasn’t proved himself to be Satoshi, he has an army of followers who believe he is really Satoshi – speaking honestly, we are a bit skeptical of his claims.

The One and Only Bug – So Far

One of the most intriguing things about Bitcoin is the lack of bugs and exploits. Since the Bitcoin network was launched back in 2009, there has only ever been one bug found and exploited. Even the most adept software developers leave a myriad of bugs, hence the emergence of bug bounties on most software and crypto projects. This bug meant transactions weren’t properly verified and allowed users to essentially create an infinite amount of Bitcoin. Over 184 billion Bitcoins were created during the exploit and they were sent to two addresses. Within a matter of hours, the transactions had been spotted and were erased from the transaction history. The bug was then fixed and a fresh fork of the Bitcoin network was released.

The Groundbreaking First Transaction

Many people believe the first Bitcoin transaction to be between Laszlo Hanyecz and a pizza shop where he bought 2 pizzas for 10,000 Bitcoin – $76,720,000 at today’s value. However, the first transaction was in fact between Satoshi and developer Hal Finney on January 12th 2009 – a whole year before Laszlo got his hands-on delicious Bitcoin pizza. Laszlo made headlines by grabbing a hot slice for what is now an eye watering amount of Bitcoin, but it’s simply a myth that he was the first man to “spend” BTC.

From Spending to Trading

On March 17th 2010 the first Bitcoin exchange opened its doors – While this exchange is now defunct, it served a purpose and was instrumental in the commercialization of Bitcoin and can be accredited to its meteoric rise. Within four months of the exchange opening, the price of a single Bitcoin had increased in value by over 900% to $0.08. Looking at the current crypto market, it’s evident that while it now no longer exists was nothing short of a trailblazer.

Bitcoin’s Persistent Resilience

Following Bitcoins rise to $0.08, there were multiple huge spikes and dips in the price. During February 2011 Bitcoin was worth $1, and this price held until April 2011. The first Bitcoin bubble came on July 8th 2011, as the price hit $31. The bubble then popped and Bitcoin sank to as low as $2 during December 2011. Bitcoin first hit $1,000 in January 2014, followed by a dip in price, which meant that it didn’t see $1,000 again until January 2017. From the next rise to $1,000 in January 2017, Bitcoin’s price continued to soar until it reached its all-time-high (ATH) of $20,089 on December 16th 2017. From there it fell 50% in the 16 proceeding days. Bitcoin is still a long way off its ATH, but is currently experiencing a resurgence in value, breaking through the $8,000 barrier during July 2018.

The Emergence of New Technology

Bitcoin suffers from some slight scalability issues, which – at one point in time – threatened to render Bitcoin unusable as a currency for day-to-day use. However, a group of developers created the Lightning Network to facilitate fast and low-cost payments between users. While the Lightning Network is still in beta 0.4, there are many companies launching Lightning Network solutions for merchants and consumers to help Bitcoin become more widely accepted as a payment method. Laszylo “the Bitcoin Pizza guy” Hanyecz struck again and bought pizza using the Lightning Network, in what is considered to be one of the first real-world purchases via the network. The Lightning Network is a large and intricate topic, one we will cover in a later post, but if you can’t wait, you might want to take a look at our introduction to the Lighting Network.

Government Regulation Battles Rage On

Bitcoin has had a tough time with regulators and governments alike. Many governments have tried to destroy and remove cryptocurrencies totally, while some have been more welcoming. Malta recently introduced three new crypto-friendly laws and New York has reduced electricity prices for crypto miners. Bitcoin has endured the bad times and relished in the good times, which shows that no government can totally outlaw Bitcoin – good luck following this act Ripple.

Bitcoin Continues to Make History

This is only a brief look into the history of the pioneering cryptocurrency. There is so much more to Bitcoin and how it works, but don’t worry. We will take you through the world of cryptocurrencies step-by-step and help you to become a Bitcoin expert. Stay tuned as next week we will be covering more aspects of the Bitcoin world, specifically how you can go about buying Bitcoin.