Bitcoin Series #2: A Brief History of Bitcoin
In the last post we got a general overview about Bitcoin and Cryptocurrencies. Today we are going to drive a little deeper into the history of Bitcoin, the most famous cryptocurrency.
Humble beginnings
While Bitcoin may be the most well-known cryptocurrency, it was not the first of the digital cash technologies on the scene. The distinction goes to the cash protocols conceived by David Chaum in 1983. The system was able to attract the attention of only one bank and closed down in 1998. The was followed by a number of other digital currencies such as Wei Dai’s b-money and Nick Szabo’s bit gold.
Bitcoin came to the scene in November 2008 as part of a paper posted on a cryptography mailing list by Satoshi Nakamoto, an alias. The paper was titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. The paper described the benefits and methods of using a peer-to-peer network in order to log every transaction without having to strictly rely on trust. The Bitcoin network came into existence in January 2009 as the first Bitcoins were mined by Satoshi Nakamoto and released to the public.
By 2011, Bitcoin’s open source code, gave birth to a number of other cryptocurrencies. During this time there was a growing acceptance of cryptocurrencies. Bitcoin exploded into public attention with the first viral video released by WeUseCoins on 22 March 2011. The video attracted 6.4 million views and led to greater attention focused on Bitcoins.
By October 2012, over 1,000 merchants began accepting Bitcoin as part of their payment processing services. This was evident by early 2013 when the Bitcoin-based payment processor Coinbase reported that they had sold over $1 million US worth of Bitcoins in a single month.
Growing pains
Bitcoin had its first major downturn in the Spring of 2013 when the Bitcoin transaction log, or blockchain, temporary split into two independent chains. problem. Users reacted to this by selling off their coins, anticipating a drop in the cryptocurrency.
Then Mr Gox, one of the major exchanges for the Bitcoin market, halted their transactions, the exchange rate dropped by 23%. However, it was not long before the market recovered and the price of Bitcoin reached its previous level in a matter of hours.
Caught up in regulations
The first regulations to address coins occurred when the Financial Crimes Enforcement Network of the US came in the form of guidelines for decentralized virtual currency and at the same time classifying Bitcoin miners who were located in the United States as Money Service Businesses, applying a number of legal obligations such as registration to their operations.
The most significant blow to the Bitcoin market came on the May 15, 2013. The largest Bitcoin exchange, Mt Gox, collapsed due to US authorities seizing the associated accounts for not following legislation as Mr Gox had not registered their business. While this significantly devalued the cryptocurrency, it showed no signs of sowing down as more number of merchants started accepting Bitcoins.
There were a number of other high profile incidents involving Bitcoin such as the US DEA seizing 26,000 Bitcoins when the largest Dark Net website, the Silk Road was disabled and its owner arrested. Mr Gox also filed for bankruptcy in Japan in February 2014, taking with it 744,000 Bitcoins. However, following Mr Gox’s downfall, the number of Bitcoin exchanges grew.
Marked by volatility
While the number of people accepting and transacting in Bitcoins is growing, there have been a number of security breaches and concerns regarding use of cryptocurrencies for illicit trade have persisted. This has hampered a wider adoption of Bitcoin and its siblings. There has also been a growing trend of countries around the world introducing legislation to control the use of Bitcoin while some have started working on their own cryptocurrencies.
This has led to a significant volatility in the price of Bitcoin. The volatility and the resulting highs and lows are a reason many people are wary of it.
So where is this all headed?
Despite its humble beginnings and a tumultuous history, Bitcoin is here to stay. While many people are still trying to get their heads around the idea of cryptocurrencies, blockchain, DeFi, NFTs and what not, the world of finance and money as we know it is being completely transformed right before our eyes.
Bitcoin’s history has been marked by high volatility as cryptocurrencies are still not widely accepted. There is also growing resistance from governments all around the world. However, despite this, today more than 15,000 businesses worldwide accept Bitcoin and this number is likely to grow by leaps and bounds in the future.
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