A Brief History of Bitcoin: from the Genesis block till now
Or how Blockchain came to be a revolutionary technology
13 years ago today the very first block of Bitcoin was mined. Embedded in the Genesis block was the text:
The Times Jan/03/2009 Chancellor on brink of second bailout for banks.
The title refers to a headline in The London Times newspaper, reflecting on the financial crisis of 2008. This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking. And this was the birth of how a revolutionary idea became a reality.
The value of Bitcoin
Let’s take a walk through the timeline and gain an understanding of the most notable facts:
Тhe Bitcoin story starts in 2008 with an anonymous founder called Satoshi Nakamoto. At the present time a post titled “Bitcoin P2P E-Cash Paper” was shared by Nakamoto. On the 18th of August 2008 the actual name, ”Bitcoin.org” was registered.
Then on the 31st October of the same year, a message from the mysterious designer of the cryptocurrency also gave a link to a Bitcoin whitepaper called “Bitcoin A Peer-To-Peer Electronic Cash System”.
Until now, with many speculations being raised, the identity of Nakamoto is still unknown, some people even speculate that Nakamoto could be a group of people due to the complexity of the coding required in order to create Bitcoin.
The key to understanding how cryptocurrencies work is to understand Bitcoin’s rise in market value.
Bitcoin is a decentralized digital currency that operates without a central administrator like a central bank. The process of creating Bitcoins is called “mining”. What we call the blockchain is the system where the transactions are verified through network nodes and recorded through a public distributed ledger.
On January 3rd 2009 the first block of the bitcoin network was mined — the Genesis block. At that time, Bitcoin had very little monetary value and the coins were mainly available to miners. The reward for the miners per block was 50 BTC (now the reward is 6.3 BTC).
One of the first supporters, adopters, contributors to Bitcoin and the receiver of the first Bitcoin transaction was programmer Hal Finney. He downloaded the Bitcoin software the day it was released and received 10 bitcoins from Nakamoto. This is recorded on the blockchain and it is the world’s first Bitcoin transaction on 12 January 2009 (block 170). Other early supporters were Wei Dai, creator of Bitcoin predecessor b-money, and Nick Szabo, creator of Bitcoin predecessor bit gold.
History narrates that a year later, the first commercial transaction with Bitcoins took place. A man in Florida negotiated to purchase two “Papa John’s” Pizzas valued at $25 in exchange for his 10k Bitcoins. This was on May 22nd 2010. At this time the cost of a Bitcoin was around four bitcoins for a penny. However, if you could translate the momentary worth of those bitcoins into today’s value, the transaction was probably worth around half a billion dollars. Yes, this sounds bizarre, half a billion dollars for pizza! This is why today on that day we celebrate Bitcoin pizza day! 🍕
It is estimated that Nakamoto had mined about 1 million bitcoins before he handed over the network alert key to Gavin Anderson.
The price of bitcoins reached one dollar in February 2011.
From there, most of the Bitcoin value has been promoted on various forums online and in the black market. The price at this point was largely inconsistent. The name of one such darknet market was “Silk Road“ where a total of 9.9 million bitcoins were transacted, with a total market value of 214 million dollars.
By April 2013 the price of Bitcoin reached 200 USD and by the end of the year, it was around $1000 dollars.
The price was largely flat between 2013 to 2016 when it spiked to unprecedented levels in 2017. Suddenly interest in Bitcoin reached its highest point and even your next-door neighbour was looking for a way to cash in. The price action in 2021 gained even more attention from the mainstream media — then Bitcoin reached its all-time high (ATH) of more than $60k.
Bitcoin controversies
Bitcoin has been plagued with a lot of controversies. When it was launched, the attention of the wrong kind of people was caught — drug dealers and the black market. For them, the cryptocurrency was heaven-sent as they could bypass strict scrutiny from authorities. Without attracting the attention of authorities, dealing with drugs could be done anonymously online.
Up until 2013, crypto was mainly used in the black market more than it was used for legitimate purposes. However, things took a turn when more people started embracing the coins as a medium of exchange and store of value. Around 2014, under a string of accusations of hacks and loss of bitcoins, the main Bitcoin exchange “Mt. Gox” was forced to close down. In 2013, the site actually went offline due to extended media coverage that brought in lots of traffic. The second most popular exchange at that time — “Trade Hill” also went down in 2013, further shuttering investor confidence.
The final nail for Mt. Gox came in February 2014 when it was hacked into and 850 bitcoins were stolen. Later, the company filed for bankruptcy. The Bitcoin hacks started appearing more often.
Тhe other strong opposition against bitcoins comes from governments, who were used to exercising some form of control over the financial markets.
How does the traditional money market work? The government issues bonds and the Fed (or national banks) print money in return.
Taking the consideration of being a threat, some countries have banned the use of Bitcoin in their economy. At the same time, some have embraced it, governments have also handled the legal structure needed to sustain cryptocurrencies. It is still hard to qualify Bitcoin as a digital collectable asset or virtual currency. This also poses questions on taxation. How should you tax it?
To give you an example, in countries like Israel and the US, Bitcoin is classified as a commodity and therefore they tax it. While in European countries like the UK, Russia and the EU they treat it as a virtual currency. What is the future of Bitcoin? Will it continue rising? This is the question at the heart of anyone who is thinking of investing in Bitcoin and other cryptocurrencies.
In 2015, the Ethereum network was launched. This was a major event in the evolution of Blockchain. Ethereum added a second layer and enabled developers to write smart contracts and decentralized apps that could be deployed to a live network.
One more important event also occurred that year. NASDAQ initiated a blockchain trial. The Linux Foundation launched the Hyperledger project. Nine major investment banks joined forces to form the R3 consortium, exploring how blockchain could benefit their operations.
In 2016 the Bitcoin’s popularity was on the rise and in the summer of 2017 Japan recognized Bitcoin as a legal currency and later the same year Bitcoin hit a record high of nearly $20,000. 2017 will remain in history as the year of the crypto boom — the ICO hype, the Bitconnect scam.
2018 — the dormant year
The price fell as low as $3,800 for a Bitcoin. The online payment firm Stripe stopped accepting Bitcoin payments. On top of this Google, Twitter and Facebook banned cryptocurrency advertising. The cherry on top was the South Korean ban of anonymous cryptocurrency trading but announced it would invest millions in blockchain initiatives.
2019 — on the rise again
Walmart also launched a supply chain system that is based on the Hyperledger platform. Amazon announced the general availability of its Amazon Managed Blockchain service on AWS. The Ethereum network transactions exceeded 1 million per day.
2019 is pronounced as the year of DeFi.
Blockchain research and development took centre stage as organizations embraced blockchain technology and decentralized applications for a variety of use cases.
2020 — blockchain development at all-time high
According to Deloitte’s 2020 Global Blockchain Survey, nearly 40% of respondents incorporated blockchain into production, and 55% viewed blockchain as a top strategic priority. Ethereum launched the Beacon Chain in preparation for Ethereum 2.0. Stablecoins saw a significant rise because they promised more stability than traditional cryptocurrencies. There was a growing interest in combining blockchain with AI to optimize business processes.
2021 — wide acceptance
Bitcoin and nearly all altcoins hit their ATH prices.
If we have to summarize 2021 was the year of the Non-Fungible Token (NFT) craze, Metaverse and Web 3.0.
Bitcoin surpassed $1 trillion in market value for the first time.
History was made when Mike Winkelmann, the artist known as Beeple, sold his piece called “Everydays: The First 5000 Days” as an NFT in March. Overall in 2021, the NFT market had its best year with over $23 billion.
We should also mention here, that 2021 was the meme-coin year and Elon Musk’s tweets had a huge influence on the price of Bitcoin and Doge.
Between 2018 and 2021 many countries set some legal frameworks for cryptocurrencies, banks continued to explore the blockchain potential, companies started accepting cryptocurrencies and integrating blockchain in their processes, eliminating the need for a middleman.
Throughout these four years, there was a growing interest in using blockchain for applications other than cryptocurrency trading. This trend continues into 2021 as governments and enterprises look to blockchain to handle a variety of use cases.
The future of blockchain technology
If blockchain continues on its current path, it affects many industries — including finance, retail, mining, travel, healthcare, education, agriculture and entertainment. The biggest effect might be in financial services, especially with the growing movement toward decentralized finance, which uses permissioned blockchains to handle complex financial use cases. Governments will also likely continue to embrace blockchain.
These days the question is: How stable is the cryptocurrency market?
Since Bitcoin was not considered a worthwhile investment, faith in the market has been boosted by the entry of institutional investors. A big number of them see their entry into the market as a vote of confidence. Because of the cryptocurrency, large hedge funds and openly traded companies have been bullish.
The Covid19 epidemic has also caused some institutional investors to take a closer look at Bitcoin, as many people avoid using physical money due to the risk of transmitting the virus. Bitcoin has been very volatile. Even so, a big role in stabilizing the price will be played by the investments of institutional investors. In the future, another factor that is going to keep Bitcoin bullish is the supply part. While bitcoins are actually mined, a very small number of people are doing that at the moment.
Some time bitcoins are going to be floated on the NASDAQ and people are seeing it as a big possibility to bank on. This will further boost credibility for blockchain assets. Some have suggested that what cryptocurrencies need is a verified ETF (exchange-traded funds). A lot of education is needed so that the general public understands how blockchain technology works. Due to rumours of them making a killing, many people are investing in the technology.
A Harvard professor by the name of Kenneth Rogoff estimates that the market capitalization for cryptocurrencies could hit a high of 5 to 10 trillion in the next five years. With this in view, it is estimated that the long term value for Bitcoin could be in the range of one hundred thousand dollars. Anyway, this is speculative and a lot can change amidst.
As universities, governments and private corporations continue to research and invest in blockchain, the technology will only improve.
But they must first address the challenges that blockchain brings — particularly regarding security, privacy, scalability and interoperability.
