Bitcoin has taken the world by storm and seems to be getting stronger by the day. The price reached an all time high of $4500 just a week before the time of writing this. But when did bitcoin start and why? Who created it? Let’s have a look back at the history of bitcoin.
When did Bitcoin Start ?
In November 2008, a paper was posted to a cryptography mailing list under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper explained in detail how to use a peer-to-peer network to create a system for digital payments that doesn’t need to rely on trust or a central middleman. The system solved the double spend problem that had been an issue with digital payments previously. Bitcoin with a capital B is the protocol and bitcoin is the currency in it. BTC is the symbol for bitcoin currency.
The bitcoin network, the blockchain came into existence in January 2009 with the release of the first open source bitcoin client. The genesis block (the first block of bitcoins mined) by Satoshi Nakamoto had a reward of 50 BTC. It’s been estimated that Satoshi Nakamoto, (who ever he, she or they may be) has mined over 1 million bitcoins. This amount at the current market price at the time of writing is just under 4 billion USD.
Who is Behind Bitcoin?
The person or group of people behind the pseudonym Satoshi Nakamoto remains unknown until this day. This mystery is one of the most compelling stories in technology in the modern era. There has been a lot of speculation on who is this mysterious computer science genius. Some suspects were: Wei Dai, a computer engineer that created b-money and Hal Finney, who developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. Both of them have denied their involvement in publishing the paper or having any connection with the identity of Satoshi Nakamoto.
Coindesk has published a pretty good speculative article on who Satoshi Nakamoto may be.
History of Bitcoin
Since the publication of the paper in 2008 a lot has happened, let’s have a brief look through how bitcoin has evolved, what the price has done and what issues may have come up on the way.
Bitcoin started trading with the price of $0.003 on BitcoinMarket.com in 2010. In February 2013 Coinbase reported selling $1 million worth of bitcoins in a single month at the price of just over $22 per bitcoin. At the end of that year we witnessed the first bubble in the bitcoin price when it shot up to $1000 per BTC.
There have been vast fluctuations in the price and bitcoin still remains a hugely volatile digital currency. Even though the price crashed after the initial hype down to $200 per bitcoin in early 2015 it has been on a steady climb ever since and has slowly gone mainstream. Today at the time of writing the price is just under $4000 and reached an all time high of $4500 just a week ago.
It’s not been all smooth sailing though.
On 6 August 2010, a first major vulnerability in the protocol was spotted. Transactions weren’t properly verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic restrictions and create an indefinite number of bitcoins. On the 15th of August, this vulnerability was exploited.
More than 184 billion bitcoins were generated in a transaction, and sent to two addresses on the network. They did not however get away with this. Shortly after this incident, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol. This has so far been the only major security flaw found and exploited in bitcoin’s history.
It didn’t take long until government authorities started looking closely at bitcoin and other cryptocurrencies. On 18th of March 2013, FinCEN issued a report regarding digital currencies. It classified cryptocurrencies as digital payment systems as they are not legal tender under any sovereign jurisdiction. This cleared the users from any legal obligations however exchanges and payment providers selling bitcoin have to adhere to anti-money laundering regulations. Since then a huge amount of exchanges have registered with FinCEN.
The laws and regulations on bitcoin vary vastly between different countries and jurisdictions. Although in most places anti-money laundering rules apply to exchanges and people selling large amounts of bitcoin, most governments have moved away from the stance of trying to criminalise and stop the use of bitcoin and other cryptocurrencies.
On the 22nd of October 2015, the European Court of Justice (ECJ) ruled that Bitcoin transactions will be exempt from Value Added Tax (VAT). This was a huge win for the bitcoin community and businesses wishing to transact in bitcoin. Bitcoin saw a spike in the price soonafter the ruling and has been on a steep uptrend ever since.
Where is Bitcoin Today?
More and more people are adopting the use of bitcoin either for investment purposes or as a way to pay. It solves a problem for a vast amount of unbanked people who are currently lacking ways to pay online either due to their credit rating or restrictions by their government. For example this is why a lot of people transact and buy bitcoin on Paxful. There’s a huge amount of people who have the need or want to transact online but traditional systems either don’t let them or they have no access to them, normally through no fault of their own.
More and more businesses are accepting bitcoin and startups that are leveraging blockchain tech keep popping up like mushrooms after rain. We will be seeing something truly marvellous very soon as blockchain-tech can totally revolutionise the way we do things on the internet. At the time of writing there were over 230 000 bitcoin transactions in a space of 24h.
More and more large businesses keep starting to accept payments in bitcoin. For example, you can book a holiday on Expedia.com, paying with bitcoin. A Japanese retail giant Bic Camera enrolled bitcoin payments in July 2017.
Antigua & Barbuda will accept bitcoin for government services and Ukraine will install over 150 bitcoin ATM’s by the end of this year. You can also purchase video games for Xbox with bitcoin for example. I could go on…
Is Bitcoin a Bubble?
What is a bubble in the first place?
Bubble – used to refer to a good or fortunate situation that is isolated from reality or unlikely to last.
A bubble as they call it normally requires a huge hype around an industry or field. A simple test can be done on whether bitcoin is a bubble. Ask a 100 random people on the street if they know what bitcoin is. If all of them know what you are talking about – bubble confirmed. Most likely, currently more than 80% of these people will not have a clue what bitcoin or blockchain is. From this we can assume that it has not yet reached its full capacity. John Mcafee in a recent article also agrees, that bitcoin is not a bubble. There are many myths about bitcoin but we are still probably only seeing the tip of the iceberg.
What are your thoughts on this? Where do you think bitcoin will go and what it will bring?