Bitcoin today is the head of a growing list of over 2000 digital coins and his price change affects every day the rest of the currencies. It has been surrounded by controversy and hype, caused the fortune of many believers and also was the reason for many suicides after losing money from hacks, or password loss. Why the fuss? We already have digital money. 99.9% of the money in the world is just a number in a computer file inside bank institutions. Which were the events driving a group of people to the creation of bitcoin and, then, the rest of the crypto coins?
Before the advent of the Bitcoin, there were several proposals of digital cash that was decentralised and anonymous. David Chaum and Stephan Brands developed ecash an anonymous cryptographic electronic cash system in 1983. Another technology that later was used in bitcoin mining was Hascash a “proof of work”, developed by Adam Black, its original purpose being spam control.
Hal Finney refined the idea and proposed a reusable proof of work(RPoW) as electronic money. A website could ask for a PoW token as payment for a service to avoid frivolous use or the resources. This PoW required an amount of work to be created (mined). The RPoW concept permitted the receptor of the Pow token to accumulate it and exchanged later without the need to spend time creating it. Bitcoin will use the Hascash RPow as the central algorithm for its mining, although with refinements that enhanced its safety and protection.
On 18 August 2008, the name bitcoin.org was registered.
On 31 October 2018, a paper titled A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto was posted to a cryptographic mailing list.
On December 27, 2009, in a blog entry, Nick Szabo proposed the BitGold as a revolutionary money system, presenting a lot of similarities to the Bitcoin paper. It had a limited supply to protect against inflation. It used RPoW to create it, and didn’t need the trust of a third party, that is, it depicted a peer-to-peer secure transaction. The post is here.
On January 3, the bitcoin network started to operate, with Nakamoto mining the “genesis block of bitcoin” – block number zero, with a reward of 50 bitcoins. In the coinbase contained the phrase: The Times 03/Jan/2009 Chancellor on the brink of second bailout for banks.
Nobody outside the inner circles of the Bitcoin creation has found out the real identity of Satoshi Nakamoto- if it really is a person and not a group. It was discussed if Satoshi was Nick Szabo or Finney. Also, the possibility of a collective linked to the financial sector has been discussed.
The Newyorker and Fast Company investigated his real identity. The Newyorker trimmed the list of candidates to two: Michael Clear and Vili Lehdonvirta. The Fast Company presented some circumstantial evidence of an encryption patent application by Neal King, Vladimir Oksman and Charles Bry on the 15thof August 2008, being the bitcoin.org domain registered within hours after the patent application.
Others linked the Nakamoto personality to the Japanese mathematician Shinichi Mochizuki, but, later, Stefan Thomas, a swiss coder, investigated the time stamps of all Sakamoto posts. The results showed that there were almost no posts between the hours 5 a.m. and 11 a.m. GMT, even on weekends, deducting these were Sakamoto’s sleeping hours, which are midnight to 6 a.m. in North American’s EST.
An internet search for similarities in writing to the bitcoin paper suggests Nick Szabo’s bit gold article as the closest in style, although Nick has denied being Sakamoto.
An Australian guy, Craig Wright, claimed several times to be the real Satoshi Nakamoto, without proving his claim.
To the present day, the real identity of Satoshi Nakamoto is still a mystery.
Hal Finney was a cryptographer and one of the first Bitcoin miners. He downloaded the software the first day it became available. He was, also, the receptor of the first Bitcoin transaction from Satoshi Nakamoto on January 12, 2009, for 10 Bitcoins. He described this transaction and also his first mining block (“block 70-something”) in a Washington Post interview. This fact leads many to believe that he was the real Nakamoto. Finney was diagnosed with ALS the same year, two months before Nakamoto disappeared. He died in 2014, although his body has been cryogenically preserved by the Alcor Life Extension Foundation. [decryptmedia.com]
May 22, 2010 – Laszlo Hanyecz pays the most expensive pizzas in history
On May 18, 2010, Laszlo posted on Bitcoin Forum a post saying “I’ll pay 10,000 bitcoins for a couple of pizzas.. like maybe 2 large ones so I have some left over for the next day.” 10,000 Bitcoins were valued at $41 at the time. Today it will be close to 52 million dollars.
On May 21 he explained “I just think it would be interesting if I could say that I paid for a pizza in bitcoins.”
It took a while getting them, since the transaction took place four days after his request, on May 22. “I just want to report that I successfully traded 10,000 bitcoins for pizza”, and posted this link, that still is active: http://heliacal.net/~solar/bitcoin/pizza/showing two Papa’s Johns Speciality pizzas.
2011 – Other Cryptocurrencies emerge
In view of the growing success of bitcoin other teams began releasing new crypto coins, based on Bitcoin’s open-source code, trying to improve on the original code, by offering higher transaction speeds, better anonymity, etc, the firstborn altcoins were Namecoin and Litecoin.
The Electronic Frontier Foundation announced in an article analysing the new currency they will start accepting BTC donations.
Bitpay was founded in May 2011 by Tony Gallippi and Stephen Pair as a Cash payment processing services for merchants. One year later Bitpay announced it had over 1,000 merchants accepting Bitcoin transactions under their payment system.
The digital currency was brought to the awareness of the public in January 2012, in the third season’s episode of the CBS’s drama The Good Wife, titled “Bitcoin for dummies”.
September 2012 saw the launch of The Bitcoin Foundation.
The first crash of the Bitcoin price took place on the 12thof March 2013 after a technical glitch forced developers to halt all transactions temporarily. The problem arose when a recently mined block was recognised by part of the network running version 0.8 but not by the nodes running version 0.7. The price fell from $48.5 to $37, but it regained most of its losses four hours later.
Earlier, on February 2013, Coinbase announced the sale of bitcoins for a total value of US$ 1 million in a single month at over $22 each.
In April 1st the exchange rate of the Bitcoin reaches $100, days later tripled its price when Mt. Gox, the largest Bitcoin exchange got into processing problems, resulting in the second crash of the cryptocurrency falling from over $300 to $76, although recovering partly hours later.
Dating site OK Cupido and online food delivery company Foodler began accepting Bitcoin payments.
The third Crash for the digital currency came in December 2013. After surpassing the $1,000 and making a double peak at 1,175, the price dropped to about $384 on the 18thof that month. It recovers to almost $1,000 in January, but continues descending in what would be the first bear market of the crypto world, reaching a bottom at $162.
It was a year with plenty of bad news for this technology, including China banning financial institutions from using Bitcoin, and Baidu stopping its acceptance for some paid services.
Chart 1 – The First Bear Market in the History of Cryptocurrencies
Beginning of February, Mt. Gox, the leading exchange of the crypto-world with 70% of all transactions announced the suspension of withdrawals on technical issues. By the end of the month, it filed for bankruptcy in Japan and reports of a hack with a loss of 744,000 Bitcoin spread out. That hack was never solved. At today’s price the stolen coins are worth over 3.8 billion dollars.
Besides that, the network grew in activity surpassing the 100 petahash/second.
On September 12, 2014, Reuters reported that TeraExchange LLC received approval from the Commodity Futures Trading Commission CFTC for its Bitcoin OTC swap contract. The first time a US regulatory agency approved a Bitcoin financial product.
In December 2014, Microsoft announced it would accept it also to buy Xbox games and Windows software.
The bad news:
January 2015 Bitstamp announced a hack which resulted in about 19,000 bitcoins stolen from their hot wallet.
The good news:
February 2015 BiPay said in an article that the number of merchants accepting bitcoin exceeded 100,000, among them Microsoft, Dell, Wikipedia, Greenpeace, Expedia and PayPal.
October 2015 witnessed a proposal submitted to the Unicode Consortium for a Bitcoin symbol.
2016 marks Ethereum’s arrival and with ether depicting a modified blockchain to facilitate smart contracts and speed up transactions.
Ethereum’s birth marks the arrival of the Initial Coin Offer offerings. ICOS are fundraising platforms to allow investors the opportunity to invest in what the traditional world calls stock shares. This led the SEC to warn investors that due to the lack of control ICOs could become scams or Ponzi schemes under the appearance of legitimate projects.
Uber in Argentina switched to Bitcoin to bypass Argentina’s government order to credit card companies to block Uber app.
Bitfinex was hacked in August 2016 and close to 120,000 Bitcoins stolen. The hacker managed to get access to the customer’s wallets and also to override Bitfinex withdrawal limits, moving the funds to thousands of addresses. A plan carefully conceived and executed. This is the Forbes article on the subject.
Businesses accepting Bitcoin transactions continue growing to triple in February 2017 the figures 12 months before. Github projects surpassed the 10,000 figure, and exchange volumes increased exponentially.
Bitcoin network was split on August 1 to create a new coin, in an event called Bitcoin Cash hard fork. Everybody was expecting another Bitcoin crash, but after a slight retracement from 2,800 to 2,719, it soon recovered and made a new All time high to $3000 six days later.
Bitcoin reaches $10,000 on November 17 and continues climbing up to 19,797 on December, 17. That was its peak so far. Since then the crypto world is experiencing its second bear market.
It was the year when the SEC stepped in and to warn that on-line crypto trading platforms should register. Tech companies, initially Facebook followed by Google and then Twitter announced started banning ads about cryptos, creating price drops after the news.
Bitcoin dropped by 50% in two weeks, dropping below $7,000 beginning of February, a bearish sentiment that drives the price into a wave of drops down to 3,128 on December 16, 2018.
Chart 2- The Rise to the Top and Second Bear Market of the Bitcoin and Cryptos and ICOS
Bitcoin is, so far, the best investment of the year. Its history continues developing.
To end this brief and incomplete Bitcoin history, let’s mention the words of two major players in this field.
Hal Finney, in his famous his 2013 post said: ” I have always loved crypto, the mystery and the paradox of it.”
And Charlie Lee, one of the creators of Litlecoin:
There will be at most 21 million bitcoins in existence. There isn’t even enough BTC to go around for EVERY millionaire to own one. So before you buy any other coin (LTC included), try to own at least 1 BTC first. 🥅
Once you have 1 BTC, buy all the shitcoins you want! 😂 pic.twitter.com/bc3xKKGB0m
— Charlie Lee [LTC⚡] (@SatoshiLite) July 17, 2018
References Wikipedia, Decryptmedia.com, Forbes.com