Bitcoin Pizza Day Explained

Published in

Topic Crypto

6 min readMay 22, 2021

On the 22nd of May 2010, bitcoin was exchanged for physical goods for the very first time. Laszlo Hanyecz, an early bitcoin enthusiast and contributor, paid 10,000BTC for 2 Papa John’s pizzas.

Today, that transaction is ridiculed and revered in roughly equal quantities, with some mocking it as an apparent waste of what would become more than half a billion dollars worth of bitcoin, and others lauding it as a landmark moment in bitcoin’s history. Those in the latter camp celebrate May 22 as Bitcoin Pizza Day.

What Happened?

Let’s set the scene. Bitcoin was a little over one year old, its mysterious creator Satoshi Nakamoto was still active, and bitcoin was trading for less than a penny on the very first bitcoin exchange that had launched just months earlier. It’s needless to say that it was far too early for any shop (or pizzeria) to have even considered accepting bitcoin as payment — after all, almost no one knew about it. So, how did the pizza transaction work?

On May 18, early bitcoin contributor Laszlo Hanyecz made a post on the Bitcointalk forum saying he’d be willing to pay 10,000 bitcoin for 2 pizzas. With such a small number of bitcoin users at the time, it took 4 days and a thread bump to find someone who was both willing and able to accept the deal.

Finally, on May 22, Laszlo updated the thread to say he had “successfully traded 10,000 bitcoins for pizza” and posted some pictures of his meal, thanking someone called Jercos who had bought the pizzas for him.

Jercos was the online name of Jeremy Sturdivant, another early bitcoiner who was actually living more than 3500 kilometres away from Laszlo on the opposite side of the US at the time. But he wasn’t going to let geography get in the way of the purchase, communicating with Laszlo on IRC to finalise the deal before arranging a Papa John’s delivery to his house.

Jercos was paid well for his assistance, even when accounting for bitcoin’s low price at the time; the 10,000 bitcoin he received was worth about $42, while the pizzas cost just $25. The payment he received has only looked better as time has passed and bitcoin’s price has increased. In fact, it was the rising price that finally made others pay attention to the purchase many months after the event. When it happened, almost nobody paid attention or recognised the significance of the transaction, with only two other users commenting on it — one of which was bitcoin’s second-ever developer Martti Malmi.

In November 2010, after a substantial increase in bitcoin’s price, a user added to the thread asking what it was like eating a $2600 pizza. Those kinds of comments would continue to be added in the months and years that followed, and someone even created a Bitcoin Pizza Index to track the increasing value of those 10,000 bitcoin. At its peak, they were worth more than half a billion dollars.

Jercos sold those bitcoin well before they became that valuable, letting them go after a 10-fold increase in price to cover expenses while travelling. Meanwhile, Laszlo would go on to make many more pizza purchases throughout 2010, spending around 100,000 BTC in total.

Many headlines and stories you’ll see about this effectively mock him for that, as if he actually spent billions of dollars on pizza (which is obviously incorrect). In its early days, Bitcoin was effectively a worthless novelty that you could mine at home or request for free from bitcoin faucets. In that context, it’s easy to see why Laszlo has no regrets for spending his bitcoin on pizza. He says he’s just happy that he got some free meals from working on an open-source project. In a piece for Bitcoin Magazine he said, “usually hobbies are a time sink and money sink, and in this case, my hobby bought me dinner.”

Lazlo’s Other Contributions

Laszlo has less reason to regret his purchases than just about any other bitcoiner from that time period, as he had an easier time accumulating those coins than many others. That’s because Laszlo was the first to introduce GPU-mining shortly before his pizza purchase, allowing him to 10x his hashpower and mine thousands of coins per day while everyone else was using less efficient CPUs.

Interestingly, Satoshi Nakamoto was unhappy with this development, emailing Laszlo to say “a big attraction to new users is that anyone with a computer can generate some free coins… GPUs would prematurely limit the incentive to only those with high end GPU hardware. It’s inevitable that GPU compute clusters will eventually hog all the generated coins, but I don’t want to hasten that day.” Some have suggested that this interaction may have pushed Laszlo towards making the pizza purchase in an effort to redistribute some of the additional bitcoin he’d earned from GPU mining.

On top of this, Laszlo was also responsible for bringing Bitcoin Core to macOS, so he’s clearly an extremely important figure in Bitcoin’s history from a technical perspective. But he’s rarely remembered for that. Instead, the focus is always placed on his Pizza payment, largely because the idea of a multi-million dollar pizza makes great clickbait, but also because there is genuine significance to the transaction.

Why It Matters

Earlier, I mentioned that Bitcoin was purely a novelty in 2010 — Laszlo has even said it was like “monopoly money” at the time — and that’s why the Bitcoin Pizza transaction meant so much: it was the first time anyone had exchanged anything real and genuinely valuable for bitcoin. It was Bitcoin’s zero to one moment. It proved that Bitcoin had value beyond the pure speculation that had taken place up to that point, and it was Bitcoin’s shaky first step on the long road to becoming a widely accepted and respected money — a road that it continues along today.

If that still doesn’t sound significant, just think about how many copycat cryptocurrencies have come along and failed to even make it as far as a ‘pizza-style’ transaction. Virtually everything else has failed to even reach that first hurdle, despite coming into existence in what has almost certainly been a more favourable environment. And yet, Bitcoin managed it when it was little more than a one-year-old internet oddity.

Once the pizza transaction had set a precedent and proved Bitcoin’s potential as a medium of exchange, it wouldn’t take too long for others to start using it in that way, particularly as darknet markets like the Silk Road took off.

The popular perception of Bitcoin and ideas about how it should be used have evolved significantly since then, with focus shifting to Bitcoin’s function as a store of value rather than a medium of exchange — but that doesn’t mean the pendulum won’t swing back in that direction once Bitcoin is more established and stable, or that efforts to encourage bitcoin for payments have completely faded.

Today, it’s entirely obvious that the tradeoffs required to keep blockchains secure and meaningfully decentralised means they can’t directly support day-to-day payments, and so many are looking to ‘layer 2’ scaling solutions to solve this. For Bitcoin, that comes in the form of the Lightning Network, a system of payment channels that will allow for faster, cheaper, and more private bitcoin transactions. On February 25th 2018, in something of a symbolic move that points to the future potential of Lightning and bitcoin as a transactional currency, Laszlo Hanyecz became the first person to buy pizzas using the Lightning Network. This time, he paid just 649,000 Satoshis (0.00649 BTC) — I guess we’ll just have to wait and see if that transaction becomes as ludicrously expensive or as significant as the original.

Bitcoin Pizza Day Explained

What Happened?

Lazlo’s Other Contributions

Why It Matters

Further Reading:

Written by Joseph Harris