History of bitcoin

How to turn an IT experiment into a common tool, that shakes the world of the economy? Unfortunately, it is not that easy, and the only man who managed to do it is elusive. We’re talking about cryptocurrency bitcoin, and its creator, hiding under the nickname Satoshi Nakamoto. Let’s start from the beginning.

The cryptocurrency concept

In 1998 Chinese computer engineer, Wei Dai, created and published the very first concept of the electronic and completely anonymous cash system. To achieve that the system would have to be completely decentralized and that decentralization would be the main difference between regular currencies and cryptocurrencies. Currencies are always being controlled by governments. They control the currency system by printing fiat money, which is money with no intrinsic value, or demanding additions to digital banking ledgers. The cryptocurrency system, in theory, was supposed not to have the central eminent. It would work as a medium of exchange and secure transactions by using cryptography. Cryptography would also have one essential function – controlling the creation of any additional units.

The manifest

The idea of bitcoin based on We Dai’s concept. In 2008 someone known under a nickname Satoshi Nakamoto published the “Satoshi Nakamoto Manifest”, in which the whole concept and technical issues if bitcoin were described. The basis for bitcoin is peer-to-peer system, and transactions take place directly between users, without any intermediary. The transactions are verified by network nodes and recorded in public distributed ledger called a blockchain. Blockchain is simply a chain of blocks, where each block contains the group of information about accepted transactions. This solution prevents from double-spending, since the blockchain is public, and contains information of particular transactions.

history bitcoin

The implementation

1st of March, 2009, the blockchain started its existence as the very first block, “Genesis” was created. A few months later Satoshi Nakamoto conducted first bitcoin transaction sending 10 bitcoins to Hal Finnley, who, by the way, was one of the first bitcoin supporters. At first, Nakamoto was the only bitcoin miner, and it is estimated that in early bitcoin days he managed to mine about a million of bitcoins. After that, he disappeared and handed over the system to Gavin Andersen, who started Bitcoin Foundation and became the lead bitcoin developer. Another historical moment was when user “laszlo” ordered two pizzas paying 10 000 bitcoins for it, which was a value of 41 dollars at that time. Soon after the transaction the bitcoins were sold by the receiver, which he probably regrets right now.

The hype

When bitcoin appeared on the market, its value was 0,003 dollars. Right now it’s 4,422.12. It’s popularity started at first in groups of cypherpunks. Cypherpunks are people who believe that using strong cryptography is a way of introducing changes in social and political life. Privacy is primary value for them, so that anonymous payment system was the perfect solution. In 2011 first car was sold for bitcoins, to be exact 3000 BTC. Two years later a university on Cyprus introduced bitcoin payment for the tuition. Then the popularity of bitcoin kept growing. Nowadays more companies accept bitcoins, and this option appears even in cafes and restaurants. Cryptocurrency was called a temporary trend, but right now things got serious. What is the future of bitcoins? No one predicted the success, so probably no one can tell how bitcoin will develop.