Bitcoin is the most well known of the crypto-currencies, but it’s a bit of a mystery by its very nature. So what is Bitcoin, where did it come from and why has its popularity exploded? HistoryOfBitcoin.org hopes to answer all of these questions. From the first whispers of an idea in 2007 to China’s central bank ban on Bitcoin transactions late last year, it’s all here.
Several key pieces fell into place October 2008, essentially setting the wheels in motion for the rise of Bitcoin. A patent filed by Neal King, Vladimir Oksman and Charles Bry detailed a system for peer-to-peer encrypted communications. This was ultimately the system Bitcoin creator Satoshi Nakamoto used for the currency. In a white paper from October 31st 2008 Nakamoto detailed how the currency would work.
The system is simple: When a Bitcoin transfer occurs, a code is generated and a decentralized network turns that code into a transaction log. The longer the code, the more truth it carries, meaning every transaction is accounted for and double spending is impossible. A reward is randomly dispersed to transactions, increasing the supply of the currency, and providing incentive to Bitcoin miners to keep the system honest.
The first Bitcoin transfer was January 12th 2009 and a few months later, someone used Bitcoin to buy pizza — the first exchange of Bitcoin for a real-world product. Bitcoin started to generate the trappings of a currency throughout the summer. With the establishment of the MtGox exchange, Bitcoin’s value increased tenfold and bugs started to be stomped out of the code.
The first signs of trouble appeared 2010 with a report from the Financial Action Task Force, which warned about the use of crypto-currencies to fund terrorists groups and to launder money. In June 2011, a user reported that $375,000 (25,000 Bitcoin) had been stolen from him. MtGox was hacked and 60,000 accounts were compromised, including an admin account which sent out hundreds of thousands of sell orders. MtGox’s BTC price went from $17.51 to $0.01. Silk Road opened in September of 2011 and eventually proved that the FATA may not have been far off the mark.
Through all the ups and downs — and there have been a lot — Bitcoin has continued tracking upwards and making more steps towards legitimacy. Internet entrepreneurs the Winklevoss twins registered an Exchange Trading Fund with the Securities Exchange Commission “designed for investors seeking a cost-effective and convenient means to gain exposure to Bitcoins with minimal credit risk.” Bitcoin soon arrived on Bloomberg’s stock exchange terminals and in November 2013, it surpassed $1,000.
Between the installation of Bitcoin ATMs, government scrutiny, fluctuations caused by the Silk Road cycle of rise and demise and the skyrocketing price due to rampant speculation, the currency has had a rocky road. With a finite supply, there may be an upper cap to Bitcoin, but the cat is out of the bag in terms of decentralized, encrypted, non-regulated currency.
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