In the broad span of human history, Bitcoin is incredibly new. But in internet time, Bitcoin has been around for a bit. It started in 2009 and has grown to a multi-billion dollar market cap. Some people have been infatuated with Bitcoin for years now, but many people heard about it for the first time in 2017. Bitcoin is just now entering pop-culture. I’m going to try to give you a brief overview of Bitcoin’s short, yet exciting history. I expect that 100 years from now Bitcoin will be seen as an innovation as important as the printing press.
A Time of Myth
Just like the early history of humanity, the early history of Bitcoin is shrouded in myth. Only a few people know what really happened and they aren’t telling. Some claims have been made, but they are dubious at best and unverifiable. But legend has it that in 2007, Satoshi Nakamoto began thinking up what would eventually Bitcoin. Who is Satoshi Nakamoto? That’s one of Bitcoin’s fun mysteries. We don’t know for sure who he/she is. There is wide speculation that Satoshi Nakamoto is a group of people who together created Bitcoin.
On 18 August 2008 bitcoin.org was registered anonymously. Shortly after that, on 31 October 2008, the Bitcoin White Paper was released. If you’ve never read it, you can get it here. The Genesis Block of Bitcoin was mined on 9 January 2009 along with the release of Version 0.1. The Great Recession was in progress at this point and some people were offended that money could be easily stolen from the average American and handed over to very large, very rich, very politically connected banks who had made bad bets. Crony socialism was rampant and the central banks of the world were stealing from all of us. Bitcoin had a libertarian bent from the start. Many of the people who first got into Bitcoin were looking for a way to free themselves from the abuses of governments and central bankers.
The very first Bitcoin transaction took place on 12 January 2009. It was a transaction between Satoshi and a man named Hal Finney. During these early days, it was cryptography experts and cypher punks who were playing with the protocol. An exchange rate was first created on 5 October 2009. Version 0.2 was released on 16 December 2009. Then on 30 December 2009, the first difficulty increase occurred. Bitcoin Market, the first currency exchange for Bitcoin was launched on 6 February 2010.
The 125 Million Dollar Pizza
The first real world purchase with Bitcoin was made on 22 May 2010. Laszlo Hanyecz paid 10,000 bitcoins for a pizza. At that time, 10,000 BTC was about $25. In today’s exchange (6 December 2017) 10,000 BTC is worth $125,980,000.
On 7 July 2010 version 0.3 was released. Then on 11 July 2010 Slashdot mentioned Bitcoin leading to a surge of new users. This was the first big surge in Bitcoin price.
On 17 July 2010 the now infamous MtGox exchange was created. MtGox would quickly become the largest exchange and the first large Bitcoin scandal. MtGox was hacked and many people had their bitcoins stolen. The first major breach occurred on 19 June 2011. The MtGox leadership didn’t handle the situation well and a lot of anger, frustration, and accusations were thrown around. MtGox was closed in February 2014 and journalists again began claiming that Bitcoin was dead. The important takeaway however was that Bitcoin, as a protocol, performed flawlessly. The weakness of leaving your coins in the control of a centralized third party was the scandal.
Pooled Bitcoin mining first became a thing in September of 2010. The difficulty of mining Bitcoin had increased to a point where it was beneficial to work together in a pool to mine bitcoins. During this time hackers had periodically exploited Bitcoin and developers had plugged holes in the Bitcoin code. In October 2010 the first government agency, the Financial Action Task Force (FATF) issued a warning on cryptocurrencies being used by naughty people. At this time, Bitcoin is trading for around $0.06 per 1 BTC. Then in November 2010 the Bitcoin market cap exceeded $1 million for the first time. On 8 December 2010 the first mobile Bitcoin transaction occurred.
The Silk Road
In early 2011 the Silk Road opened for business. Silk Road was founded by Ross Ulbrikt and was intended to be a free market for anyone to buy and sell. Many of the people who used Silk Road were marginalized groups such as people in the drug and prostitution business. Silk Road was eventually shut down by the FBI on 2 October 2013. and in a great travesty of justice Ross was sentenced to a ridiculous prison term. The entire case was basically the government trying to prove to everyone watching who was boss. I plan to do a full post on this case later on.
Parity with the Dollar in 2011
On 28 January 2011, 25% of all the 21 million Bitcoins that will ever be created were mined. Then on 9 February 2011, Bitcoin reached parity with the dollar as 1 BTC equaled $1. On 14 February 2011, the first car was offered for sale for 3,000 BTC. On 27 March 2011 Britcoin opens exchanging BTC and British Pounds or GBP. Also in March, a Bitcoin exchange opens in Brazil.
On 16 April 2011, Time Magazine publishes an article on Bitcoin claiming it as a threat to governments and banks. Then on 2 June 2011, 1 BTC equals $10. In June 2011, after peaking at $31.91 per 1 BTC, Bitcoin price collapses and the “experts” proclaim Bitcoin’s death.
On 13 June 2011 the largest, up to that time theft of Bitcoin occurs. 25,000 coins are stolen from a wallet. At that time 25,000 BTC was worth $375,000. This incident highlights the importance of wallet security. On 14 June 2011 Wikileaks begins accepting Bitcoin donations. Through the next few months several high value bitcoin heists occur. Then on 20 August 2011, the first Bitcoin conference is held in New York, NY.
On 6 September 2011 some actual physical bitcoins are minted by Casascius Coins. On 27 February 2012 Bitcoin Magazine is launched. On 9 May 2012 an FBI document was leaked detailing the FBI’s concerns about cryptocurrencies.
In June of 2012 Coinbase, today one of the largest Bitcoin exchanges was founded in San Francisco, CA. On 15 November 2012 WordPress.com begins accepting Bitcoin as payment. Then on 28 November 2012 the Bitcoin mining reward is halved from 50 BTC per block mined to 25 BTC.
On 12 March 2013 one of the early Hard Forks occurred in Bitcoin. Now in 2017 it seems like a hard fork occurs every month. Also in March, Jason King begins Sean’s Outpost, a charity that accepts donations in Bitcoin to help the homeless. Towards the end of March 2013 Let’s Talk Bitcoin begins. Let’s Talk Bitcoin is an excellent network of podcasts that discuss a wide variety of cryptocurrency topics. Then on March 21st, Bitcoin prices spike to $74. Before the end of March 2013 the total market cap of Bitcoin exceeds $1 Billion.
Another Bitcoin Bubble in 2013
In April of 2013 another Bitcoin bubble occurs. Bitcoin surges to $266 then falls precipitously. In May of 2013 a gaming company, ESEA is caught secretly using their customers computers to mine Bitcoin.
On 2 May 2013 the first Bitcoin ATM is put in action in San Diego, CA. In August 2013 Bloomberg adds a Bitcoin price ticker to its terminal. In 2013 Bitcoin rapidly gains acceptance by an ever wider variety of merchants and consumers. Bitcoin sets a new high in early November 2013 at $269, only to double by mid-November to $503 only to approach $1,000. This is when many of today’s Bitcoin millionaires were minted. Bitcoin transaction volume at this time exceeds the volume of money moved by Western Union.
Governments Begin to React
In December 2013 the Chinese central bank bans bitcoin transactions. This doesn’t have much of an effect because in 2017 some of the world’s largest Bitcoin mining facilities are in China.
Throughout 2014 the popularity of Bitcoin enjoys steady growth thanks to Bitcoin evangelists. Let’s Talk Bitcoin is one of the leaders. Throughout 2015 and most of 2016 Bitcoin prices languish around $500 or less. This leads many to proclaim Bitcoin dead, again.
In 2017 the price of Bitcoin has surged tremendously. As I look right now, 1 BTC equals $12,696. Many are calling for an extreme correction. Some bankers and regulators are enraged. Some jurisdictions such as Japan and South Korea seem to welcome cryptocurrencies. Futures trading will begin soon. It will be very interesting to see what 2018 brings.