Bitcoin, even as the pioneer of commercially used digital currency, has always remained on the fringes of mainstream media’s attention. The history of bitcoin and its development, thus, appears to be erratic and its catapult to fame, sudden. This piece helps readers identify the growth story of the virtual currency since its early inception:
The Registration of Bitcoin
The knowledge of the initial stages of bitcoin’s creation is largely speculative. The web domain bitcoin.org was anonymously created in August 2008 as per historyofbitcoin.org and the design paper behind its technology titled “Bitcoin: A Peer-to-Peer Electronic Cash System” released in October the same year by Satoshi Nakamoto, the famed mysterious creator behind the technology. Sources trace the actual inception of the digital asset to three individuals who had filed for the registration of a patent relating to encryption technology in August 2008, which closely resembled the layout for the digital currency when it first released, despite the individuals denying any connection to the supposed creator.
Nevertheless, the encryption technology had come into play with the release of the early versions of the asset’s core software on bitcoin.org. The domain still serves as an important resource for learning about the technology and how it is traded.
The Mining of Block 0
Bitcoin technology works on the concept of “blocks”, which reference previous blocks or transactions that took place just prior to it and so forth, thus creating a chain of blocks ‘blockchain’. A blockchain serves as the public ledger or proof for all bitcoin transactions. The first block, or the Genesis Block as it is known, was mined on January 3, 2009, and its proof of work was unique since it referred to no prior block.
The first known transaction of a transfer of bitcoin took place between Satoshi Nakamoto and Hal Finney (a co-creator and cryptographer) three days later.
The Release of Bitcoin 0.1 Software
The foremost version of the core software for mining of bitcoins was released on January 9, 2009, and has since seen a number of collaborative improvements by improving upon the protocols under that initial version, known as the Bitcoin Improvement Process (BIP). The protocol works in a manner where users run the software on personal CPUs forming ‘nodes’, for the peer-to-peer network of existing bitcoins, which are linked through the software containing rules for facilitating communication between nodes. Bitcoin mining is still performed through modified versions of a software program or purchased through mediums for buyers and sellers, such as stock exchanges.
An Exchange Rate for Bitcoin
The value of a bitcoin was determined in October 2009 by a system devised by the New Liberty Standard for the digital asset which was based on costs involved in the mining of a coin, including the electricity costs of running CPUs. Formerly, when bitcoin mining was far less competitive than it is in 2018, bitcoins could be mined inexpensively through user CPUs. The value was determined through an equation at $US 1 = 1,309.03 BTC (source: historyofbitcoin.org).
First Difficulty Increase in 2009
The interest in bitcoins increased with the demand for them being approximated with an exchange rate value and a bigger number of miners began to take up the task of ‘solving’ bitcoin problems to mine their own currency, which was how the system was commonly used at the time. The increase in demand for problems led to the first automatic adjustment of difficulty in order to increase the average time for solving to 10 minutes per bitcoin, to control the supply of bitcoins to mining nodes. Multiple difficulty increases took place on a regularised basis since then in order to accommodate the rising demand for bitcoin globally.
Bitcoin Market: The First Bitcoin Exchange
Trading for bitcoins was systematically introduced over an exchange with the establishment of “The Bitcoin Market” in February 2010. The exchange did not continue for a long period of time and was subsequently replaced by the better market and successful exchanges that opened up in Japan and France in the same year.
NASDAQ Begins Using Blockchain Technology
NASDAQ was among the foremost stock exchanges in the world to adopt blockchain technology for its system of successfully recording securities transactions for its clients through its Ling Blockchain Ledger Technology, which it released in 2015.
The US Commodity Futures Trading Commission in December 2017, defined bitcoin digital currency as a commodity and allowed futures trading on three stock exchanges, significantly buttressing opportunities for increasing the market capitalisation base to mainstream investors.
Japan legalises Bitcoin as Currency
In the first quarter of 2017, bitcoin prices averaged around $US 1,000 per bitcoin. Then, on April 1, 2017, the Japanese government decided to legalise the use of bitcoin as a currency, skyrocketing its value by 300% in three months. Eventually, the value saw a downturn and survived the bearish market to hover at a 500% value by the beginning of the last quarter of 2017. The Japanese government clearly decided on an aggressive move to capitalise the trend, legalising four cryptocurrency exchanges by the end of 2017. When most nations were still toeing the line of cautioning investors from investing in BTCs, Japan’s confidence in the digital asset sent a strong message to investors regarding the direction in which other nations were likely to shape their policies.
Bitcoin Reaches Highest Price of $19,783/BTC
Over the winter of 2017, bitcoin saw its most historic rise in a short span, reaching $US 10,000 to an all-time high of $US 19,783 per bitcoin on December 17, 2017. Multiple reasons around this time were attributed to this rise, such as the propensity of companies wanting to cash in issuing their own forms of cryptocurrency (Kodak) and news of Initial Coin Offerings in Japan and United States. Coinbase saw 100,000 new accounts being opened within the first week of November.
Anticipated End of Bitcoin Mining
Users of the bitcoin mining community have anticipated that keeping in mind the difficulty increases for mining bitcoins and costs at these levels, the entire gamut of bitcoins (21 million) will be completely and successfully mined by the year 2140. This means that the market of bitcoin would be in contemplation of those finite number of bitcoins being traded as per that date.
At present, the value of bitcoin still remains at $8,860, which is approximately 5,78,000 rupees/bitcoin. The technology behind bitcoin itself has succeeded in infinite uses and is bound to become a reality in commercial day-to-day usage. With all its perceived issues across the previous decade, the future of the digital asset promises to be exciting.
Tell us in comments how much it was helpful or if we missed covering any important terms.
Disclaimer: Trading in cryptocurrencies is subject to market, technical and legal risks. Prices in India vary from international prices due to local demand and supply. This article is for user’s knowledge. Please don’t consider this as any investment advice.