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The idea started with the Cypherpunks
The idea for something like Bitcoin has been floating around the internet for a while. There were already plans for a digital currency in the 1990s. A currency without interference from governments and banks. These ideas came from the cypherpunks.
Cypherpunks are computer programmers with a knack for cryptography. But with a clear, almost rebellious vision. In this digital society, privacy is at stake. Everything you do is recorded and that information can end up in the wrong hands. According to the cypherpunks, that is not a good development.
Cypherpunks are for the preservation of privacy. You can read that in the manifesto of the Cypherpunks from 1993: ‘Privacy is necessary for an open society in the electronic age.’
The cypherpunks wanted to develop a currency that guarantees privacy. Several groups tried to create such a currency, but none of them have taken off. Computers and the internet were not yet advanced enough for such a development.
Until 2008.
The introduction of Bitcoin
The pseudonymous Satoshi Nakamoto published his Bitcoin plan on the mailing list of the Cypherpunks on October 31, 2008. The title was Bitcoin: A Peer-to-Peer Electronic Cash System. This plan is also known as the Bitcoin white paper. In eight pages, Satoshi Nakamoto writes why he invented bitcoin and how it works. The beginning of the plan describes the “why” of Bitcoin. The other part describes the technical part of Bitcoin.
Nakamoto explained how bitcoin transactions would take place on the blockchain. He never mentioned the word ‘blockchain’. That word is only added later by someone from the Bitcoin community. The word Bitcoin is also only used once in the white paper: in the title.
To this day we don’t know who Satoshi Nakamoto is. It can be a man or a woman, or a group of people. The unknown identity of Satoshi may be the reason why Bitcoin has succeeded.
The Bitcoin Network launches
On January 3, 2009, the Bitcoin network launched. Satoshi Nakamoto was the first participant and he used his computer to mine Bitcoin. Mining is the processing of Bitcoin transactions in blocks. In the beginning, there were actually no trades at all, as Satoshi Nakamoto was the only user.
Later, Hal Finney, an American programmer joined. Hal Finney was the first to receive bitcoin through a direct transaction. On January 12, 2009, Nakamoto sent 10 Bitcoin to Hal Finney.
The very first Bitcoin transaction block, called the Genesis Block contained something special. In this block, Satoshi added a newspaper headline: ‘Chancellor on brink of second bailout for banks’. Satoshi Nakamoto incorporated this headline for a reason. Besides privacy, the economic crisis of 2008 and the power of banks are important reasons for the creation of Bitcoin.
An expensive pizza
On a bitcoin forum, Laszlo Hanyecz offered 10,000 Bitcoins to whoever had two pizzas delivered to him. Not a direct transaction, but a milestone. The first Bitcoin sale was a fact.
Bitcoin creator leaves the project
Satoshi Nakamoto was last heard of on April 23, 2011. As quiet as he came, he left the project. In an email to programmer Mike Hearn, he said the project was “in good hands.” It is conjecture about why Satoshi Nakamoto left the project. Chances are that Satoshi left Bitcoin behind because he believes that no one should rule over bitcoin.
First Bitcoin exchanges get off the ground
Early major Bitcoin transactions took place on black market websites. The largest was Silk Road, where users bought and sold illicit goods. The arrival of Bitcoin exchanges changed that. Mt. Gox made it easier than ever for users to trade Bitcoin for the first time. There was a market for Bitcoin, with huge supply and demand. Mt. Gox has a dubious reputation in the crypto world as the exchange went offline in early 2014 after a hack. The hackers stole over 750,000 Bitcoin, at that time being worth around $350 million.
Because people used Bitcoin at black market websites, several countries decided to regulate Bitcoin trading. The People’s Bank of China had the most impact on Bitcoin trading as they:
– prohibited financial institutions from using Bitcoin.
– Completely banned the use of Bitcoin.
– Cracked down on major Bitcoin miners.
Other countries, like El Salvador, took a different approach. El Salvador gave Bitcoin the status of legal tender.
Nowadays there is Bitcoin news daily. More and more people use Bitcoin to conduct payments or speculate on its value. We recommend following cryptocurrency-related news before investing in them.
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Stefan Grasic (Dipl.-Jur) is the owner of Business24-7 and has considerable experience in the financial and investment niche, but also enjoys writing articles for the general readership. Stefan is an active stock, CFD, crypto and general investment researcher, advising blockchain companies such as Blockbird, GoCrypto, Hive Terminal at their start up level. Stefan began trading in 2010 as a college student. Money was tight,…