Bitcoin is a digital currency with zero central authority or intermediary and it operates on a peer to peer network. Cryptocurrency is one of many forms of cryptocurrency, which are digital money or tokens that are secured and validated using cryptography. As bitcoin and cryptocurrency becomes more popular around the globe than ever, the reasons are numerous as bitcoin offers many advantages to traditional money, including speedier and cheaper transactions, more privacy and privacy, more control and freedom, more innovation and opportunity. However, how did Bitcoin come to be anything at all? How did this revolutionary technology take shape and when did it start? In this blog, we’ll take a look back at the history of Bitcoin, from its start to present day.
The Predecessors of Bitcoin
Bitcoin is not the first thing to be played with cryptography, and in fact a lot of people have been screwing around with ideas similar to Bitcoin for quite a while. In 1992 Cynthia Dwork and Moni Naor proposed that an encapsulation of computational puzzles could represent value. This independently rediscovered, Adam Back developed the hashcash proof of work scheme for spam control, 1997. The first proposals for the distributed digital scarcity based cryptocrnvernities were Wei Dai b-money and Nick Szabo bit gold. In 2004, the hashcash proof of work algorithm was re-used and reused under a trusted fee schedule in 2004 in reusable proof of work (RPOW) by Hal Finney. However, in the bit gold proposal (which was an inflation control, collectible market based mechanism proposal), Nick Szabo investigated some other aspects, including a Byzantine fault tolerant agreement protocol based on quorum addresses to store and transfer the chained proof of work solutions to which Sybil attacks were vulnerable.
The Birth of Bitcoin
Bitcoin is a digital currency with zero central authority or intermediary and it operates on a peer to peer network. Cryptocurrency is one of many forms of cryptocurrency, which are digital money or tokens that are secured and validated using cryptography. As bitcoin and cryptocurrency becomes more popular around the globe than ever, the reasons are numerous as bitcoin offers many advantages to traditional money, including speedier and cheaper transactions, more privacy and privacy, more control and freedom, more innovation and opportunity. However, how did Bitcoin come to be anything at all? How did this revolutionary technology take shape and when did it start? In this blog, we’ll take a look back at the history of Bitcoin, from its start to present day.
The Predecessors of Bitcoin
Bitcoin is not the first thing to be played with cryptography, and in fact a lot of people have been screwing around with ideas similar to Bitcoin for quite a while. In 1992 Cynthia Dwork and Moni Naor proposed that an encapsulation of computational puzzles could represent value. This independently rediscovered, Adam Back developed the hashcash proof of work scheme for spam control, 1997. The first proposals for the distributed digital scarcity based cryptocrnvernities were Wei Dai b-money and Nick Szabo bit gold. In 2004, the hashcash proof of work algorithm was re-used and reused under a trusted fee schedule in 2004 in reusable proof of work (RPOW) by Hal Finney. However, in the bit gold proposal (which was an inflation control, collectible market based mechanism proposal), Nick Szabo investigated some other aspects, including a Byzantine fault tolerant agreement protocol based on quorum addresses to store and transfer the chained proof of work solutions to which Sybil attacks were vulnerable. In February 2011, bitcoin reached parity with the US dollar at $1 per bitcoin. In June 2011, WikiLeaks and other organizations began to accept bitcoins for donations. In October 2011, the first fork of bitcoin occurred, creating Litecoin as an alternative cryptocurrency with faster transaction confirmation times.
The following years saw more development, adoption, and regulation of bitcoin and cryptocurrency. In 2012, Bitcoin Foundation was founded to standardize and promote bitcoin, while BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. In April 2013, bitcoin reached a new high of $266 per bitcoin before crashing to around $50 due to a DDoS attack on Mt. Gox. In October 2013, the FBI shut down the Silk Road, a dark web marketplace that accepted bitcoins for illegal goods and services, and seized 144,000 bitcoins from its operator Ross Ulbricht. In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, the first university in the world to do so. In December 2013, China banned its financial institutions from handling bitcoin transactions, causing a sharp drop in the price of bitcoin.
In 2014, several major companies and organizations started to accept or support bitcoin, such as Overstock.com, Dell, Microsoft, Expedia, Wikipedia, and the United Way . However, 2014 was also a turbulent year for bitcoin, as Mt. Gox suspended trading and filed for bankruptcy after losing 850,000 bitcoins (worth about $450 million at that time) due to hacking or theft. In June 2014, the US Marshals Service auctioned off 29,656 bitcoins seized from the Silk Road. In September 2014, PayPal announced that it would allow its merchants to accept bitcoin through its Braintree subsidiary.
In 2015, bitcoin gained more recognition and legitimacy in the eyes of the public and the authorities. In January 2015, Coinbase raised $75 million as part of a Series C funding round, smashing the previous record for a bitcoin company. In February 2015, the number of merchants accepting bitcoin exceeded 100,000. In March 2015, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. In April 2015, Bitstamp resumed trading after being hacked in January and losing around 19,000 bitcoins (worth about $5 million at that time). In July 2015, New York State Department of Financial Services (NYDFS) issued the first BitLicense to Circle Internet Financial, a company that allows users to buy and sell bitcoins using fiat currency. In August 2015, Barclays became the first major bank to process bitcoin transactions through its Start-up Accelerator program.
In 2016, bitcoin continued to grow and mature as a technology and an asset. In January 2016, former Coinbase employee Charlie Lee announced Litecoin's Segregated Witness activation proposal (SegWit), which aimed to increase the block size limit and improve transaction efficiency. In April 2016, Steam started accepting bitcoin as payment for video games and other online media. In May 2016, Craig Wright claimed to be Satoshi Nakamoto but failed to provide conclusive proof. In June 2016, Bitfinex was hacked and lost around 120,000 bitcoins (worth about $72 million at that time). In July 2016, the second halving of bitcoin mining reward occurred, reducing it from 25 to 12.5 bitcoins per block. In August 2016, hackers stole more than $60 million worth of cryptocurrency from The DAO (Decentralized Autonomous Organization), a venture capital fund built on Ethereum blockchain. This led to a hard fork of Ethereum into two separate blockchains: Ethereum (ETH) and Ethereum Classic (ETC).
In 2017, bitcoin reached new heights of popularity and value. In January 2017, bitcoin broke $1,000 for the first time in three years. In March 2017, Japan officially recognized bitcoin as a legal method of payment. In May 2017,the WannaCry ransomware attack infected more than 230,000 computers in over 150 countries and demanded payment in bitcoin. In June 2017,the price of bitcoin surpassed $3,000 for the first time. In August 2017,the first hard fork of bitcoin occurred,creating Bitcoin Cash (BCH) as an alternative cryptocurrency with larger block size limit and lower transaction fees. In September 2017,China banned initial coin offerings (ICOs) and ordered all domestic cryptocurrency exchanges to shut down. In October 2017,the second hard fork of bitcoin occurred,creating Bitcoin Gold (BTG) as an alternative cryptocurrency that uses a different mining algorithm to prevent centralization by large mining pools. In November 2017,the price of bitcoin surpassed $10,000 for the first time. In December 2017,the price of bitcoin reached an all-time high of nearly $20,000 before plunging by almost half in the following weeks due to market volatility and regulatory uncertainty.
In 2018,bitcoin experienced a prolonged bear market that saw its value drop by more than 80% from its peak, reaching a low of around $3,200 in December 2018. The main factors that contributed to this decline were the increasing regulatory scrutiny, the hacking and theft of several cryptocurrency exchanges and wallets, the emergence of more competitors and alternatives, and the loss of public interest and confidence. However, 2018 was also a year of innovation and development for bitcoin and cryptocurrency, as many projects and initiatives were launched or completed, such as:
• Lightning Network: A second-layer solution that enables fast and cheap transactions between bitcoin nodes, without congesting the main blockchain. The Lightning Network went live in March 2018, and has since grown to over 10,000 nodes and 35,000 channels as of April 2019.
• SegWit: A soft fork of bitcoin that increases the block size limit by removing the signature data from the transactions. SegWit was activated in August 2017, but its adoption rate was slow until February 2018, when Coinbase and Bitfinex implemented it. SegWit has since increased the efficiency and capacity of the bitcoin network.
• Bitcoin Futures: A financial contract that allows investors to speculate on the future price of bitcoin, without actually owning or holding it. Bitcoin futures were launched by Cboe Global Markets and CME Group in December 2017, and have since attracted more institutional investors and traders to the cryptocurrency market.
• Bitcoin ETFs: An exchange-traded fund that tracks the performance of bitcoin, allowing investors to buy and sell bitcoin through a regulated platform. Bitcoin ETFs have been proposed by several entities, but none have been approved by the US Securities and Exchange Commission (SEC) as of April 2019. The SEC has cited concerns over market manipulation, liquidity, custody, and investor protection as reasons for rejecting or delaying the approval of bitcoin ETFs.
2018: Bitcoin started the year at around $13,800 and reached a high of $16,500 in January. However, it began to decline in February and by December, it had fallen to $3,709, a decline of 73%. This was due to a number of factors, including the Chinese government's crackdown on cryptocurrency trading, the bear market in the stock market, and concerns about Bitcoin's scalability.
2019: Bitcoin continued to struggle in 2019, trading mostly between $3,000 and $4,000. However, there were some positive signs, such as the launch of the Bakkt Bitcoin futures exchange and the increasing adoption of Bitcoin by businesses and institutions.
2020: Bitcoin started to recover in 2020, as the COVID-19 pandemic led investors to seek out safe haven assets. The price of Bitcoin reached a high of $19,891 in December, a gain of over 300% from the start of the year.
2021: Bitcoin had a record-breaking year in 2021, as the price surged to an all-time high of $68,789 in April. This was driven by a number of factors, including the increasing adoption of Bitcoin by institutional investors, the launch of Bitcoin ETFs, and the growing popularity of decentralized finance (DeFi).
2022: Bitcoin's price declined in 2022, as the global economy entered a recession. The price fell below $30,000 in June, but it has since recovered somewhat and is currently trading around $23,000.
2023: Bitcoin's price has been on an upward trend in 2023, and it
is currently trading around $27,000. There are a number of factors that
could drive the price of Bitcoin higher in the future, including the
continued adoption of Bitcoin by institutions, the development of new
Bitcoin-based products and services, and the increasing popularity of
Bitcoin as a store of value.