Business Research

History of Bitcoin

(Literally!) Everything You Need to Know

April 22, 2022 | 11 min read

One of the biggest buzzwords in recent times, Bitcoin has
made many millionaires

and broken some too.

For the uninitiated, Bitcoin is a digital currency that works free of any central control or the oversight of banks or governments. Rather, it works on peer-to-peer networks and cryptography.

It was essentially created as a way for people to send money over the internet, with the intention to serve as an alternative payment system that would operate free of any central control but otherwise be used just like traditional money.

Just how you would keep traditional coins in a physical wallet, virtual currencies like Bitcoin are kept in digital wallets and can be accessed from a client software.

The “wallet” is actually an agreement among the network about the ownership of the coin, and a private key is used to prove ownership of funds to the network when making a transaction.

And that's a brief intro about what Bitcoin is.

Now, how about a brief yet complete history of Bitcoin?
  • When was Bitcoin created?
  • Who invented Bitcoin?
  • How much is a Bitcoin worth?
  • Bitcoin price history

time to unravel the answers to all these questions in a chronological journey.

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1982

Blind Signatures for Untraceable Payments: The Foundation of Cryptocurrency Technology

Let's start with the pre-Bitcoin era that led to the invention of this digital currency. Before the term “Bitcoin” was coined, the idea for untraceable digital cash technologies started with the issuer-based ecash protocols from the American cryptographer David Chum.

In 1982, he invented the 'Blinding' algorithm which is central to modern-day web-based encryption. He published a paper where he shared this concept of anonymous cryptographic electronic money, and it's believed to be the first cryptocurrency to ever exist.

Adam Back's Proof of Work

In 1997, British cryptographer and cypherpunk Adam Back invented Hashcash, which uses a "proof of work" system that will later make Bitcoin mining possible. Hashcash was essentially proposed as a system to limit email spam and denial-of-service attacks.

CEO of Blockstream

Back is now the CEO of Blockstream, a blockchain technology company, which he co-founded in 2014.

1997
1998

B-money

As we approached the turn of the millennium, more cryptocurrency ideas came into the picture. In late 1998, Wei Dai, a computer engineer published an essay that proposed “b-money” — not a rapper but a cryptocurrency architecture that's quite similar to what the blockchain in Bitcoin would eventually become.

Dai also developed the Crypto++ cryptographic library and co-proposed the VMAC message authentication code algorithm.

Bit gold

The same year, Nicholas “Nick” Szabo, a computer scientist and cryptographer developed the concept of smart digital contracts and designed a mechanism “Bit gold” for a decentralized alternative currency that did not require a third party to create or manage it.

Like b-money, the bit gold project wasn't implemented but is said to be the precursor to the Bitcoin protocol that arrived a decade later...

Bitcoin: A Peer-to-Peer Electronic Cash System

Satoshi Nakamoto — remember the name, for it's still a mystery as to who this person or group really is.

It's a pseudonym of the person or group of people who wrote the all-important white paper in October 2008, titled “Bitcoin: A Peer-to-Peer Electronic Cash System”.

The whitepaper's idea had similar ambitions to the previously mentioned papers and proposals: secure digital signatures, not requiring a third party, proof of work, and hashing the transactions together to form a chain.

So it was in 2008 when Bitcoin first arrived on the scene. In August of that year, Bitcoin.org was registered.

Wei Dai and Adam Back were supposedly contacted by Satoshi Nakamoto as he/she/they were developing Bitcoin in 2008, as the b-money and Hashcash papers were referenced in the Bitcoin whitepaper.

2008
2009

1 Bitcoin = $0

On 3rd January 2009, the first Bitcoin block, called the Genesis Block, was mined.

The value of one Bitcoin was $0 when it was first introduced in 2009. Imagine getting your hands on a couple of bitcoins back then!😭

This could've been you today:

Bitcoin's First-Ever Exchange Rate was Published

In October 2009, the New Liberty Standard published the first Bitcoin exchange rate in the newborn cryptocurrency's history, considering $1 to be worth 1,309.03 BTC.

Nakamoto also released the second iteration of Bitcoin software in December.

Pizza is the Real Deal

2010 was a notable year for Bitcoin when it first started trading publicly. This was the year when the cryptocurrency's first price bump occurred — the value of a single Bitcoin shot from around $0.0008 to $0.08.

The first-ever trade of Bitcoin happened when a Florida-based programmer Laszlo Hanyecz traded 10,000 BTC in exchange for two pizzas, valued at a total of $25. The same transaction would have a value of hundreds of millions of dollars today! We won't lie, that's dough to digest!

In July 2010, a short article on Slashdot.org (“news for nerds”) spread the word to many young and technically savvy buyers. This community was all about the “Californian ideology” — belief in the power of technology and entrepreneurs to transform the world.

Bitcoin's Market Cap Goes Over $1 Million

The first two 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 in 2010. Mining pools are where miners merge resources to get Bitcoin.

By November, the market cap for Bitcoin went over $1 million for the first time. Just a month before that, someone spotted a vulnerability in Bitcoin's protocol that allowed for transactions without proper verification. While the vulnerability was exploited, generating 184 billion BTC, the transaction was soon erased and the vulnerability fixed.

2010
2011

The Year of Confused Stonks

2011 was another major milestone-filled year for Bitcoin.

In February, 1 Bitcoin was worth $1 for the first time. In June, Bitcoin hit its first bubble, rocketing to around $31 (3,200% in just three months) before soon diving back down to single digits. This was the first instance that evinced the ultra volatile nature of cryptocurrencies.

The volatility was thanks to Bitcoin's erratic press coverage — TIME Magazine published an article on Bitcoin for the first time, but an article on Gawker talked about Silk Road, the dark web drug market where Bitcoin was frequently used as payment.

Emergence of Other Cryptocurrencies

In June 2011, Mt. Gox faced a serious security breach that compromised tens of thousands of accounts and their Bitcoins. Even so, public interest in cryptocurrencies grew.

This led to the emergence of altcoins such as Ethereum and Litecoin, whose developers were either trying to improve the code behind Bitcoin's blockchain or adapting it for different uses.

Bitcoin Hits $100 Mark for The First Time

After a turbulent year, 2012 was a year of steady growth for Bitcoin. It was on its way to becoming the world's top digital currency after crossing the $100 threshold in April.

In November, WordPress became the first major merchant to accept payments in BTC, with their payment processing partner being BitPay.com.

2012
2013

Another Tumultuous Year

2013 proved to be a rollercoaster year for Bitcoin's price. The cryptocurrency began the year trading at $13.40 and went through two price bubbles within twelve months.

The first one happened at the beginning of April when the price rocketed to $220. It was followed by an equally rapid fall, down to $70 in mid-April.

The second one happened in early October when BTC was trading at $123.20. By December, it had spiked to $1,156.10 but then fell back to $760 three days later.

So Bitcoin's price soared and plummeted in 2013, but it passed a value of $1,000 for the first time and was becoming the most popular alternative currency.

“HODL” and the Winklevii Rebound

2013 also introduced elements of social media to Bitcoin.

On December 18, 2013, a forum member with the handle “GameKyuubi” wrote a post titled “I AM HODLING,” and the term “HODL” (hold on for dear life, misspelling of hold) originated. Today, these so-called “HOLDERS” are people who insist on holding a crypto coin for long-term gains instead of short-term wins. The post helped create a sense of community and a commitment to holding Bitcoin which furthered its value.

Another social media element — or you could say The Social Network element — was when the Winklevoss twins, who had sued Mark Zuckerberg over the origins of Facebook and settled for $65 million, announced Gemini in June 2013.

Gemini is a cryptocurrency exchange that allows customers to buy, sell, and store digital assets. Oh, and the twins also disclosed they owned nearly $11 million worth of BTC back then, and are Bitcoin billionaires today.

NFT was Introduced for the First Time

A Non-fungible token or NFT is kind of like Bitcoin, except while you can trade Bitcoin like real money at a volatile market value, each NFT is unique. You possess the token that says you own a digital asset, like an art piece (image, video, music, memes, etc.), and you can trade it to get a different piece, just like physical assets.

So “non-fungible” essentially means that it's unique, like a one-of-a-kind Pokemon card, unlike a Bitcoin that's fungible — trade one for another Bitcoin, and you'll have exactly the same thing.

The first one-off NFT, called “Quantum”, was created on May 3, 2014, by Kevin McCoy and Anil Dash, live at the Seven on Seven conferences at the New Museum in New York City.

The Mt. Gox Hack

Coming back to Bitcoin history, January 2014 saw the price plunge below $1,000, and then it struggled around this mark for the next couple of years.

The price fell from $850 to $580 (a 32% decrease) after Mt. Gox, one of the first crypto exchanges, declared they lost 850,000 Bitcoins in a major hack and filed for bankruptcy in February 2014.

A month later, a Newsweek article titled “The Face Behind Bitcoin" claimed that Bitcoin's inventor was a retired, soft-spoken model train enthusiast from LA named Dorian Nakamoto. He soon denied the fact by saying "I have nothing to do with Bitcoin.” And with that, the Nakamoto mystery continued.

Elon Musk Talked About Bitcoin for The First Time

And then, enter Elon — the entrepreneur whose tweets shake the crypto market today, the 'Dogefather', the second richest man on Earth.

In October 2014, Elon first mentioned Bitcoin to be “probably a good thing” at Vanity Fair's New Establishment Summit. He thought it would end up as “primarily a means of doing illegal transactions,” and then clarified that it's not “necessarily entirely bad,” as “some things maybe shouldn't be illegal.”

Elon's skepticism was more or less justified as for the entirety of 2014, Bitcoin struggled to pick up — a decline that recovered only much later in 2017. This “crypto winter” coincided with complete radio silence from Elon Musk on crypto and Bitcoin.

Also, Microsoft became an early adopter of Bitcoin in 2014 when it began accepting the cryptocurrency as payment for games, apps, and other digital content for platforms like Windows Phone and Xbox.

2014
2015

Say Hi to ₿

Bitcoin's price remained less than impressive (compared to today), as it touched a low of $315 at the beginning of 2015. But the cryptocurrency continued to gain interest.

Coinbase, currently one of the biggest cryptocurrency exchange platforms founded in 2012, raised $75 million as part of a Series C funding round, smashing all previous records for a Bitcoin company.

Less than a year after the shutdown of Mt. Gox, UK-based exchange Bitstamp announced their exchange would be taken offline while they investigate a hack that led to about 19,000 Bitcoins (equivalent to roughly $5 million at that time) being stolen from their hot wallet. Bitstamp resumed trading on 9th January after ramping up its security measures and assuring customers that their account balances would not be impacted.

In February, the number of merchants accepting Bitcoin exceeded 100,000. And in November, the Unicode Committee adopted the Bitcoin currency symbol (₿) to be in a future version of the Unicode Standard. The glyph will be assigned the «U + 20BF BITCOIN SIGN» slot and would eventually be displayed in standard system fonts.

Craig Wright Claims to be Satoshi

In 2016, Australian computer scientist Craig Wright alleged that he wrote the Bitcoin whitepaper. But Wright had no concrete proof. The discrepancies in his proof led to Wright's claims being dubbed a “scam” and “cryptographically verifiable fraud” by security researcher Dan Kaminsky.

Wright, however, is currently suing Bitcoin.org, claiming copyright over the white paper that they currently host a copy of online. Cobra, the pseudonymous creator of the Bitcoin.org website, has been ordered by London's High Court to discontinue hosting its copy of the Bitcoin white paper.

The lawsuit is ongoing, but questions like “Who is behind Bitcoin?”, “who made Bitcoin?”, “who started Bitcoin?”, “who created bitcoin?”, etc. still remain unanswered.

Other notable events included researchers publishing a paper proving that by November 2013, Bitcoin commerce was no longer driven by "sin" activities but rather by legitimate enterprises.

In March 2016, the Cabinet of Japan recognized Bitcoin as having a function similar to real money. Bidorbuy, the largest South African online marketplace, launched an option for Bitcoin payments.

2016
2017

The Rise of Bitcoin

After months and months of slogging, Bitcoin finally gained traction again. BTC passed the $1,000 mark and hit $3,000 by June. By October, it was topping $6,000. November ended at about $10,000, and by the end of December, Bitcoin hit a peak of nearly $20,000.

The 2017 bubble helped place Bitcoin firmly in the mainstream spotlight. Governments and economists took notice and began developing digital currencies to compete with Bitcoin. Analysts debated its value as an asset while countless investors made extreme price forecasts. Banks and financial institutions looked into it as a probable investment that can be made legit.

Blockchain, on the whole, gained momentum as it became a major topic of interest in Fintech and other industries.

The ever-increasing number of Bitcoin miners also meant higher transaction fees and processing times. This led Bitcoin to split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). The split was called the Bitcoin Cash hard fork, and BCH is now the fifth-largest cryptocurrency by market cap.

But as more and more people and businesses tried to cash in on the Bitcoin bull run, unsurprisingly, the growth had to slump.

The Fall of Bitcoin

What goes up...yup. The spectacular run ended near the $20,000 mark at the end of 2017, and soon began another choppy couple of years for Bitcoin traders, especially ones who held on expecting the price to keep soaring

Investors saw the value of coins fall dramatically in early 2018 as prices crashed amid uncertainty and other psychological and technical factors.

For example, major social media platforms such as Facebook and Twitter, along with Google, banned users from advertising Bitcoin and other cryptocurrencies. The online payment platform Stripe announced that it would phase out its support for Bitcoin payments by late April 2018.

Towards the end of 2018, the price plummeted by nearly 80% to around $3,300.

2018
2019

The Slow and Steady Recovery

The first quarter of 2019 saw a slow resurgence in price and trading volume and by June 2019, the price surpassed $10,000 again. This got hopes up as many predicted another bull run.

Bitcoin Thrived in the Pandemic

As the COVID-19 pandemic hit, the economic turmoil, combined with the acceleration of online payments, led Bitcoin to another high.

The coronavirus crushed the stock market in March 2020, but the subsequent release of stimulus checks may have helped as the entire stock market, including crypto, saw a major resurgence from March lows.

What's more, the checks ignited concerns over inflation and a potentially weakened purchasing power of the U.S. dollar. This boosted Bitcoin's narrative as an investment asset because its supply has a hard cap of 21 million coins. Institutional interest (from credit unions, banks, hedge funds, etc.) also increased, which further propelled Bitcoin's price.

In October 2020, PayPal announced it will allow customers to hold and trade Bitcoin and other coins, and shop using cryptocurrencies at the 26 million merchants on its network.

All things combined, the cryptocurrency started the year at around $7,200 and reached over $20,000 in December — a near-280% increase in the price than at the start of the year.

2020
2021

Bitcoin Reaches a Record High

Closing 2020 with a market value of over $20,000, Bitcoin's price burst in a month and reached an all-time high at $40,000 in January 2021. Bitcoin eventually hit a peak of over $64,000 in mid-April 2021, becoming one of the best-performing assets of the year.

So, how much is 1 Bitcoin worth today? At the time of writing, as of mid-September 2021, BTC is trading at around $47,000. And if you compare 2021 with 2011, and Bitcoin's value has risen 9,000,000%!

Moreover, Elon Musk's influence on Bitcoin and crypto, in general, is greater than ever. In February, the Bitcoin bull was ignited by a $1.5 billion investment in BTC by Tesla. The electric carmaker also said it would start accepting Bitcoin as a payment method.

But just two months later, the company announced it would no longer accept the cryptocurrency for purchases, citing concerns over the environmental impact of Bitcoin mining which uses huge amounts of electricity. Musk tweeted why Tesla won't accept payments in Bitcoin and that they plan to resume BTC transactions as soon as mining shifts to more sustainable means.

The NFT Trend

Remember “Quantum”, the first one-off NFT created in 2014? It sold for $1.4 million at the close of Sotheby's auction Natively Digital. Check out the NFT art below, courtesy of Sotheby's.

In March 2021, the most expensive NFT titled “EVERYDAYS: THE FIRST 5000 DAYS” — from Beeple, a 41-year-old illustrator from Wisconsin — sold for $69.3 million at Christie's historic auction house.

Big-time athletes such as Rob Gronkowski have also gotten into the NFT game, selling trading cards for millions. Twitter's CEO Jack Dorsey sold his first tweet as an NFT for over $2.9 million and donated the proceeds to charity.

Recent data suggests the NFT bubble is bursting, as NFT sales have fallen dramatically since the first quarter of 2021. Still, some in the crypto space are betting NFTs could play a role in the development of immersive virtual worlds.

So, What Lies Ahead?

Predictions for the future value of Bitcoin vary based on who makes the estimate, but most experts point toward a steady boom of Bitcoin.

According to Jeremy Liew, a partner at Lightspeed Venture Partners and the first investor in Snapchat, Bitcoin could reach $500,000 per coin in 2030.

And according to the June 2020 Crypto Research Report, the cryptocurrency could go over $397,000 by 2030.

“ And on the flip side, Bitcoin has been declared dead 429 times to date.”

But then some of the biggest brands on the planet

are starting to accept Bitcoin and other cryptocurrencies, while more and more companies are exploring the possibility and weighing up their options.

Also, like it or not, the future of Bitcoin rests in the hands of governments oversight too. The American government is calling for more regulation and transparency in cryptocurrencies to help curb ransomware and other web hacking attacks. El Salvador recently became the first country to use Bitcoin as legal tender.

So for Bitcoin to become a mainstream means of doing business, governments of all countries need to lay down regulations, which will take time.

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