A Brief History of Bitcoin
Bitcoin is making headlines again around the world as its value heads skywards at record speed. A year ago, a single Bitcoin would have set you back just over $7,000, while in March, you could have bought one for as little as $5,000.
Since then, the cryptocurrency has been on an upwards trajectory on a scale that’s only beaten by the boom of late 2017.
Of course, there is no way to accurately predict what the future has in store for Bitcoin or other tokens like Litecoin or Ethereum. But we can take a look at their history to better understand how we got here, which, in turn, may give us a better insight into the future.
The Internet Before Crypto
The internet itself is a major technological innovation. It has connected people and businesses from all over the world and allowed them to interact, do business, and share information freely.
Over the last two decades, it has been altered almost beyond recognition by other technical innovations. For example, smartphones and tablets have changed the way many get online, allowing users to video chat with services like FaceTime, play games with others thanks to companies like PokerStars, and share their days through social media sites like Instagram.
Another development that could have the biggest impact on the way everything in the world operates is cryptocurrencies. Up until the creation of Bitcoin, all internet payments had to be linked to a name, were controlled by a bank, and used centuries-old systems. That all changed during the height of the biggest recessions seen in the best part of a century.
Bitcoin - The Birth of a New Asset Class
Bitcoin was first published to the world in late 2008. The domain name bitcoin.org was registered in August of that year, while a paper published by “Satoshi Nakamoto” first began circulating at the end of October. In January the following year, the first (or genesis) Bitcoin block was mined.
No one is quite sure who Nakamoto is. It is assumed the name is a pseudonym, and it is not certain whether the mysterious Satoshi is one person or a group. However, this isn’t actually seen as too important within the crypto community.
The concept of a “cryptocurrency” had been around before this, with theoretical proposals published as far back as 1992. However, the first to actualize the technology was Bitcoin.
A couple of years later, using the open-source code of Bitcoin, many other cryptocurrencies began to emerge. One of the most famous from this time is Litecoin, which continues to trade today despite a decline in popularity and influence.
Others, such as Ripple and Ethereum, began a few years later, offering features like support for smart contracts.
Acceptance as a Currency
Bitcoin and other cryptocurrencies began being used in transactions very quickly, though most were informally negotiated among individuals. One of the earliest examples is from May 2010, when one person used 10,000 Bitcoins to buy two pizzas. At the time, a single BTC was worth less than $0.01. Today, the same number of Bitcoins would be worth $184 million.
In 2011 and 2012, some major organizations began accepting Bitcoin for transactions. This included the Electronic Frontier Foundation and WordPress. Over time, more consumer-facing brands began accepting cryptocurrencies, including Microsoft, KFC, and Starbucks.
Boom and Bust
Bitcoin was made famous in 2017 when worldwide household recognition was achieved thanks to its booming price. It started the year valued around $800, but fell as low as $750 by mid-January.
Soon afterward, Bitcoin began a rapid climb, reaching $5,000 by September, $8,000 by November, and peaking at $19,783.06. That high was 1,824% higher than at the beginning of the year. A crash soon followed. By the following February, the price had fallen to $6,200.
That was the first (and likely won’t be the last) time the digital currency has seen a rapid rise and fall in its value. The first took place in June 2011, when Bitcoin spiked at $31 before falling to $2 in December. It happened again in November 2013, climbing from $150 in October to $1,242, only to fall to $600 in December.
We’re likely seeing the start of another boom, with the price shooting past $10,000 in mid-2020 and reaching more than $18,000 in November.
The future looks bright for cryptocurrencies in general, though Bitcoin remains the most famous and therefore the most popular. Most other coins track its performance, with investors seeing the price of Bitcoin as an indicator of what other currencies should do.
Bitcoin has established itself as a store of value, offering protection against inflation in the same way that gold does. However, it still struggles to break into the world of payments. Slow progress is being made, but success in this area is yet to be determined.