The History of Bitcoin

2017 was memorable for many reasons. Among these were the meteoric rise in value and popular recognition of Bitcoin and cryptocurrencies in general. For the first time, the average person was aware of the practical existence of cryptocurrencies. They were no longer the exclusive domain of techies or financial speculators.

Even so, while a greater number people are aware of the existence of Bitcoin, most still know little about its history, trajectory, or how it can directly benefit them. Much as was true at the dawn of the internet revolution, we first become peripherally aware that something exists just prior to it actually revolutionizing our way of life.

Bitcoin started in 2008. Its origin is somewhat enigmatic. Its genesis can be traced to a research paper that was published by a person calling himself Satoshi Nakamoto in November of 2008. In this paper, the structure for a digital currency that would be practical, secure, untraceable and free of government oversight was presented. The paper was titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” To date, nobody knows the real identity of Nakamoto. It is widely assumed that it is a pseudonym.

Regardless of the identity of its author, what was roadmapped on that paper soon came to fruition in January of 2009 when the same Nakamoto released the open-source code for Bitcoin. Open-source code can be seen as software released to the public for free — accessible and open to modifications and improvements by others.

The source code for Bitcoin allowed anyone to start “mining” Bitcoins. Mining is the term that is used to describe the action of using a computer’s processing power to solve complex mathematical problems. The purpose of these calculations are to facilitate and secure the processing and encryption of transactions done with Bitcoin. Each transaction can be seen as a block that relies on the block preceding it to generate its encryption. This is what gives rise to the term “blockchain.”

You can visualize a blockchain as a series of bricks making up a wall. In a pile, individual bricks can be interchanged and would never be noticed. After they are mortared together and form part of a wall, however, the brick becomes an integral part of the wall. Each brick is now secure and irremovable. That is how Bitcoins transactions are secured — each transaction helps to keep the one preceding it in place. This way nobody can come in later and “fudge” with the numbers. It is like having an old-fashioned ledger with entries made in permanent ink.

As is the case with most innovative projects, the number of early adopters in 2009 was small but enthusiastic. Initially, the majority of Bitcoin miners and users were those with an interest in cryptography. The general public was mostly unaware of Bitcoin at this point.

Throughout the first year of its existence and into mid-2010, the value of an individual Bitcoin did not surpass 14 cents. Even so, during 2010, Bitcoin started to garner recognition outside of the cryptographical community. There was a movement to get WikiLeaks to use Bitcoin as a method for receiving donations. It was now being seen, albeit by a relatively small number of people, as a legitimate currency for transacting business. With greater usage and acceptance, Bitcoin “wallets” — personal digital repositories where individuals can store their Bitcoins — also started growing in number.

By the end of 2010, Nakamoto, the “founding father” of Bitcoin, started to publish statements indicating that he was concerned with the sudden growth and expansion of the Bitcoin network. He indicated that he felt that Bitcoin should “grow gradually so the software can be strengthened along the way.” The last published message from Nakamoto came in December of 2010.

In spite of Nakamoto’s wishes and pleas, Bitcoin kept marching along gaining new adherents along the way. By February of 2011, Bitcoin had surpassed parity with the U.S. Dollar. In April of that same year, an article appeared on Forbes introducing a larger number of people to Bitcoin and the concept of cryptocurrency. By May 2011, the value of a Bitcoin was at $8.89.

This period of time is described as the first Bitcoin boom. Having started 2011 with a value of $0.86, by the middle of the year it was hovering at $27. Articles in tech and popular media started appearing mentioning Bitcoin. Gawker published one article highlighting how Bitcoin was popular with “online” drug dealers, referring to the e-Bay of the darkweb, SilkRoad. In fact, SilkRoad had made Bitcoin the defacto currency of choice for those who were selling drugs and other illegal goods and services on its site.

It is important to note that while Bitcoin was a natural choice for individuals wishing to conduct nefarious purchases online, they were but a small segment. Much as hard cash is used to conduct similar transactions, so too were Bitcoins being used for the same purpose. However, also like real cash, the majority of the transactions with Bitcoin involved legitimate and honest commerce.

Unfortunately, Bitcoin had to endure a baptism by an impure world. As noble as the concept was, the worst natures of our society combined with what was then a small number of actual adherents to take a toll on Bitcoin. By the end of 2011, it’s value had dropped to approximately $2. Many thought that this was the end of the grand cryptocurrency experiment.

2012 and 2013 proved the naysayers wrong. Partially due to the financial crisis in Cyprus during that time period, the standing of — and interest in — Bitcoin began to rise again. This time the growth was even more impressive. By the end of 2012 Bitcoin was at $12 — well on its way to recovering from its 2011 growing pains. By the end of November of 2013, it was above $1,200.

Media coverage of reported hacks and theft of Bitcoin wallets initiated a downward turn in the value of Bitcoin once again. By the end of December 2013 and throughout the early part of 2014, its value hovered between $600 and $800.

May of 2015 brought about what hindsight can label as the final low for Bitcoin. After reaching $200, it has since embarked on a trajectory that has led it to the level that we know today. Yes, the path from 2015 to the present wasn’t a solid rise upward. As with any commodity, it had its ups and downs. What is important, however, is that its overall course direction has been upward — relieving pressure as needed with slight dips but always recovering higher and stronger.

The potential for Bitcoin entering 2018 is unlimited. Having gone through its growing pains it is now entering its maturing stage. There is talk about it breaking through even more glass ceilings of acceptance. There is even a possibility of it being accepted on Amazon as a form of payment. Essentially, Bitcoin is poised to become what it was always meant to be — the universal and secure currency of the world.