The
history of Bitcoin has been a turbulent one to say the least, 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.
But something as uncertain as Bitcoin (and
cryptocurrency in general)
was never going to be smooth sailing. Many tried a cryptographed
digital currency before it, and they weren't able to fully crack it.
Since Bitcoin became a reality nearly a decade ago, there have been some
high highs and some low lows. For some Bitcoin owners, that's part of
the appeal.
But
how did we get to where we are today with
Bitcoin? How did it begin,
what were its forebearers, and what have been the unexpected turns of
the
Bitcoin journey?
Bitcoin Timeline
Bitcoin itself did not exist until the late 2000s. Its origins, however, trace back to a few decades ago.
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1982-1997
Specifically,
we can trace it back as far as 1982. That is when computer scientist
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 could not 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 a company
founded in Amsterdam 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 very similar to what Bitcoin uses.
1998
This
year saw the sudden emergence of two
cryptocurrency ideas. In late
1998, Wei Dai released an essay detailing 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 broadcast to the network.
That
same year, Nick Szabo put out a similar proposal for "Bit Gold."
Szabo's reasoning for alternative currency was to create something that
did not 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.
2008
Those
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, an unknown person or group of people, wrote the Bitcoin paper.
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2009
Just
a few days into 2009, the first-ever block of
Bitcoins, known as the
Genesis Block, was mined. By Jan. 9, the first iteration of Bitcoin
software was released, and on Jan. 12, the first-ever bitcoin
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.
2010
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. Florida-based programmer Laszlo Hanyecz 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, Bitcoin's value finally broke the penny
threshold
A
pivotal year for the exchange of
Bitcoin, fittingly the first Bitcoin
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 for Bitcoin. 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
transaction was soon erased and the vulnerability fixed.
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2011
Steadily
making gains in value after finally passing 1 cent threshold, in
February 2011 a major milestone occurred: 1 Bitcoin was worth $1 for the
first time.
Bitcoin
began receiving press - both good and bad. TIME Magazine published an
article on
Bitcoin 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 people
talking, and by June,
Bitcoin was worth over $30. Soon after, it crashed
back down to about $10.
Also
in June, Mt. Gox dealt with a serious security breach that compromised
tens of thousands of accounts and their Bitcoins. It would not be the
first security issue Mt. Gox would deal with.
Still,
Bitcoin was becoming an entity that more and more of the public knew
about 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. In 2011, Litecoin -- now the seventh-largest
cryptocurrency by market cap -- debuted.
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2012
If
2011 was a choppy year for
Bitcoin, 2012 was smoother sailing. Among
notable moments for
Bitcoin on its way to becoming the world's top
digital coin was its crossing the $100 threshold in April.
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2013
Bitcoin's
price saw its share of ups and downs in 2013, but it passed a value of
$1,000 for the first time and was becoming the most recognizable and
successful wallet and exchange available.
2014-16
And
then... it stalled for a while. Quickly in January 2014 it fell below
$1,000 and struggled below the key level for a few years. A few things
of note happened, like
Crypto exchange Mt. Gox going bankrupt and
shutting down, but this period mostly saw Bitcoin rising and falling
somewhat while failing to reach its high.
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2017
2017,
though, was the biggest and busiest year for
Bitcoin. 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 Bitcoin 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. In August, this led to
Bitcoin Cash (BCH) being created via a
fork in the network. Bitcoin Cash is now the fifth-largest
cryptocurrency by market cap.
Still,
for the remainder of 2017 Bitcoin was on an upswing. By October, it was
topping $6,000. It ended November at nearly $10,000, and by the end of
December Bitcoin 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 heady growth.
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2018
2018
has been a rough year for
Bitcoin users, especially ones who held on
assuming the price would keep ascending. Many sold their Bitcoins while
they could, and the price has steadily dropped all year. As of this
writing, Bitcoin's price is at $6,542.78, a decline of 67%.
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Further Information
Need more information on some of the concepts mentioned in the timeline? Here is what you need to know.
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What is Proof of Work?
Proof-of-work
is the system
Bitcoin's blockchain network uses 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.
Proof-of-work
is an incredibly controversial method. It's a secure method of
verifying transactions, but requires a lot of energy. As more and more
people began mining bitcoins,
more high-powered mining hardware and graphics processing units (GPU)
were created for people to gain an advantage. This consumes large
amounts of energy, and with so many Bitcoin and other
cryptocurrency
miners out there, many are worried about the environmental
ramifications. Some
cryptocurrencies are testing a proof-of-stake
method, which consumes significantly less power.
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Who is Satoshi Nakamoto?
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.
Others think it may have been Hal Finney, a notable developer and the
person Nakamoto sent Bitcoins to in the first ever Bitcoin transaction
all the way back in 2009.
One
person is speculated as Satoshi because he tried literally saying he
was. That person was Craig Wright, an Australian businessman who not
only publicly claimed to be Satoshi Nakamoto but promised he would
provide proof of it. So far, he has not provided this proof.
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Mt. Gox Hacks
At
one point in Bitcoin's history, it could be argued that Mt. Gox, a
Tokyo-based Bitcoin exchange, was the largest exchange. But by 2014, it
was gone.
Mt.
Gox was plagued with security issues that would become its downfall.
The 2011 hack came just a few months after Mark Karpelès, a French
businessman, purchased the exchange. The hacker, upon access,
artificially altered the nominal value of Bitcoin all the way down to
one cent and then transferred 2,000 BTC from Mt. Gox customer accounts
onto the exchange. These Bitcoins were sold, and in the brief moment
that Bitcoin appeared to be worth a single penny, 650 were purchased.
This
was a brief but severe setback for Mt. Gox, but the exchange put in new
security measures and stabilized, growing to the biggest exchange by
2013. These security measures, though, weren't as effective as they had
hoped. In early February of 2014, Mt. Gox stopped Bitcoin withdrawals. A
few weeks later, all trading was stopped.
As
it turned out, Mt. Gox was being hacked for years. Overall, hackers had
taken 100,000 Bitcoins from the exchange - and over 744,000 from Mt.
Gox customers. The company was insolvent, and the exchange filed for
bankruptcy protection.
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Altcoins
It's
possible you only heard about
Bitcoin in the last couple of years, but
cryptocurrency developed a passionate following even when it was
smaller. Some of those passionate people also took umbrage with some
elements of
Bitcoin, and others thought the blockchain behind it could
be used for other purposes.
This
birthed, at this point, hundreds of new
cryptocurrencies that still
exist today. 2011 saw the birth of Litecoin, a cryptocurrency similar to
Bitcoin that advertises itself as having a significantly faster
transaction speed than Bitcoin. This would also be a major selling point
of Ripple and its XRP cryptocurrency, though Ripple seeks to help banks and financial institutions.
Bitcoin
is still the cryptocurrency with the largest market cap by a large
margin. Previously mentioned other altcoins (Litecoin, XRP, Bitcoin
Cash) are also in the top 10. In second is Ethereum and its
cryptocurrency of Ether. Ethereum stands out from others because its
blockchain is used to hold data like smart contracts.
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Bitcoin Forks
A
hard fork in
Bitcoin's blockchain network creates a major change to the
network's protocol, such as Bitcoin Cash being created to increase the
size of the blocks on the network. Only nodes with the upgraded network
are able to validate transactions.
Changes
made in the protocol can be for reasons like Bitcoin Cash, where many
thought an idea was practical, or could be used for a necessary purpose
like undoing transactions performed by a hacker.
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