Bitcoin Bootcamp # 1 - History of Bitcoin
This post recounts the history of bitcoin from 2008 through 2022.
Bitcoin was born on 3rd January 2009, when her genesis block (block zero) was mined. Bitcoin started out as an electronic currency that didn’t need a bank or financial institution. It has performed exceptionally as a medium of exchange and has even become legal tender in El Salvador and a Swiss city.
Bitcoin's use for payments is increasing thanks to projects like the Lightning Network. It's also becoming a powerful DeFi Blockchain thanks to projects like Liquid Network, Omni Layer, and Stacks. Many people also consider Bitcoin as a digital store of value.
Let’s have a quick look at Bitcoin’s history.
On 15th August 2008, a patent for “Updating and Distributing Encryption Keys” was filed by Neal King, Vladimir Oksman, and Charles Bry.
3 days later, the domain “bitcoin.org” was registered supposedly by Neal King, Vladimir Oksman, and Charles Bry. The whois record for the bitcoin.org domain shows the registrant’s city and the country as Panama. The domain expires on 18th August 2021 and the whois records do not disclose much data about the registrants.
The whitepaper “Bitcoin: A Peer-to-Peer Electronic Cash System” was released on 31 October 2008 by Satoshi Nakamoto. The paper mentions his email address as firstname.lastname@example.org and website as www.bitcoin.org
There are several theories about who Satoshi Nakamoto is. Interestingly, the word satoshi means “wisdom” or “reason” and Nakamoto means “central source”. Satoshi’s PGP public key is available at: http://bitcointalk.org/Satoshi_Nakamoto.asc
The site Bitcoin.org is live and active and states that it was “originally registered and owned by Bitcoin’s first two developers, Satoshi Nakamoto and Martti Malmi” (aka Sirius). The site states “When Nakamoto left the project, he gave ownership of the domain to additional people, separate from the Bitcoin developers, to spread responsibility and prevent any one person or group from easily gaining control over the Bitcoin project”.
On 3rd January, the bitcoin genesis block (block zero) was mined with the nonce 2083236893 and a block reward of 50 bitcoins. A few days later, Bitcoin v0.1 was released and announced on the cryptography mailing list.
On 12th January 2009, the first bitcoin transaction took place between “Satoshi” and Hal Finney. This transaction is recorded in block 170.
In October 2009 the New Liberty Standard established the value of Bitcoin at 1309.03 bitcoins for 1 dollar. That's right, it was a fraction of a cent!
Hong Kong’s first Bitcoin counter opened to the public that month.
Bitcoin v0.2 released was released on 16th December 2009 and on 30th December, Bitcoin saw its first difficulty increase.
The first Bitcoin real-world transaction took place on 22nd May 2010 and involved 10,000 bitcoins being exchanged for $25 worth of pizza.
In February 2010, the world’s first Bitcoin market was established by dwdollar.
Bitcoin v0.3 released was released on 7th July and over the next 5 days, there was a 10x increase in its exchange value (from US$ 0.008 per bitcoin to US$ 0.08 per bitcoin. On 17th July, the now-bankrupt Mt. Gox, which went on to become the largest bitcoin exchange, was born.
Bitcoin was hacked in August 2010 when some hackers exploited a vulnerability and generated billions of bitcoins which were sent to two addresses on the network. The vulnerability was fixed, the transaction was erased from the transaction log and the Bitcoin network was forked to an updated version.
The first instance of pooled mining was block 79,764 on 14th September and the first escrowed bitcoin trade was conducted on 16th October. The first bitcoin short sale transaction took place 12 days later.
In November 2010, the market capitalization of Bitcoin reached US$1 million.
The first bitcoin call option was sold on 9th December.
In January 2011, the most infamous tor site for drugs and other contraband was born — Silk Road, which used bitcoins for untraceable transactions. Silk Road was an illegal online marketplace that facilitated the sale of hundreds of millions of dollars worth of drugs, guns, stolen financial information, counterfeit documents, and more. All Silk Road transactions were conducted exclusively in bitcoin.
By the next month, Bitcoin was valued at a dollar per bitcoin and by June, a bitcoin was worth $31.
Bitcoin generation crossed the 25% mark when 5.25 million bitcoins (out of a total of 21 million) were generated by block 105000 on 28th January.
Mt. Gox, the largest bitcoin exchange at the time, suffered a massive security breach on 19 June 2011. Bitomat, the third-largest bitcoin exchange at the time, suffered a hack in July 2011, which resulted in a loss of 17,000 bitcoins (worth around US$ 220,000).
In August 2011, MyBitcoin shut down after losing 78,000 bitcoins (worth around US$ 800,000).
Litecoin (LTC), also called Bitcoin's younger brother, was born on 13 October 2011. It was a source code fork of the Bitcoin Core client. As compared to BTC, LTC supports faster transactions and higher transaction volumes.
The largest single transaction fee of 171 bitcoins was paid in block 157235 on 12th December.
In January 2012, bitcoin made its television debut on “The Good Wife”.
The largest number of transactions (1322) took place in block 181919 on 3rd June, making it the largest block.
Bitcoin Savings and Trust, a suspected Ponzi scheme, shut down in August 2012 and investors lost US$ 5.6 million. Bitcoinica, a bitcoin exchange, was hacked twice in 2012. Bitfloor, a bitcoin exchange, was hacked in September 2012 and lost 24,000 bitcoins (worth US$ 250,000).
Bitcoin’s first halving took place on 28 November 2012 at block 210,000. The block reward became 25.
In February 2013, Coinbase, the bitcoin-based payment processor, reported selling a million dollars worth of bitcoins in a month at over $22 per bitcoin. The Internet Archive started accepting bitcoin donations and gave employees the option to receive a part of their salaries in bitcoin.
In March 2013, the US Financial Crimes Enforcement Network (FinCEN) issued a “guidance report for persons administering, exchanging or using virtual. In the same month, Bitcoin market capitalization crossed a billion dollars for the first time.
Instawallet, a web-based wallet provider, shut down after it lost 35,000 bitcoins (worth US$ 4.6 million) in a hack on 3rd April 2013. Wired published a study that month which showed that 45% of bitcoin exchanges had shut down.
In May 2013, the Foreign Exchange Administration and Policy Department in Thailand declared bitcoin illegal.
In June 2013, a major bitcoin theft took place. It involved 25,000 BTC valued at $375,000. That month also saw the US Drug Enforcement Administration become the first government agency to seize bitcoins. The next month saw the launch of a project in Kenya linking bitcoin with the popular mobile payments system M-Pesa.
In August 2013, a US court said that “It is clear that Bitcoin can be used as money” and “It can be used to purchase goods or services”. In the same month, Bloomberg began testing bitcoin data on its terminal and a US court ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws). Germany’s Finance Ministry declared bitcoin as a financial instrument with legal and tax implications.
On 11th August 2013, a bug in a pseudorandom number generator in the Android operating system was disclosed. This bug had been exploited to steal bitcoins from wallets generated by Android apps.
In October 2013, the US Federal Bureau of Investigation arrested Silk Road founder Ross Ulbricht and seized around 26,000 bitcoin from him.
Ross Ulbricht is currently serving two life sentences in prison after being found guilty of money laundering, computer hacking, and conspiracy to traffic narcotics.
The same month saw the launch of the world’s first bitcoin ATM in a coffee shop in Vancouver, Canada. The ATM allowed clients to sell and purchase bitcoin.
In October 2013, an Australian bitcoin wallet provider, Inputs.io, was hacked and lost 4100 bitcoins (worth over A$ 1 million). In the same month, Global Bond Limited’s bitcoin trading platform defrauded US$ 5 million worth of bitcoins from over 500 investors.
In November 2013, Bitcoin price hit $700 as the Federal Reserve chairman said that bitcoin “may hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment system”. That month, bitcoin began to be accepted at the University of Nicosia.
In December 2013, China’s central bank barred financial institutions from handling bitcoin transactions. That month also saw the bitcoin network exceed 10 petahash per second for the first time.
January 2014 saw the launch of the world’s first insured bitcoin storage service. Overstock.com became the first major online retailer to accept bitcoin. That month Zynga began testing bitcoin for the purchase of in-game assets and some US casinos started to accept bitcoin.
In February 2014, the Revenue & Customs division of the UK Government classified bitcoin as assets or private money. This meant that no VAT would be charged on the mining or exchange of bitcoin.
In the same month, Mt. Gox, a Japan-based exchange that handled 70% of global bitcoin trade, declared bankruptcy and claimed that US$ 390 million worth of bitcoin had gone missing. The Mt. Gox CEO was arrested for embezzlement.
On 3 March 2014, a bitcoin exchange called Flexcoin shut down due to a supposed hack.
In June 2014, the US government auctioned the more than 29,000 bitcoins that had been seized from Silk Road. That month, the bitcoin network exceeded 100 petahash per second for the first time.
The next month saw the New York State Department of Financial Services releasing the first draft of its proposed rules for regulating virtual currencies. The European Banking Authority also published its opinion on “virtual currencies” and recommended that virtual currency exchanges should be declared as “obliged entities” and must comply with anti-money laundering and counter-terrorist financing requirements.
The world’s first regulated Bitcoin Investment fund was launched by Global Advisors Bitcoin Investment Fund.
In August 2014, George Osborne, the Chancellor of the UK Exchequer, purchased £20 worth of bitcoin and announced the Government’s “Call for Information” on digital currencies.
In September 2014, the U.S. Commodity Futures Trading Commission formally approved an “over-the-counter swap product based on the price of a bitcoin”.
In October 2014, the first bitcoin derivative transaction was executed on a regulated exchange. A couple of months later, Microsoft began accepting bitcoin payments for the purchase of Xbox games and Windows apps.
2015 began with the New York Stock Exchange investing in Coinbase’s $75M Series C funding round.
Regulatory guidelines for “decentralized virtual currencies” were established by the US Financial Crimes Enforcement Network (FinCEN). These regulations classified “bitcoin miners” as Money Service Businesses who were made subject to registration and several other legal obligations.
In August 2015, it was estimated that 160,000 merchants were accepting bitcoin payments.
In 2015, hackers stole US$ 2.1 million worth of bitcoin from the Chinese cryptocurrency exchange Bter and US $5.1 million worth of bitcoin from the Slovenian exchange Bitstamp.
In January 2016, the bitcoin network exceeded 1 exahash per second for the first time.
In March 2016, virtual currencies were recognized as “having a function similar to real money” by the Cabinet of Japan.
Bitcoin’s second halving took place on 9 July 2016 at block 420,000. The block reward became 12.5.
In July 2016, Uber started accepting bitcoin after the Argentinian government stopped credit card companies from dealing with Uber.
In September 2016, it was estimated that there were 770 Bitcoin ATMs in the world.
In November 2016, the Swiss Railway operator SBB started selling bitcoin through their automated ticket machines.
In 2016, hackers stole US$ 72 million in bitcoin from the Hong Kong-based exchange Bitfinex and US$ 2 million from GateCoin. The CEO of US-based exchange Cryptsy was charged with stealing US$ 3.3 million worth of bitcoin.
For the first time ever, the price of a bitcoin crossed the price of an ounce of gold on March 2, 2017. The month also saw the number of bitcoin-related GitHub projects exceed 10,000.
The Bitcoin Cash hard fork took place on 1 August 2017 at block 478558. This is when the Bitcoin Blockchain split into two — Bitcoin (BTC) chain with a 1 MB block size limit and the Bitcoin Cash (BCH) chain with an 8 MB block size limit. For each bitcoin (BTC), an owner got 1 Bitcoin Cash (BCH).
Bitcoin Gold was created by a hard fork at block 491407 on 24 October 2017. For each Bitcoin (BTC), an owner got 1 Bitcoin Gold (BTG).
Bitcoin SV was created by a hard fork at block 556766 on 15 November 2018. For each Bitcoin Cash (BCH), an owner got 1 Bitcoin SV (BSV).
Bitcoin’s third halving took place on 11 May 2020 at block 630,000. The block reward became 6.25.
eCash was created by a hard fork at block 661648 on 15 November 2020. For each Bitcoin Cash (BCH), an owner got 1,000,000 eCash (XEC).
Bitcoin’s market cap surpassed US $1 trillion for the first time ever on 19 February 2021.
Bitcoin hit an all-time high of US $64,863.10 on 14 April 2021.
On 7 September 2021, El Salvador became the world’s first country to recognize Bitcoin as legal tender.
In March 2022, the Swiss City of Lugano made Bitcoin ‘De Facto’ legal tender. Lugano, in addition to allowing crypto for taxes, is aiming to have all of its businesses seamlessly use crypto for everyday transactions.