Listed below are selected key events that played a role in Bitcoin’s initial evolution and performance. Due to the great number of important occurrences, the list is incomplete and doesn’t cover all relevant or influencing events. Please understand it as my personal view on what happened in the world of Bitcoin up to the date my book A brief introduction to Bitcoin was published. For the sake of clarity, the chronological development is divided into a few subsections.
· Satoshi Nakamoto publishes the Bitcoin white paper on 31 October 2008.
· On January 03, 2009, the genesis block is created.
· Five days later, on January 08, 2009, the Bitcoin code is released.
· On January 12, 2009, the first Bitcoin transaction between two people occurs, when Satoshi Nakamoto sends 50 Bitcoin to the cryptographer Hal Finney. This is the only transaction known to have been sent by the creator of Bitcoin.
· In May 2010, the first transaction for real-world goods takes place with the purchase of two pizzas for 10,000 Bitcoins by the programmer Laszlo Hanyecz. The price for the pizzas was negotiated on the “Bitcointalk” forum.
· In October 2010, the first escrow exchange takes place on the Bitcoin forum.
· On November 6, 2010, the Bitcoin economy exceeds $1 million.
· On December 16, 2010, the first Bitcoin pool, Slush, verifies its first block.
· On February 9, 2011, the Bitcoin price hits U.S. dollar parity. This event prompts several IT journals (Slashdot, Hacker News) to report about Bitcoin.
· In March and April 2011 exchanges are opened to new currencies (British Pound Sterling, Brazilian Reals, Polish Zloty) and TIME Magazine publishes an article about Bitcoin.
As a result of these and other events, the Bitcoin value on the exchange MtGox, which was the leading Bitcoin exchange at the time, hits an all-time high of $31.91 with a market capitalisation of approximately $206 million on June 8, 2011.
Beginning in June and ending in late 2011, the Bitcoin value has its first major slump after reaching a low of $1.99 on November 17, 2011. A conceivable explanation for the negative development is a series of thefts.
• MtGox, on June 19, 2011 has 60,000 user accounts stolen from its database. An unidentified hacker is able to log in to MtGox as an administrator and set sales orders of hundreds of thousands of Bitcoins into the system. As a result, MtGox freezes trading for seven days and reverses the sales orders.
• On June 20, 2011, the EFF (Electronic Frontier Foundation) announces they no longer accept Bitcoin payments for donations.
The opinions of the media on Bitcoin are largely negative after these events. The online magazine „Wired” publishes an article titled „The Rise and Fall of Bitcoin”, which entails statements that the digital currency has become unusable.
Contrary to expectations, the currency stabilises over the following weeks. After the low is reached at just below two U.S. dollars, the price recovers quickly up to a high of $7.22, when the currency is featured in an American legal drama with over 10 million viewers. A price correction brings the price down again to about $5, where it stays relatively stable for more than three months.
Only in May 2012 does the price begin to rise again.
By the end of August 2012, the price has risen to $15.4, fuelled by new media attention and an artificial boom brought about by fraudulent Bitcoin Ponzi schemes. When the Ponzi schemes are exposed and collapse, the price oscillates between ten and fourteen U.S. dollars for several months.
In 2013, the price rises almost exponentially, from under $20 in early February to over $220 in April. A popular explanation of this increase is the financial crisis in Cyprus. Another explanation by economists are the new investors stepping into the Bitcoin market after the Financial Crimes Enforcement Network (FinCEN) makes clear statements in March 2013 regarding the legal status and legal obligations of decentralised currencies. Added to this is the growing number of companies that begin accepting Bitcoin as a payment method together with the interest of the media and the general public. In October 2012, Bitcoin is listed as a currency in Capgemini’s eighth annual World Payments Report.
In April 2013, the payment processor „BitInstant” and the largest exchange platform MtGox experience strong delays of up to a half an hour on sales orders due to high demand overburdening their capacity. As shown above the Bitcoin price falls from $266 to $76 on April 10th, 2013 and returns to $160 within six hours.
Following the collapse in April 2013, Bitcoin experiences a long period of high volatility coupled with low liquidity. Silk Road, which was one of the largest black markets using Bitcoin as a method of payment, is forced by DDoS attacks to shut down its services at short notice. This prompts dealers to leave the Bitcoin market.
• It is publicly announced that sensitive data has been stored in the blockchain, including 2.5 MB of Wikileaks U.S. diplomatic cable leaks as well as links to child pornography. Once this data is committed to the blockchain it cannot be removed, meaning every owner of the blockchain has access to it. This results in damage to the image of the blockchain.
• Two of the largest Bitcoin companies at the time, CoinLab and MtGox, have litigation over their contractual arrangements. U.S. Homeland Security blocks an account of the MtGox Mutuum Sigillum LLC subsidiary after the exchange fails to register as a money transmitter.
• In this period, multiple exchanges suffer major hacks and come under stronger regulatory scrutiny. The exchange Bitstamp suffers a major hack and loses 19,000 Bitcoin, or about $5 million at the time, and Bitfinex loses over $60 million. The IRS demands user information from all exchanges.
• Despite this, big players garner strong interest in Bitcoin. Wallet and exchange provider Coinbase raises funding from investors including the New York Stock Exchange (NYSE), Fortune 500 financial services group USAA, Spanish mega-bank BBVA and Japanese telecom giant DoCoMo. Later, multiple big institutions like the global stock market Nasdaq, the Bank of England and IBM, begin experimenting with blockchain technologies. Multiple blockchain projects like Ethereum and ZCash take off.
• In a series of clashes between powerful names in the crypto space and the law, the founder of the online dark market Silk Road, Ross Ulbricht, is sentenced to life in prison. MtGox founder Mark Karpeles is charged with embezzlement for tampering with user balances for personal gain, leading to the shattering collapse of MtGox.
• A controversial attempt is made to resolve the scaling issue, when Bitcoin developer Mike Hearn forks Bitcoin XT to allow an increase of the block size limit.
• More and more coins and tokens begin appearing in the crypto space. “ICOs” (Initial Coin Offerings) take flight and with them a new exchange, Binance.
• In 2017, China, which has become the biggest force in the crypto world with 8 out of 10 exchange transactions being in yuan, announces it would ban cryptocurrency exchanges. Except for a short period of panic, this has no tangible, lasting effects.
• Bitcoin Cash and Bitcoin Gold fork from the Bitcoin blockchain. Bitcoin Cash claims to solve the scaling issue by increasing the block size and causes a big ideological rift in the Bitcoin community.
• In January 2018, after an entire year of solid growth, the Bitcoin price falls from a high of nearly $20,000 down to below $8,000 in March and stays well below or around $10,000 until the end of 2019.
This article is an excerpt from my book, A brief introduction to Bitcoin.