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Bitcoin – A Brief History

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Bitcoin is the first cryptocurrency that has lasted for more than 7 years and received any sort of mass
adoption, but it took some time to get to this point. Before Bitcoin, there were a number of cryptocurrencies
that reached some level of popularity. It all started back in 1980 when cryptographer David Chaum first
developed the idea of a currency backed by a proof-of-work computer algorithm as opposed to a central
bank. Chaum later went on to found DigiCash which had a briefly successful yet ultimately failed run at
becoming the world’s first mass adopted cryptocurrency. US based e-gold was possibly the most notable of
the Pre-Bitcoin cryptocurrencies, although technologically it was significantly different from Bitcoin due to
a centralized owner and non-fixed supply.
In August 2008, Neal Kin, Vladimir Oksman and Charles Bry filed a patent application for an encryption
technology. The domain name was also registered in the same month using which allowed for anonymous domain name registrations.
The big day came on October 31st 2008, Satoshi Nakamoto (a pseudonym with the true identity still
unconfirmed) published a white paper named “Bitcoin: A Peer-to-Peer Electronic Cash System”. The paper
outlined various uses for the coin in addition to providing information about blockchain technology and
how the coin would be mined using computer algorithms. The original white paper used Bitcoin as an
example of a deflationary currency and one that governments or other central lenders could not artificially
increase the money supply of, therefore devaluing a certain currency. The whitepaper also outlined issues
with banks as trusted lenders, and how the blockchain’s irreversible transaction design could reduce risk of
fraud for merchants.
From January 2009 onwards, activists began mining the coin and the first Bitcoin blocks were created.
Nakamoto and other cryptography enthusiasts began exchanging the coin for services with one another and
in October 2009, the first official exchange rate was established for the coin of US$1 = 1,309.03 BTC. The
original exchange rate was based on how much electricity it would cost to mine 1 Bitcoin.
The first real world transaction took place in May 2010 when enthusiast Laszlo Hanyecz bought two pizzas
in Jacksonville, Florida for 10,000 BTC. Today 10,000BTC is worth over $40 million. A few months later
in August, the first major Bitcoin hacking incident occured, the hacker exploited a vulnerability in the
Bitcoin verification system and generated 184 billion Bitcoins. This led to the first major dip in the value of
Bitcoin as a currency. This then led to government investigations of potential money laundering using
Bitcoin. The early scares didn’t last long though and In November 2010, Bitcoin reached a market
capitalization of $1 million for the first time.
In January 2011, Bitcoin received a reasonable amount of mainstream coverage for the first time. Silk Road,
an underground dark net website dealing in illicit goods such as illegal drugs and stolen credit cards was
launched on the back of sending and receiving payments in Bitcoin. At its peak, it was estimated that up to
50% of Bitcoin transactions were ones that occured on Silk Road. The perceived anonymity of Bitcoin
made it a favorite among Silk Road users. In February, Bitcoin reaches a market price of $1 for the first
time and by July the coin had jumped to a value of $31.
2012 was somewhat of an uneventful year, although real world adoption continued with hosting platform
Wordpress accepting the coin in November of that year. By March 2013, the market capitalization had
reached $1 billion and Bitcoin exchange Coinbase reported over $1 million of Bitcoin transactions in a
single month. In June, the DEA reported 11.02 Bitcoins as an asset during a drug seizure, the first time a
government agency recognized Bitcoin as having inherent value. Drugs continued to make headlines as Silk
Road owner Ross William Albricht was arrested in October, the FBI seized 26,000 Bitcoins from Silk Road
servers during the arrest. Brighter news came the next month when the world’s first Bitcoin ATM opened in
Vancouver and China arrived on the scene when Chinese market activity overtook the US for the first time.
By November of 2013, the price of 1 Bitcoin reached $1,000 for the first time.
December of 2013 came with China’s central bank ruling that Bitcoin was not a currency and barred
financial institution from accepting Bitcoins as a form of payment. In February 2014, Japanese based
exchange Mt. Gox suspended Bitcoin withdrawals, citing technical issues. Within just a few weeks, the
exchange had filed for bankruptcy amid claims of poor management and lack of security protocols.
Roughly $740 million worth of Bitcoin, or 7% of the overall amount in circulation was lost in the incident.
This issue led to the value of Bitcoin dropping 36% over the course of the month.
In June, TeraExchange LLC received approval from the U.S.Commodity Futures Trading Commission.
This marked the first time that a U.S. agency approved a Bitcoin exchange. Computer manufacturer Dell
began accepting Bitcoin as a means of payment at this time, the largest company to do so up to that point.
AirBaltic also became the world’s first airline to accept Bitcoin payments. In December, tech giant
Microsoft began accepting payments in Bitcoin.
Coinbase, now one of the largest cryptocurrency exchange platforms received $75 million in a funding
round, with the New York Stock Exchange being a minor investor. Further real world scaling continued and
by August 2015, over 160,000 companies were accepting Bitcoin as a means of payment. December
brought news of the potential identity of the notorious Satoshi Nakamoto figure. Wired magazine claimed
the Australian Craig Wright was indeed Nakamoto. This led to a series of events that eventually resulted in
a confirmation that Wright was indeed NOT Nakamoto.
July 2016 marked the second “halving day” in Bitcoin’s history, where the reward for mining 1 block was
halved to 12.5 Bitcoins per block. This was part of Bitcoin’s original design to gradually decrease the
supply of new coins available. The next halving is due to occur in 2020, with the total supply available to
the market around the year 2140.
At the time of writing, Bitcoin trades for around $4,000 per coin on exchanges.

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