History of Bitcoin
The Early Days
Before Bitcoin became an entity in any sort of way, a number of different digital cash technologies were making their way to the forefront. This all began with issuer-based ecash protocols thought up by David Chaum and Stefan Brands. To join this, a proof-of-work scheme for helping with spam control was thought up by Adam Back, and it was given the name of hashcash.
First proposals for cryptocurrencies came from Wei Dai – a Chinese computer engineer who thought up b-money – and Nick Szabo – a US developer responsible for a digital currency that he called bit gold. Alongside these two men, a third known as Hal Finney went on to develop reusable proof of work utilizing the hashcash protocol as its algorithm.
Bitcoin is said to be the product of someone going by the name of Satoshi Nakamoto. Yet very little is known about this person in particular. Many people have started to believe that the name is a pseudonym by which one of the three formerly spoken-of men (Dai, Szabo, and Finney) goes by. This has actually been denied by all three, though. However, speaking of Nakamoto, it was in October of 2008 that a link to a paper authored by him came to light. This paper went by the title of Bitcoin: A Peer-to-Peer Electronic Cash System.
The paper by Nakamoto described various methods of utilizing a peer-to-peer network in order to generate what it described as “a system for electronic transactions without relying on trust.” This system came into effect on January 3rd, 2009. At this time, Nakamoto mined the very first block of Bitcoin, which brought forth a reward of 50 Bitcoins. Then, the first open-source Bitcoin client was made available six days later.
The aforementioned Hal Finney was one of the cryptocurrency’s first adopters and contributors. He also went on to become the very first receiver of a Bitcoin transaction, proceeding to download the software on the day it came out. He received 10 Bitcoins from Mr. Nakamoto in the opening transaction, which took place on January 12th, 2009. Szabo and Dai were also early supporters of the Bitcoin cryptocurrency.
Originally, the value of Bitcoin transactions was negotiated by individuals via the Bitcoin forum. This led to notable transactions taking place, such as two pizzas being indirectly bought for 10,000 BTC. Yet Bitcoin suffered its first let-down in August of 2010 when a huge vulnerability was noticed. Transactions were not properly verified before being included in a transaction log or blockchain. This allowed users to bypass the economic restrictions, thereby giving them the ability to generate indefinite numbers of Bitcoins. This vulnerability saw more than 184 billion Bitcoins created in a single transaction. However, this was the only major security flaw that was located and exploited in the history of the cryptocurrency.
Years of Growth
It didn’t take long for Bitcoin to be recognized as being a big thing, especially in the online world. By January of 2011, the Electronic Frontier Foundation (an international digital rights group from San Francisco) had begun accepting Bitcoin. This activity stopped in June of the same year, with certain concerns brought forth about the lack of legal precedent. Yet by May 17th, 2013, the organization began accepting them again.
This acceptance of Bitcoin expanded to other companies, including WikiLeaks (a non-profit organization that publishes secret information, news leaks, and other classified media from anonymous sources). The Bitcoin Magazine was founded in September of 2011, and by the start of 2012, Bitcoin had made its way onto television, being featured as the main topic within the fictional CBS legal drama The Good Wife. It was also in September of 2012 that the Bitcoin Foundation was launched. The sole purpose of this was to ensure that Bitcoin experienced accelerated growth around the world.
It was in February of 2013 that the Coinbase exchange reported that it had sold $1 million worth of Bitcoin within a single month, setting the price of them at $22 per Bitcoin.
Throughout 2013, certain issues arose with the Bitcoin exchange known as Mt. Gox. Launched in July of 2010, Mt. Gox swiftly rose to prominence, handling over 70% of all Bitcoin transactions between 2013 and 2014. Yet in February of 2014, the company suspended its trading and closed down its website, along with the exchange service that it offered. A security breach had caused the nominal price of a Bitcoin to fraudulently fall to one cent on the Mt. Gox exchange.
At this time, the company also filed for bankruptcy protection from creditors before beginning liquidation proceedings in April of the same year. That wasn’t the half of it, though, as Mt. Gox also announced that about 850,000 Bitcoins belonging to customers and the company had gone missing, most likely having been stolen! At the time, this number of Bitcoins was valued at over $450 million. Since then, about 200,000 of these have been located, but the reasons behind their original disappearance weren’t initially very clear.
The vast majority of the missing Bitcoin belonged to customers, with 100,000 belonging to the company. Mt. Gox blamed the disappearance of these Bitcoins on hackers, with the CEO saying that technical issues had opened up a gap for fraudulent withdrawals to be made. He was arrested in August of 2015 and charged with fraud and embezzlement in Japan.
Throughout these problems, the value of Bitcoin went from around $1,242 per Bitcoin in November of 2013 down to $550 after the shutdown of Mt. Gox in February of 2014. The price continued to fall, hitting a low of $340, which hadn’t been seen since the Cypriot financial crisis in 2012.
Getting Back on Track
While certain issues were very much contributing to the decline of Bitcoin in 2014, many companies still held vast interest in utilizing the cryptocurrency. For example, in January of that year, Zynga made the announcement that it was testing Bitcoin for purchasing in-game assets relating to seven of its own games. A couple of hotels in Las Vegas also announced that they would start accepting the Bitcoin cryptocurrency in various hotel locations, including at the front desk and in their restaurants.
Towards the end of 2014, Microsoft started accepting the cryptocurrency as a means for people to purchase Xbox games and Windows software. By the time 2015 rolled around, Coinbase went on to raise about $75 million as part of a funding round. Despite the fact that the UK exchange company Bitstamp made an announcement that they would stop operations while a potential hack was investigated regarding 19,000 Bitcoins around this time, too, it didn’t impact the cryptocurrency on such a high level.
As of August 2015, estimates showed that about 160,000 merchants were accepting payments made by Bitcoin, and Barclays Bank announced their intention to become the first UK bank to start accepting it as well. Throughout 2015 and 2016, the price of Bitcoin fluctuated between the lows of $200 and upwards to $780, with different factors affecting this. However, it reached a vast high by January of 2017, hitting the $1,150 mark.
Bitcoin in More Recent Times
As 2017 progressed, the number of business and corporations accepting Bitcoin payments continued increasing, with high-profile organizations such as Norway’s largest online bank, Skandiabanken, integrating the cryptocurrency.
Exchange trading volumes also continued to increase throughout 2017, with the Mexican exchange known as Bitso reporting that trading volumes had increased by 1500% for the six-month period ending in March of the year. At the start of August, Bitcoin split into two separate currencies – Bitcoin (BTC) and Bitcoin Cash (BCH). Yet in December of that year, the software marketplace known as Steam made the announcement that it would no longer accept payments via Bitcoin, blaming slow transaction speeds and price volatility for this.
Even with all of this happening, the price of the cryptocurrency soared, hitting highs from week to week and month to month. This saw it surge to $17,900 per Bitcoin on December 15th of 2017 – the highest that it has ever been traded at. Yet with such a huge surge, a vast decline also took place, which happened just one week later. The cryptocurrency lost one-third of its value in a 24-hour time period, dropping below $14,000.
As 2018 rolled around, various other security measures were brought into place with regard to Bitcoin transactions. For example, in South Korea, a regulation that requires all Bitcoin traders to reveal their identity was put into effect. This, naturally, puts an end to all anonymous trading of the cryptocurrency. Just two days later, the online payment firm known as Stripe made the announcement that it had chosen to phase out Bitcoin support. The reason behind this? Declining demand, rising fees, and longer transaction times.
On February 5th, 2018, the price of Bitcoin had dropped by 50% within 16 days, falling below the $7,000 mark. It sunk down to around $6,926 before managing to turn itself around and rise up to $9,244 by April of this year.
Other Pieces of Information About Bitcoin
Even though Bitcoin has gone through multiple ups and downs throughout its decade-long existence, one thing is for sure – it has maintained its status within the financial world. As of April 2018, over 2,668 Bitcoin ATMs existed throughout the world. The countries with the highest number of these were the United States, Canada, Austria, the United Kingdom, and Spain.
Furthermore, the number of Bitcoins that are currently in circulation stands at just under the 17-million mark as of March this year. It remains as the cryptocurrency with a significantly higher value than many of its digital currency counterparts, including popular options like Ripple, Litecoin, and Ethereum.
Throughout the years of its existence, theft of Bitcoin has been quite widely documented on multiple occasions. At other times, Bitcoin exchanges have also shut down, taking clients’ Bitcoin along with them. Alongside the Mt. Gox shutdown, exchanges like Bitomat, MyBitcoin, and Bitcoinica have also shut down, with allegations of fraudulent activity and security breaches by hackers being cited as the reasons why.
Today, a vast collection of online and offline companies, organizations, and businesses accept Bitcoin payments, including hotels, restaurants, e-commerce sites, flight companies, and, of course, online gambling platforms. Bitcoin has certainly revolutionized the way that people are able to use finance, bringing forth a modern and decentralized currency with its own range of benefits.