The History of Bitcoin – How This Cryptocurrency Evolved
On January 3rd, 2009, Bitcoin’s Block Zero, aka The Genesis Block, was mined.
The date marked the first appearance of a decentralized digital currency that provided private, peer-to-peer transfers using blockchain technology.
Wow, that’s a mouthful, huh? Let’s put that in more familiar terms.
The release of Bitcoin was the first virtual currency not tied to a governmental authority or agency. Bitcoin was simply Bitcoin. It didn’t matter if you lived in the United States, the United Kingdom, China, or anywhere in the world. Using Bitcoin was the same everywhere from the acceptance to the value.
Bitcoin took away the oversight and put it in the hands of the miners and the users. You can send currency from your wallet to another user’s without a middleman approving the transaction or keeping a ledger and thereby monitoring your activities. Bitcoin is known as a “cryptocurrency” because transactions are encrypted using cryptography.
You can read more about this currency and how it works in our introduction to Bitcoin. On this page, we’re going to cover its origins and its (relatively short) history.
Pre-Bitcoin Cryptocurrency
The idea of having a virtual method of transferring cash wasn’t new in 2009. After all, PayPal, for example, was launched in 1998 and involved peer-to-peer money transfers. The difference, though, was that PayPal was facilitating fiat currency (governmentally-declared legal tender) like US dollars or British Sterling.
Another difference is that PayPal users are on record. There isn’t the anonymity that Bitcoin provides. You have an account, and most users also link a traditional bank account, credit card, or debit card to their PayPal wallet.
B-money and Hashcash
The creator of Bitcoin, Satoshi Nakamoto, referenced some earlier attempts to accomplish what Bitcoin eventually successfully provided. B-money and Hashcash were explicitly mentioned in the original Bitcoin white paper.
The B-money structure involved every transaction being sent to the network of users for verification and maintenance. Hashcash used the proof-of-work concept that Bitcoin is known for in conjunction with Bitcoin mining and sealing off the blockchains.
Similar, but not on the money
There were other similar endeavors like DigiCash, Bit Gold, and Russia’s Web Money, but Bitcoin was the first to meet all of the criteria of anonymity, peer-to-peer transactions, a decentralized currency, proof-of-work concept, and no central server.
Who Is Satoshi Nakamoto?
A history of Bitcoin would certainly not be worth anything if Satoshi Nakamoto weren’t mentioned at least a few times. Nakamoto is a pseudonym and may not even be one individual, but instead, a group of developers.
What is known is that the Bitcoin project was started in 2007. In 2008, a mysterious application for an encryption patent was filed by Neal King, Vladimir Oksman, and Charles Bry, but all three deny any association with Nakamoto.
Also in 2008, bitcoin.org was registered through anonymousspeech.com, further maintaining the concealment of the owner’s identity. Later that year, the Bitcoin project ended up being registered on SourceForge.net as open-source software.
Nakamoto’s original paper
Just two months later, the Genesis block made its debut. Before that, though, Hal Finney, a console game developer, had read a posting called “Bitcoin: A Peer-to-Peer Electronic Cash System” that was shared amongst cryptography mailing list recipients. The paper was penned by the elusive Nakamoto.
Finney ironically had created the first reusable proof-of-work (RPOW) system in 2004 and was more than a little intrigued about the Bitcoin project. He ended up being the first miner and recipient of the first Bitcoin transaction in January of 2009.
Both Finney and one of Bitcoin’s core developers, Mike Hearn, denied knowing who Satoshi Nakamoto really is, even though both have had direct communication. Hearn received an email in 2011 from Nakamoto that famously states “I’ve moved on to other things. It’s in good hands with Gavin (Andresen) and everyone.”
Satoshi Nakamoto’s projected net worth
His (or her?) identity may still be a mystery, but it’s speculated that Nakamoto owns approximately 980,000 BTC. At Bitcoin’s famous “near 20,000 USD” high in December of 2017, the creator was worth an estimated $19.4 billion and still retains quite an impressive portfolio, although some or all of it could have been transferred from wallet to wallet endless times.
The Highs and Lows of Bitcoin: 2009 – 2017
Imagine that you could take a time machine and go back to October 2009. Now, you’ll want to head over to New Liberty Standard, where the first US Bitcoin exchanges are active and operational. Using your PayPal account, transfer over $5.02, exactly like the first Bitcoin purchaser did, and then prepare to receive 5,050 BTC in your wallet.
At the time, that wasn’t all that impressive. After all, one BTC wasn’t even worth a single penny. But you’re optimistic, and after all, you’ve only spent about five dollars on your creative financial investment.
Okay, leave your account intact, hop back in your time machine, and fast forward to December 17, 2017. You’re curious, of course, so let’s take a peek at how much your Bitcoin investment is worth. After all, it was less than a penny for each unit. Even if it’s gone up to a dollar for each BTC, you’re looking at a decent return on investment.
You’d probably need to sit down for that one, huh? $19,783!
And how many shares did you buy? 5,050? Let’s do the math: 5050 x $19,783 = $99,904,150.
At that rate, the term “good investment” doesn’t even begin to describe it.
Now, Bitcoin hasn’t been consistently riding high. In fact, there have been numerous highs and lows associated with the cryptocurrency. It wasn’t even until February 2011 that it reached the one-dollar (USD) mark. But overall, it has shown significant increases. Despite any graphical depictions showing some spikes and downturns, looking at the past eight years, there’s a steady valuation climb.
In April of 2013, it skyrocketed to $200 but then fell rapidly to $67. But then, in November that year, it achieved an incredible $1,216.70. It’s value had risen nearly 1800% in just seven months.
That was the highest value Bitcoin reached for the next three years. The ebbs and flows continued on a monthly basis, until things got really interesting in 2017. In June, the value exceeded $3,000. By September, it was up to $5,000. In November, one BTC surpassed the $10,000 mark. Then, as in our time machine reference, on December 17th, jaws dropped as Bitcoin almost doubled to $20,000, hitting its all-time high (to date) of $19,783.
Since the beginning of 2018, the fluctuation that Bitcoin is known for has resumed with a high in January of $14,235 and a low in February of $6,166.
From Bitcoin to Altcoins: 2011 – 2017
It didn’t take too long from the 2009 launch to start seeing some variations on the concept. Although Bitcoin is still the premier and most mainstream cryptocurrency, it has prompted new alternatives, aptly named altcoins.
Namecoin
Namecoin was the first altcoin, making its debut in 2011. Namecoin and other leading altcoins were premised to provide an even better version of Bitcoin.
Most altcoins have a similar structure to Bitcon but have tweaked the formula to offer new security measures, different ways of mining or obtaining the coins, and enhanced platforms.
Variations on blockchain technology
The newer releases are taking things to a whole other level with entirely new applications. For example, you have Bounty0x that is a virtual bounty hunting platform and rewards BNTY tokens for successful “hunting.”
DeepBrain Chain is focused on reducing artificial intelligence computational costs to help businesses fully utilize and develop the power of AI.
There are also charitable organization tie-ins like Dogecoin and altcoins like Steem that are in conjunction with blogging and social media presence.
Over 1,000 altcoins are currently in the marketplace, and more are being continuously developed with new twists on the blockchain and decentralized currency concept. Some can be purchased with fiat currency, but for others, you need to invest in a different cryptocurrency like Bitcoin or Ethereum first.
You can read all about some of the main altcoins on the following page.
Silk Road: 2011 – 2013
Just like the internet, Bitcoin can provide good, positive services for its users. It’s an easy way to transfer money, and it allows you to quickly move funds when a conventional financial institution may be turning you down for an account.
Bitcoin has been the driving force behind altcoins and the emergence of blockchain technology that has far-reaching benefits that go well beyond maintaining financial ledgers.
But just as with the internet (and pretty much everything else), it can also be used in ways that are detrimental. A prime example of this is the famous Silk Road case.
In February of 2011, Ross William Ulbricht launched his dark web project that had been in the making for six months. Conducting business solely in Bitcoin, it was an online marketplace for illegal drugs.
The dark web hosting combined with the anonymity that Bitcoin provides made it traceless, for the most part, for two years. Law enforcement finally caught up with it, though, and it was eventually seized by the FBI in October of 2013, along with 26,000 BTC worth approximately $3.6 million at the time.
Ulbricht, aka “Dread Pirate Roberts,” was tried and convicted of eight counts, including narcotics conspiracy, and is spending life in prison. His counterparts in the operation re-launched Silk Road almost immediately, but it was again shut down in 2014 with new charges filed.
In the two years of operation, Silk Road facilitated $15 million in Bitcoin transactions and put a huge black mark on the original cryptocurrency.
There has been plenty more controversy surrounding Bitcoin, too, including several high-profile heists and hacks. We’ve detailed some of these on the following page.
A Fork in the Road: 2017
On August 1st, 2017, Bitcoin Cash was introduced.
Bitcoin Cash was the result of a hard fork, meaning that the blockchain was split in two on that date. While that’s not uncommon, typically when it happens, only one blockchain is used. However, in this instance, the hard fork was planned to compensate for the higher traffic and slower processing times that Bitcoin had recently been experiencing.
In the earlier years, there were far fewer users. That first month in 2009, there was one BTC traded. But since then, the number of customers has been steadily rising. In 2015, the user base reached five million. Just two years later, heading into 2017, that number was reaching the 15-million mark.
Bitcoin Cash (BCH) seemed to be a viable solution to reduce or at least maintain steadier traffic. Bitcoin Cash can process the blockchains eight times faster.
How Bitcoin Cash affected the BTC wallet holders
If you had any BTC at the time of the fork, you received the same amount of Bitcoin Cash. Your assets weren’t moved; they were duplicated. Now, that only applies to what you had at that exact moment. Nothing before or after would be affected.
Primarily what the hard fork did was take the ledgers up until the time of the fork and copy them exactly. Once the split occurred, though, Bitcoin Cash would then stand on its own. It retained the accounts to the moment of its release, but from that point on, Bitcoin Cash and Bitcoin would be separated, and new transactions applied to one or the other as directed by the users.
Currently, BCH is priced at about 12% the value of BTC. Predictors are forecasting a similar slow but steady rise throughout the next few years.
Coinbase and Bitcoin Cash
Just as a side note, Coinbase had initially declined the acceptance of Bitcoin Cash. But in December of 2017, it added it to its American exchange and appropriately credited its customers. European customers were then accommodated as well just a month later.
Timeline
Bitcoin has a very rich history. If you look at the ups and downs in valuation alone, you could fill a book. Rather than delve into all of the little details, our timeline hits some of the highlights for you.
Pizzas! The Bitcoin forum facilitated the first “Bitcoin for product” transaction when a Jacksonville, Florida, area resident paid 10,000 BTC for $25 worth of pizza from Papa John’s Pizzas! The Bitcoin forum facilitated the first “Bitcoin for product” transaction when a Jacksonville, Florida, area resident paid 10,000 BTC for $25 worth of pizza from Papa John’s
Wikileaks accepts Bitcoin as a donation method
Bitcoin Magazine launches
Steam, the software marketplace, discontinues its acceptance of Bitcoin2018 and Beyond – What’s Next for Bitcoin?
We can’t predict the future, but some analysts are quite proficient in monitoring trends and typically come up with some accurate forecasts.
Time Magazine published an article based on one analyst who previously and correctly predicted a 300% rise in BTC value in 2017. For 2018, the estimation is for BTC pricing to hit as high as $100,000, but at least somewhere between the 50K and 100K range. Bitcoin’s all-time high was just under $20,000, so that would be a big reach.
Other experts aren’t as positive. Bitcoin has been volatile, and cryptocurrency is still such an unproven market for the most part. Some say that it could crash entirely, but they also wouldn’t be surprised to see a five-times gain this year either. After all, it all started with a “less than a penny” investment that reached $19,783 in less than eight years.
Will it continue to rise, or experience an unexpected crash? Time will tell, but all indicators are green for cryptocurrency and blockchain technology.