The History of Bitcoin
Toon's expertise is Bitcoin. Joins the Telegraph's Crypto Update regularly.
Aaaah 2008… Usain Bolt set a new world record on the 100m sprint, Iron Man was released, and Barack Obama became the president of the United States. But 2008 was also the year in which the global economic crisis started, and when Bitcoin's plan was shared.
The fact that Bitcoin’s white paper was published in the same year as the crisis started is no coincidence, in fact, the financial crisis played a big part in its invention. A lot has happened since 2008.
So much that you could turn it into a movie, but we’ll stick to text and pictures for now. How did Bitcoin come to be?
The idea originated with the Cypherpunks
The idea for Bitcoin (or at least something like it) had been around for quite some time. Already in the nineties there were plans for a kind of digital currency, without interference from governments or banks. These ideas came from the Cypherpunks.
The Cypherpunk movement originated in the late eighties, and mainly consists of computer programmers with a talent for cryptography. They have a clear, almost rebellious vision. In our digital society, our privacy is increasingly at stake: everything you do is recorded, and that information could end up in the wrong hands. That’s not a good development at all, according to the Cypherpunks.
Cypherpunks therefore advocate for maintaining privacy. As the Cypherpunks’ manifesto from 1993 states: “Privacy is necessary for an open society in the electronic age.” We think it’s fair to say that this group was far ahead of its time.
The perfect case for Bitcoin
With the increasing amount of digital payments, payment activity is progressively monitored as well. Everything you buy with your debit card or credit card is recorded. For some, that feels intrusive. What if this data falls into the wrong hands? Or what if it’s used for purposes that you do not agree with?
The Cypherpunks aimed to develop a currency that guarantees your privacy; where this type of transaction information cannot be shared. Various attempts were made for developing such a currency, but none of them really succeeded. Perhaps the possibilities of computers and the internet at the time were simply too limited to execute such a project.
The plan for Bitcoin
October 31, 2008, was an historic day. On this Halloween, the world was introduced to Bitcoin. Someone called Satoshi Nakamoto published his idea for Bitcoin in the Cypherpunks mailing list.
This kind of publication, in which the reader is informed about some kind of idea or plan, is also referred to as a white paper. In a mere nine pages (only eight if we don’t count the references), Satoshi Nakamoto explains why he came up with Bitcoin and how it works exactly.
He starts with describing the ‘why’, and moves on to the more technical side. This is some heavy material, so we sure hope you did well in math at school…
Nakamoto explains how Bitcoin transactions are processed on the blockchain. Fun fact: the term ‘blockchain’ is never mentioned in the white paper. The term was coined later on by someone from the Bitcoin community. Even the word ‘Bitcoin’ is only mentioned once: in the title. Let’s just say Satoshi wasn’t quite the marketeer...
We still have no idea who Satoshi Nakamoto really is. It could be a man or a woman, or maybe a group of people. We may never find out, but that’s okay! One could argue it doesn't even matter who Satoshi really is. The mystery makes the story of Bitcoin even more exciting.
Moreover, Satoshi’s anonymity may be exactly why Bitcoin works. Bitcoin does not belong to anyone; there is no one in charge. Bitcoin can therefore not be regulated by any central party to set the rules or change them as they please.
The beginning of Bitcoin
The actual start of the Bitcoin network was on January 3, 2009, with Satoshi Nakamoto as its first participant. He used his computer to mine bitcoin. With ‘mining’ we mean the processing of Bitcoin transactions into blocks. In the beginning, there were barely any transactions, since Satoshi himself was the only one using the network. :(
But not long after, the American programmer Hal Finney joined the network. Finney was the first person to receive bitcoin through a direct transaction. On January 12, 2009, Nakamoto sent 10 BTC to Finney.
The very first transaction block contains something special. It was Satoshi’s way of giving the finger to (central) banks. He worked a newspaper headline into the block: “Chancellor on brink of second bailout for banks”. The phrase refers directly to the economic crisis of 2008 and the power of (central) banks. Together with the need for privacy, these are the main reasons for Bitcoin’s existence.
A pricy pizza…
Feeling hungry? Laszlo Hanyecz sure did in 2010, when he was about to order some pizza, and wanted to pay in bitcoin. The pizza delivery service did not accept the cryptocurrency, so Laszlo offered 10,000 BTC on a Bitcoin forum to anyone that would have two pizzas delivered to his door. It may not have been a direct purchase, but it was the first time a product was paid for with bitcoin. A milestone!
The inventor of Bitcoin leaves the project
For a few years, Satoshi Nakamoto is involved in Bitcoin through online communication with programmers and enthusiasts. On April 23, 2011, he sends an email to programmer Mike Hearn. He mentions that he thinks his project is in good hands. This is the last time anyone heard from Satoshi. As silently as he came out of nowhere, so he went.
We can only guess why Satoshi left the project. He might think no one should be the ‘owner’ of Bitcoin. Bitcoin belongs to the community, everyone owns it together.
Appearance of the first bitcoin exchanges
For a long time, bitcoin was associated with computer nerds. If you were tech savvy you could mine bitcoin yourself, and earn bitcoin in doing so. The arrival of bitcoin exchanges changed that. Via Mt. Gox it was easier than ever to buy bitcoin. Suddenly, there was a market for bitcoin, with actual supply and demand.
Mt. Gox has quite a reputation in the crypto world. The exchange went offline at the beginning of 2014, after it came to light they had been hacked for years. 750,000 bitcoin were lost, which at that time was worth no less than 350 million dollars.
In the early years of Bitcoin, an increasing amount of bitcoin (and cryptocurrency) exchanges was introduced. For example, Dutch crypto broker BTC Direct started in 2013. And since 2019 it is easier than ever to buy cryptocurrency with your phone using BLOX.
Bitcoin as a payment method
Since bitcoin and cryptocurrencies are still very volatile, they are most often used for trading. But of course you can also use your cryptos to buy things (just like it was intended). As we mentioned before, an increasing amount of (online) stores accept bitcoin as payment method nowadays. For example, Wikipedia accepts donations in bitcoin, and Microsoft offers bitcoin as payment method in their Windows and Xbox stores.
Additionally, there are initiatives that encourage the use of bitcoin. In the Dutch city of Arnhem (dubbed ‘Arnhem Bitcoin City’), there are more than 150 physical shops where you can pay with bitcoin. Check out Coinmap for all locations in your own neighborhood.
Bitcoin on your smartphone
The Bitcoin infrastructure is being built bit by bit (pun intended). It is now easier than ever to acquire bitcoin.
Bitcoin started out when smartphones were not yet as popular as they are now. Nowadays, many people use their smartphone for almost everything. To check if it's raining outside, to watch loads of cat movies, and also to buy bitcoin.
Consequently, there are many apps that help you with Bitcoin. But with each new app being launched, we can imagine that you can no longer see the forest for the trees. Thousands of storage apps for different crypto coins, that should be easier!
And that’s where BLOX comes in. You’ll have everything you need in order to buy, sell, and manage bitcoin and other crypto coins. All in just one app.
Would you like to get started with BLOX? More than 10,000 people have already preceded you.