The history of Bitcoin has been a turbulent one to say the least, and right now we're in one of the most turbulent periods in its history, as it has spent the entirety of 2018 falling further and further from its peak value of nearly $20,000 in December 2017.
But something as uncertain as Bitcoin (and cryptocurrency in general) was never going to be smooth sailing. Many tried a cryptographed digital currency before it, and they weren't able to fully crack it. Since Bitcoin became a reality nearly a decade ago, there have been some high highs and some low lows. For some Bitcoin owners, that's part of the appeal.
But how did we get to where we are today with Bitcoin? How did it begin, what were its forebearers, and what have been the unexpected turns of the Bitcoin journey? Let's take a walk through the timeline and find out.
Bitcoin itself did not exist until the late 2000s. Its origins, however, trace back to a few decades ago.
Specifically, we can trace it back as far as 1982. That is when computer scientist David Chaum first proposed the concept of e-Cash. Already concerned with privacy in the digital realm back in the early 80s, Chaum published a paper entitled "Blind signatures for untraceable payments" that detailed a new form of cryptography which he claimed could allow for an automated payment system where third parties could not see information on the payment.
Chaum tried to put this idea, which would create a blind signature system, to practical use in 1990 by creating DigiCash. DigiCash was a company founded in Amsterdam designed, as Bitcoin would be, to create a safe, secure online currency. Chaum's reputation as a brilliant mind attracted both employees and venture capital alike, but the product itself never caught on and by the late 90s DigiCash was bankrupt.
Still, Chaum opened the floodgates for other cypherpunks with similar ambitions. In 1997, Adam Back invented hashcash, a proof-of-work system that would prove very similar to what Bitcoin uses.
This year saw the sudden emergence of two cryptocurrency ideas. In late 1998, Wei Dai released an essay detailing his idea for "b-money," a cryptocurrency whose exchange reads similarly to what the blockchain in Bitcoin would eventually become. The proof-of-work system creates the currency by solving a mathematical computation, and the transfer of money is broadcast to the network.
That same year, Nick Szabo put out a similar proposal for "Bit Gold." Szabo's reasoning for alternative currency was to create something that did not require a third party, like a central bank, to create or manage it. Solving the proof-of-work gets you bits and the last bit of the string is used to create the string of the next transaction, similar to Bitcoin's blockchain.
Neither of these proposals, however, came to fruition.
Those predecessors had tried and failed for two decades prior. Then, in 2008, came Bitcoin. In August of that year, Bitcoin.org was registered. Two months later, a whitepaper was published: "Bitcoin: A Peer-to-Peer Electronic Cash System." The whitepaper's idea had similar ambitions to the previously mentioned papers: secure digital signatures, not requiring the use of a third party, proof-of-work, and hashing the transactions together to form a chain.
Satoshi Nakamoto, an unknown person or group of people, wrote the Bitcoin paper.
Just a few days into 2009, the first-ever block of Bitcoins, known as the Genesis Block, was mined. By Jan. 9, the first iteration of Bitcoin software was released, and on Jan. 12, the first-ever bitcoin transaction occurred as Nakamoto sent 10 Bitcoins ( (BTC) ) to noted computer programmer and developer Hal Finney.
Toward the end of the year, in October, the New Liberty Standard publishes the first Bitcoin exchange rate in the young cryptocurrency's history, deeming $1 to be worth 1,309.03 BTC. Nakamoto released the second version of the software in December.
With an exchange rate established, it was only a matter of time until someone attempted to make an actual purchase with Bitcoins. In May of 2010, it happened. Florida-based programmer Laszlo Hanyecz sent 10,000 BTC to a London man in exchange for two pizzas, valued at a total of $25. This still valued a single Bitcoin as a fraction of a penny, but with a purchase made, intrigued parties saw potential in the product. A couple of months later, Bitcoin's value finally broke the penny threshold
A pivotal year for the exchange of Bitcoin, fittingly the first Bitcoin exchanges popped up in 2010 as well - Bitcoin Market in February, and Mt. Gox in July. Slush, the first mining pool, also mined Bitcoin successfully for the first time that year. Mining pools are where several miners combine resources to get Bitcoin. By November, the market cap for Bitcoin surpassed $1 million for the first time.
Not that it was all ups for Bitcoin. Someone spotted a vulnerability in Bitcoin's protocol in October that allowed for transactions without proper verification and exploited it, generating 184 billion BTC. The transaction was soon erased and the vulnerability fixed.
Steadily making gains in value after finally passing 1 cent threshold, in February 2011 a major milestone occurred: 1 Bitcoin was worth $1 for the first time.
Bitcoin began receiving press - both good and bad. TIME Magazine published an article on Bitcoin for the first time, but the same year there was also an article on Gawker detailing Silk Road, the dark web drug market where Bitcoin was frequently used as payment. The publicity got people talking, and by June, Bitcoin was worth over $30. Soon after, it crashed back down to about $10.
Also in June, Mt. Gox dealt with a serious security breach that compromised tens of thousands of accounts and their Bitcoins. It would not be the first security issue Mt. Gox would deal with.
Still, Bitcoin was becoming an entity that more and more of the public knew about and interest in the cryptocurrency grew. This led to a rise in altcoins, other forms of cryptocurrency whose developers were either trying to improve upon Bitcoin or had created the digital coin for a different purpose. In 2011, Litecoin -- now the seventh-largest cryptocurrency by market cap -- debuted.
If 2011 was a choppy year for Bitcoin, 2012 was smoother sailing. Among notable moments for Bitcoin on its way to becoming the world's top digital coin was its crossing the $100 threshold in April.
Bitcoin's price saw its share of ups and downs in 2013, but it passed a value of $1,000 for the first time and was becoming the most recognizable and successful wallet and exchange available.
And then... it stalled for a while. Quickly in January 2014 it fell below $1,000 and struggled below the key level for a few years. A few things of note happened, like Crypto exchange Mt. Gox going bankrupt and shutting down, but this period mostly saw Bitcoin rising and falling somewhat while failing to reach its high.
2017, though, was the biggest and busiest year for Bitcoin. After spending 2016 desperately trying to claw its way back up, 2017 was when it finally reached and passed the $1,000 mark. It kept ascending. By June, Bitcoin was worth over $3,000.
Still, some Bitcoin users were frustrated with the network around this time as well. The rising number of Bitcoin miners meant higher fees and more time spent processing transactions, leading some to want an increase in block size. In August, this led to Bitcoin Cash (BCH) being created via a fork in the network. Bitcoin Cash is now the fifth-largest cryptocurrency by market cap.
Still, for the remainder of 2017 Bitcoin was on an upswing. By October, it was topping $6,000. It ended November at nearly $10,000, and by the end of December Bitcoin hit a peak of $19,783. More and more people and companies began chasing the trend as the price just kept rising. Unsurprisingly, it wouldn't continue that heady growth.
2018 has been a rough year for Bitcoin users, especially ones who held on assuming the price would keep ascending. Many sold their Bitcoins while they could, and the price has steadily dropped all year. As of this writing, Bitcoin's price is at $6,542.78, a decline of 67%.
Need more information on some of the concepts mentioned in the timeline? Here is what you need to know.
Proof-of-work is the system Bitcoin's blockchain network uses to create and hash blocks together. When the computer in a network must use proof-of-work for mining, it needs to solve a complicated mathematical problem. If a computer (called a "node" in the network) successfully solves the problem, it must then be verified by the other nodes in the network. If it does, the transaction is verified and completed, and the miner whose node solved it is rewarded with Bitcoins.
Proof-of-work is an incredibly controversial method. It's a secure method of verifying transactions, but requires a lot of energy. As more and more people began mining bitcoins, more high-powered mining hardware and graphics processing units (GPU) were created for people to gain an advantage. This consumes large amounts of energy, and with so many Bitcoin and other cryptocurrency miners out there, many are worried about the environmental ramifications. Some cryptocurrencies are testing a proof-of-stake method, which consumes significantly less power.
Satoshi Nakamoto is merely a pseudonym. The person behind it, however, remains a mystery.
It remains such a mystery that some think it's more than one person, doubting that one single person could create something as comprehensive as the Bitcoin network. Still, others have floated the possibility of it being one person, and there are plenty of theories as to who that one single person could be. None have been verified.
Who are the people that some people think could be Satoshi? Some of them have already been mentioned in this article, such as Bit Gold founder Nick Szabo, whose ideas were remarkably similar to that of Bitcoin. Others think it may have been Hal Finney, a notable developer and the person Nakamoto sent Bitcoins to in the first ever Bitcoin transaction all the way back in 2009.
One person is speculated as Satoshi because he tried literally saying he was. That person was Craig Wright, an Australian businessman who not only publicly claimed to be Satoshi Nakamoto but promised he would provide proof of it. So far, he has not provided this proof.
At one point in Bitcoin's history, it could be argued that Mt. Gox, a Tokyo-based Bitcoin exchange, was the largest exchange. But by 2014, it was gone.
Mt. Gox was plagued with security issues that would become its downfall. The 2011 hack came just a few months after Mark Karpelès, a French businessman, purchased the exchange. The hacker, upon access, artificially altered the nominal value of Bitcoin all the way down to one cent and then transferred 2,000 BTC from Mt. Gox customer accounts onto the exchange. These Bitcoins were sold, and in the brief moment that Bitcoin appeared to be worth a single penny, 650 were purchased.
This was a brief but severe setback for Mt. Gox, but the exchange put in new security measures and stabilized, growing to the biggest exchange by 2013. These security measures, though, weren't as effective as they had hoped. In early February of 2014, Mt. Gox stopped Bitcoin withdrawals. A few weeks later, all trading was stopped.
As it turned out, Mt. Gox was being hacked for years. Overall, hackers had taken 100,000 Bitcoins from the exchange - and over 744,000 from Mt. Gox customers. The company was insolvent, and the exchange filed for bankruptcy protection.
It's possible you only heard about Bitcoin in the last couple of years, but cryptocurrency developed a passionate following even when it was smaller. Some of those passionate people also took umbrage with some elements of Bitcoin, and others thought the blockchain behind it could be used for other purposes.
This birthed, at this point, hundreds of new cryptocurrencies that still exist today. 2011 saw the birth of Litecoin, a cryptocurrency similar to Bitcoin that advertises itself as having a significantly faster transaction speed than Bitcoin. This would also be a major selling point of Ripple and its XRP cryptocurrency, though Ripple seeks to help banks and financial institutions.
Bitcoin is still the cryptocurrency with the largest market cap by a large margin. Previously mentioned other altcoins (Litecoin, XRP, Bitcoin Cash) are also in the top 10. In second is Ethereum and its cryptocurrency of Ether. Ethereum stands out from others because its blockchain is used to hold data like smart contracts.
A hard fork in Bitcoin's blockchain network creates a major change to the network's protocol, such as Bitcoin Cash being created to increase the size of the blocks on the network. Only nodes with the upgraded network are able to validate transactions.
Changes made in the protocol can be for reasons like Bitcoin Cash, where many thought an idea was practical, or could be used for a necessary purpose like undoing transactions performed by a hacker.