The History of Bitcoin
Bitcoin is the first decentralized currency to run on the blockchain network. Currently, it is the largest and most popular cryptocurrency in the world.
The idea of Bitcoin was officially introduced in 2008 through a technical document, Bitcoin whitepaper. However, the concept of a decentralized currency dates back to the 1980s. Here is a brief history of Bitcoin.
The Idea of Cryptocurrency: 1983 – 2008
Even though Bitcoin is the first established cryptocurrency, the idea of cryptocurrency has been around for more than 20 years prior to its launch. In 1983, an American cryptographer, David Chaum, published a conference paper outlining a form of anonymous cryptographic electronic money. The concept involved a currency whose transactions are untraceable and do not depend on centralized identity. In 1995, Chaum developed a proto-cryptocurrency called Digicash. The currency required user software and specific encrypted keys to operate the currency.
In 1998, Nick Szabo designed Bit Gold, which is deemed the direct precursor of Bitcoin. Bit Gold required users to dedicate computing power to solving cryptographic puzzles. The network participants who solved the problems were rewarded.
However, Szabo could not solve the infamous problem of double spending. There was no way to prevent copying and pasting transaction data without a centralized authority. It was not until a decade later that a solution to the problem was found.
The Beginning of Bitcoin: 2008 – 2010
In 2008, an anonymous person(s) posted a paper titled “Bitcoin – A Peer-to-Peer Electronic System” on a mailing list discussion on cryptography. The author, pseudonymously known as Satoshi Nakamoto described the functionality of the Bitcoin Blockchain in the Bitcoin whitepaper.
On August 18, 2008, the domain Bitcoin.org was purchased, formally marking the beginning of the work on the Bitcoin project.
Satoshi Nakamoto mined the first block of Bitcoin, known as the Genesis Block, on January 3, 2009. A headline by the New York Times newspaper was embedded in the block. The headline highlighted the economic conditions, involving bank bailouts and a centralized financial system. Bitcoin was partly reactionary to these issues. The genesis block resulted in the mining of 50 bitcoins.
The first Bitcoin transaction took place on January 12, 2009, when Satoshi Nakamoto sent 10 Bitcoins to Hal Finney, one of the earliest Bitcoin supporters. Another notable transaction involved exchanging 10,000 Bitcoins for two pizzas.
Bitcoin virtually had no value during its launch as well as the first few months of its existence. In April 2010, six months after Bitcoin became tradable, one bitcoin sold for just under 14 cents. The price had risen to 36 cents by early November before settling at around 29 cents.
The Market Begins to Grow: 2010 – 2014
Bitcoin was still not yet worth much, but it began showing real value. In February 2011, the price of one Bitcoin crossed the dollar mark before falling back to 87 cents. A price rally followed, which saw the value of Bitcoin rise from 86 cents in early April to $8.89 towards the end of May.
On June 1, the price of Bitcoin tripled to about $27 after Gawker published a story linking Bitcoin to the online drug-dealing community. However, the price would later fall to $4.77 in September 2011.
In October 2011, the first of many Bitcoin forks appeared. Litecoin launched as an updated version of Bitcoin. It soon became the second-largest cryptocurrency by market cap.
In 2012, Bitcoin Foundation was introduced to promote the development and uptake of Bitcoin.
In 2013, Bitcoin prices rose and fell sharply amid federal, regulatory, criminal, and software issues. For example, on November 19, the price of one Bitcoin rose to $755 before falling to $378 on the same day.
Scams and Theft Dominate the Headline: 2014 – 2016
Bitcoin became highly attractive to criminals due to its decentralized nature and anonymity. In January 2014, for instance, the world’s largest Bitcoin exchange Mt.Gox collapsed, losing 850,000 users Bitcoins valued at $450 million at the time.
The hack and other security issues served as a cautionary tale that has led to improvement in security on exchanges. Larger exchanges claim to provide more guarantees on their reserve holdings in case of a security breach. However, crypto users must still employ security tips such as the use of Bitcoin hardware wallets to secure their Bitcoins.
Bitcoin Attracts Global Attention: 2016 – 2018
Bitcoin prices rose steadily, going from $434 in January 2016 to $998 in January 2017. By December 2017, Bitcoin was trading as high as just below $20,000. During this time, another blockchain project called Ethereum was gaining ground. Ethereum introduced smart contracts which opened a floodgate of cryptocurrency use cases.
Alternating Bull and Bear Markets: 2018 – Present
Bitcoin prices have been stable over the years. A bear market followed the all-time high of $19,783 in 2017. Towards the end of 2018, Bitcoin had dropped to around $3,700.
In 2020 and 2021, Bitcoin enjoyed a bull market triggered by prominent people and businesses announcing their interest in it. MicroStrategy and Tesla are some of the popular companies that invested in Bitcoin during this period. In November 2021, Bitcoin reached a record high of $69,000. The market fell once again largely due to macroeconomic concerns resulting from high inflation, rising interest rates, and the specter of war. Bitcoin price hit just above $16,000 in November 2022. The market began its recovery in 2023.
While Bitcoin’s history is full of ups and downs, especially concerning its prices, its overall performance is remarkable. It rose from a virtually valueless asset to one of the largest markets globally in terms of market cap. It is difficult to tell with certainty the future of Bitcoin. However, its history tells a story of a resilient revolutionary technology in the finance space.