Bitcoin: A brief history.

Pre-inception and the Cypherpunk movement.

We are quick to call Bitcoin the first of its kind and how it will change everything from the banking system to governance. Little do we know that Bitcoin is just an iteration that evolved from similar concepts that started to appear in the early 80's.

Cypherpunks are a group advocating and actively researching the realm of digital encryption and privacy with one of their main goal is to hide the act of hiding. Congregating around their now semi defunct mailing list they put forward ideals of peaceful anarchy in which we would respect but distrust each other. One of the concept discussed was a monetary system that would fit their world construct.

The currency systems discussed were HashCash, B-money, bit gold and finally Bitcoin. All based on an anonymous decentralised proof of work open ledger. A currency that would not need a trusted third party aka a banking system.

The early Satoshi Nakamoto days and the genesis block.

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”

We will not speculate on Satoshi’s real identity but the message he put forward was very clear from the beginning. Within the Genesis block was the hidden message quoted above, a reference to state of the economy at that moment. A failing monetary structure based on a Fiat system that was constantly being eroded by inflation. A government system that proved to be more and more unbalanced in favour of entities that held the most assets and neglecting the vast majority of the people it was supposed to represent and protect. A notion he also put forward in the Bitcoin white paper.

Satoshi mined the Genesis block and started to spread the word within the cypherpunk circle via their ownmailing list and testing the ledger system. As it would take off, participants of other communities started to take interest and discuss the new currency on a new platform www.bitcointalk.org. Computer scientist, economists, amateurs… would discuss and help build the system.

But what is that system, how does Bitcoin work?

On the surface, Bitcoin is a very simple and elegant concept. It would allow the users to transfer value to each other by relying on a trust-less system to maintain the correct balance of the ledger, completely eliminating the need to rely on a bank.

Users run nodes that connect between them. A node is simply a piece software that allow communication between the users running another node and agree on validating a very specific set of rules thus creating a peer to peer network. If any of these rules are broken then the invalid node would be rejected from the network. The nodes can transact between them as well as validate transactions from other users in the network and package them into a block. This concept of consensus is the key to keep the network running as it makes sure that everyone is honest and doesn’t try to break the rules with a penalty of having your transactions rejected.

Miners are a group of users that run another piece of software that calculate a very intensive and difficult mathematical algorithm with a solution. When they find a solution to this math problem they are rewarded with a set amount of bitcoins and the transaction fees paid by the users. the miners can show a proof of work by presenting the solution of the problem which is easily verifiable by the public. The real job of the miners within the network is to pick up the block broadcasted by the user and to validate them by solving the mathematical problem associated to each block. The more miners join the network, the more difficult the mathematical problem, this provides security to the Bitcoin network.

Bitcoin suddenly have a value

One of the most famous and incidentally funny transactions was the 10,000BTC for 2 Pizzas on May22nd 2010. User Laszlo in this thread made the transaction to buy the Pizzas and inadvertently gave a real world value to Bitcoin. 1BTC is now worth 0.0041USD.

Satoshi Nakamoto dissapears

The year following the inception, Satoshi was actively working with a core team that would develop and maintain the code of the Bitcoin software. The digital currency was becoming more and more popular and conspiracy theories started to surface left and right on the identity of the creator as well as the true purpose of such system. Building up on Cypherpunks ideals of decentralistion of power where there would be a system of governance so spread out that there would be no single point of failure or attack, Satoshi’s presence would compromise that. In December 2010 he chose to remove himself stating that the project was in good hands now. He simply vanished, removing himself as a leader and point of failure to never be seen again. To this day he has not touched a single of his Bitcoins and remain anonymous.

The community was a bit disoriented but held together. Theories started to form on why Satoshi chose to leave from being an empowerment of decentralisation all the way to Bitcoin being a government project and that former developer Jeff Garzik was a CIA infiltrate passing by the simple fact that Satoshi had died. The truth is, like many things around him, we simply don’t know.

The ALT Coins start to emerge.

In 2011 the upcoming success of Bitcoin was very clear to the community and as the debate on how to improve the system continued, different factions on how to improve it started to emerge fracturing the ecosystem. The adherents to same ideals forked the code repository of Bitcoin and implemented their own rules and algorithms. To name a few, Litecoin, Namecoin… were now existing and more to come as can be seen here. At this point Bitcoin Started to experience wild fluctuations from sub dollar values to highs of 30USD crashing back down to 2USD.

A period of growth and adoption

The year of 2012 was generally seen as a time where without much turbulence as the price would grow steadily and new businesses started to consider Bitcoin as a viable currency to transact with. The fees were low and the system functioned correctly. Institutions and media outlets started to take notice but mock the currency system dismissing it completely as being a mere curiosity. Attackers hacked a website hosting service and stealing over 40,000BTC bringing more and more awareness on good security practices when owning the currency. At the end of the year the block reward halved.

The “Willy bot” and the bubble popping

The most notable event of 2013 was the rapid almost overnight rise in price. Shooting from around USD100 all the way up to an all time high of USD1,168 then coming crashing down. A lot more people were around at this time and this crash was a much more significant one for the community as it affected many enthusiasts that over invested in a currency they didn’t fully understand yet. The rapid rise and fall of Bitcoin was later attributed to a trading bot nicknamed “Willy bot” that traded back and forth with itself pushing the price higher. This event however brought the attention of Bitcoin to an even wider audience.

Mt Gox Hack

In February 2014 the most important trading exchange Mt Gox halted all trading and announced that over 850,000 coins were stolen by hacking the exchange. This sent a cold shiver throughout the whole community as people used the exchange not only to trade but as a custodial wallet thinking their Bitcoins were safe. Alas, the coins were gone for good and Mt Gox was sued left and right but nothing could bring the coins back. That was the beginning of a 2 year bear market plagued with bad news and in-fights.

The long price winter

The period spanning from the Hack till late 2016 was one that brought a lot of negativity. The Currency use was rampant in the black market, the community started to argue more and more about the scaling problem and the rise of bad actors as leaders of different sides of the argument. Good news such as merchant like Microsoft or Steam adopting the currency had little effect on the mood of the currency. The whole project was in a deadlock at this point.

The price rise and the fork

In the summer of 2017, sentiment changed, The price started to rise and the scaling debate gave rise to 2 clear camps, on chain and off chain scaling. On the 1st of August the community supporting bigger block sacrificing decentralisation forked the blockchain ledger and started mining an alternative set of rules calling their coin B-cash. With the deadlock ending the way for advancing with the technology was now open. The Price started rising and bigger institutions started to consolidate their opinions for or against Bitcoin but one thing was sure is that the digital currency is here to stay.

Notable mentions

Tether: An altcoin that is pegged 1:1 to the USD creating a lot of controversy due to suspicion of fractional holdings. Many fear that the volumes in all cryptocurrencies are tied to Tether. To this day no proof for either side of the argument has been presented.

ICO: The rise of the so called Initial Coin Offerings has pulled an enormous amount of money into the cryptocurrency space. Governments are pronouncing themselves mostly against this unregulated space and drawing negative attention.

Hacks: Exchanges and private wallet are often hacked in the cryptocurrency world causing many users to lose access to their funds altogether. This is a serious concern highlighting the need for much greater personal security in the digital world as well as wondering where the stolen funds will end up.

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“bc1qjm0kpgleed7q2pjv9f4l4xs6vn86lkyqplhsl9” I try to convey my interest in Bitcoin. All opinions are mine and not investment advice.

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Cedric Koukjian

Cedric Koukjian

“bc1qjm0kpgleed7q2pjv9f4l4xs6vn86lkyqplhsl9” I try to convey my interest in Bitcoin. All opinions are mine and not investment advice.

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