The history of Bitcoin

The history of Bitcoin has been a turbulent one, and right now we’re in one of the most turbulent periods in its history, as it has spent the entirety of 2018 falling further and further from its peak value of nearly $20,000 in December 2017.

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But something as uncertain as Bitcoin was never going to be smooth sailing. A lot of people have tried a cryptographed digital currency before it, and they weren’t able to fully crack it. For more than a decade ago since Bitcoin became a reality, there have been some high highs and some low lows.

But how did we get to where we are today with the cryptocurrency? How did it all begin, who were its forebearers, and what have been the unexpected turns of the Bitcoin history and journey? Let’s take a walk through the timeline and find out.

The early beginnings

Bitcoin itself was not in existence until the late 2000s. Its origins, however, can be traced back to a few decades ago.

Precisely, we can trace it back as far as 1982. The history of Bitcoin starts when a computer scientist by the name David Chaum first proposed the concept of e-Cash. Already concerned with privacy in the digital realm back in the early 80s, Chaum published a paper entitled “Blind signatures for untraceable payments” that detailed a new form of cryptography which he claimed could allow for an automated payment system where third parties couldn’t see information on the payment.

Chaum tried to put this idea, which would create a blind signature system, to practical use in 1990 by creating DigiCash. DigiCash was designed, as Bitcoin would be, to create a safe, secure online currency. Chaum’s reputation as a brilliant mind attracted both employees and venture capital alike, but the product itself never caught on, and by the late 90s DigiCash was bankrupt.

Still, Chaum opened the floodgates for other cypherpunks with similar ambitions. In 1997, Adam Back invented hashcash, a proof-of-work system that would prove remarkably similar to what Bitcoin uses.

Read more: Bitcoin for Dummies

Blockchain exchange

Wei Dai released an essay in late 1998 explaining his idea for “b-money,” a cryptocurrency whose exchange reads similarly to what the blockchain in Bitcoin would eventually become. The proof-of-work system creates the currency by solving a mathematical computation, and the transfer of money is broadcasted to the network.

Bitcoin’s blockchain network uses Proof-of-work system to create and hash blocks together. When the computer in a network must use proof-of-work for mining, it needs to solve a complicated mathematical problem. If a computer (called a “node” in the network) successfully solves the problem, it must then be verified by the other nodes in the network. If it does, the transaction is verified and completed, and the miner whose node solved it is rewarded with Bitcoins.

That same year, Nick Szabo put out a similar proposal for “Bit Gold.” Szabo’s reasoning for the alternative currency was to create something that didn’t require a third party, like a central bank, to create or manage it. Solving the proof-of-work gets you bits, and the last bit of the string is used to create the string of the next transaction, similar to Bitcoin’s blockchain.

Neither of these proposals, however, came to fruition.

The history of Bitcoin begins

The predecessors had tried and failed for two decades prior. Then, in 2008, came Bitcoin. In August of that year, Bitcoin.org was registered. Two months later, a whitepaper was published: “Bitcoin: A Peer-to-Peer Electronic Cash System.”

The whitepaper’s idea had similar ambitions to the previously mentioned papers: secure digital signatures, not requiring the use of a third party, proof-of-work, and hashing the transactions together to form a chain.

Satoshi Nakamoto wrote the paper. Satoshi Nakamoto is merely a pseudonym. The person behind it, however, remains a mystery.

It remains such a mystery that some think it’s more than one person, doubting that one single person could create something as comprehensive as the Bitcoin network. Still, others have floated the possibility of it being one person, and there are plenty of theories as to who that one single person could be. None have been verified.

Who are the people that some people think could be Satoshi? Some of them have already been mentioned in this article, such as Bit Gold founder Nick Szabo, whose ideas were remarkably similar to that of Bitcoin. Many others think it is Hal Finney, a notable developer and the person Nakamoto sent Bitcoins to in the first-ever transaction all the way back in 2009.

The first of Bitcoins

A few days into the year 2009, the first-ever block of Bitcoins, known as the Genesis Block, was mined. By Jan. 9, the debut iteration of Bitcoin software was released, and on Jan. 12, the first-ever transaction occurred as Nakamoto sent 10 Bitcoins (BTC) to noted computer programmer and developer Hal Finney.

Toward the end of the year, in October, the New Liberty Standard publishes the first Bitcoin exchange rate in the young cryptocurrency’s history, deeming $1 to be worth 1,309.03 BTC. Nakamoto released the second version of the software in December.

With an exchange rate established, it was only a matter of time until someone attempted to make an actual purchase with Bitcoins. In May of 2010, it happened. A computer programmer Laszlo Hanyecz based in Florida sent 10,000 BTC to a London man in exchange for two pizzas, valued at a total of $25.

This still valued a single Bitcoin as a fraction of a penny, but with a purchase made, intrigued parties saw potential in the product. A couple of months later, the cryptocurrency’s value finally broke the penny threshold.

Mining pools

2010 is a pivotal year in the history of Bitcoin, especially for the exchange of Bitcoin; fittingly the first exchanges popped up in 2010 as well – Bitcoin Market in February, and Mt. Gox in July. Slush, the first mining pool, also mined Bitcoin successfully for the first time that year. Mining pools are where several miners combine resources to get Bitcoin.

By November, the market cap for Bitcoin surpassed $1 million for the first time.

Not that it was all ups. Someone spotted a vulnerability in Bitcoin’s protocol in October that allowed for transactions without proper verification and exploited it, generating 184 billion BTC. The vulnerability was later fixed.

Steadily making gains in value after finally passing 1 cent threshold, in February 2011 a significant milestone occurred: 1 Bitcoin was worth $1 for the first time.

Read more: Is Bitcoin a Good Investment?

Bitcoin becomes a household name

Bitcoin began to receive press – both good and bad. TIME Magazine published an article on the cryptocurrency for the first time, but the same year there was also an article on Gawker detailing Silk Road, the dark web drug market where Bitcoin was frequently used as payment. The publicity got lots of people talking Bitcoin, and by June, it was worth over $30. Soon after, it crashed back down to about $10.

Also, in June, Mt. Gox dealt with a severe security breach that compromised tens of thousands of accounts and their Bitcoins. That wouldn’t be the last security issue Mt. Gox would have to deal with.

Still, Bitcoin was generating lots of different opinions in the public and interest in the cryptocurrency grew. This led to a rise in altcoins, other forms of cryptocurrency whose developers were either trying to improve upon Bitcoin or had created the digital coin for a different purpose.

While 2011 was a choppy year for Bitcoin, 2012 was smoother sailing. Among noteworthy moments on its way to becoming the world’s top digital coin was its crossing the $100 threshold in April.

Bitcoin reaches its peak

In the history of Bitcoin, 2017 was the busiest and biggest year. After spending 2016 desperately trying to claw its way back up, 2017 was when it finally reached and passed the $1,000 mark. It kept ascending. By June, Bitcoin was worth over $3,000.

Still, some users were frustrated with the network around this time as well. The rising number of Bitcoin miners meant higher fees and more time spent processing transactions, leading some to want an increase in block size.

Still, for the remaining part of the year 2017, Bitcoin was on an upswing. By October, it was topping $6,000. The cryptocurrency ended November at nearly $10,000, and by the end of December, it hit a peak of $19,783.

More and more people and companies began chasing the trend as the price just kept rising. Unsurprisingly, it wouldn’t continue that strong growth.

2018 was a rough year for Bitcoin users, especially ones who held on assuming the price would keep ascending. Lots of people sold their Bitcoins while they could, and the price has steadily dropped all year.

The year 2019 will mark the end of the bear market, with a strong recovery in the price of Bitcoin from the beginning of the year. Bitcoin reaches new heights in terms of computing power dedicated to its security as well as in terms of use.

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