beincrypto.com 1 h Reading time: ~5 m
It is a milestone that the crypto community can always look forward to. A birthday to celebrate as you’re still cleaning up after your New Year’s Eve party. So get the balloons out because today is the day Bitcoin turns fourteen. To help you celebrate this milestone, BeInCrypto is taking you on a quick jaunt through the currency’s storied history.
Bitcoin (BTC) first appeared in Satoshi Nakamoto’s Bitcoin Whitepaper, which was first published on October 31, 2008. The paper, called ‘Bitcoin: A Peer-to-Peer Electronic Cash System,’ laid out the basic tenets of the Bitcoin network. Namely, it was to be decentralized on a blockchain and would operate independently of any financial institution. No central bank and no central server. The anonymous programmer designed it to be moderated by code, computers, and the people who used it.
Satoshi’s project was also how the vast majority of the world came to know the concept of Proof-Of-Work. Which, until recently, was the favored consensus mechanism for blockchain-based cryptocurrencies. The Proof-of-Work algorithm wasn’t created by Bitcoin, as is widely believed; it merely propelled it into the mainstream.
The concept first appeared in a 1999 academic essay by Ari Juels and Markus Jakobsson called “Proofs of Work and Bread Pudding Protocols.” In the essay, the authors describe it as “a protocol in which a prover demonstrates to a verifier that she has expended a certain level of computational effort in a specified interval of time.”
Bitcoin introduced the concept of ‘mining’ as a competitive task and added an economic incentive in the form of a coin reward. Satoshi mined the first block of Bitcoin on January 3, 2009, less than four months after the whitepaper was published. Fourteen years ago this week.
Hobbyists, Eccentrics, And The Dark Web
It took some time for the project to lift off. It wasn’t until May 22, 2010, that the first reported real-world financial transaction took place. A Florida man traded 10,000 BTC for two Papa John’s pizzas worth about $25. In that transaction, the value of one Bitcoin was approximately four cents. To this day, the Bitcoin community continues to celebrate Pizza Day on May 22.
For many millions around the globe, the first time they ever actually traded bitcoin would have been on the Dark Web, a domain of the internet designed to be free from censorship and surveillance. In this respect, Bitcoin and the Dark Web were perfect companions. Whereas Bitcoin cannot offer true privacy (all transactions are immutable and public on its blockchain), its lack of a central authority added a double layer of security and anonymity when used in conjunction with the Dark Web browser, Tor.
These elements were not just to the advantage of activists and dissidents. Unsurprisingly, Bitcoin caught the attention of criminal elements too. Two years after Bitcoin’s first transaction, on February 11, 2011, Ross Ulbricht launched The Silk Road, the first efficient online marketplace for trading illicit substances and services. According to the US government, Bitcoin facilitated a total revenue of approximately $183 million, involving 146,946 buyers and 3,877 vendors.
Ethereum and the ICO Boom
The birth of Ethereum (ETH) also makes a key turning point in the lifecycle of Bitcoin. Whereas Naksmoto’s original currency had merged two things, a digital asset run and a public blockchain, its critics say that this paradigm was profoundly limiting.
Whereas Bitcoin was conceived as a store of value and a method of exchange, Ethereum employed smart contracts. A self-executing contract written using code that would initiate when certain preconditions were met. Vitalik Buterin, the author of Ethereum’s initial whitepaper, first brought the project to the world’s attention at a Bitcoin conference in Miami, Florida, in 2014.
The success of both Bitcoin and Ethereum was the necessary precondition for the ICO boom of 2017. The name is given to an explosion of tech startups that would issue new digital currencies to help fund their development. None of these projects, nor any of the so-called “Ethereum killers,” would come close to the success of Bitcoin itself. On February 1, 2017, before the ICO boom had really caught wind, Bitcoin’s dominance sat at a whopping 96%. (Bitcoin dominance refers to the coin’s current share of the global crypto market.)
By the beginning of 2018, Bitcoin’s dominance sat at a record low of 38%. As investors balked at the masses of scamcoins and shitcoins, people returned to bitcoin in their droves. The prevailing sentiment was that no other coin could compete with Bitcoin’s tried and tested value offer.
Bitcoin To The Moon?
There have been other projects that have taken Bitcoin’s structure and built on it. One of the most renowned that does not enable smart contracts is ZCASH (ZEC). A payment cryptocurrency that takes the fundamentals of Bitcoin but adds a layer of optional privacy. Despite innovations and thousands and thousands of “altcoins,” the health and price of Bitcoin is still used as a metric for the wider cryptocurrency market. Altcoins often track its predecessor in value, and alongside USD, is the primary method of measuring a cryptocurrency’s price.
BTC reached its ATH (or all-time high) in November 2021, at the tail-end of that year’s bull run. Despite a drop of 76% in a little over a year, people are still stubbornly bullish on Bitcoin’s ability to replace fiat currency and reach new ATHs. In the fourteen years since its first mint, it has spawned an active community of backers that would make the most popular sports teams blush. The co-founder and former CEO of Twitter, Jack Dorsey, has said he believes ‘the world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be Bitcoin.’