On the 31st of October 2008, an anonymous figure by the name of Satoshi Nakamoto published a white paper detailing a design for a “peer-to-peer electronic cash system,” a global financial infrastructure that was cryptographically secure. Thirteen years later, it has now been made legal tender for the first time, in El Salvador, and is being discussed regularly in the context of global economic policy.
Let’s take a look at how we got here.
THE BIRTH OF BITCOIN
The concept of Bitcoin was published in a white paper written by an anonymous figure under the pseudonym Satoshi Nakamoto in 2008. No one knows the author’s true identity — or if it’s even a single person, rather than a group of people.
In the white paper, Nakamoto described it as a ‘purely peer-to-peer version of electronic cash’ that ‘would allow online payments to be sent directly from one party to another without going through a financial institution or any intermediary.’
On the 3rd January 2009, the genesis block (or block zero) for Bitcoin was mined over seven days by Satoshi. In this initial transaction, Satoshi famously included the following message:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
The Bitcoin software was made available to the public for the first time, and mining – the process through which new Bitcoins are created and transactions are recorded and verified on the blockchain – began.
BITCOIN PIZZA DAY
On the 22nd May 2010, the first recorded use of Bitcoin occurred when Californian student Jeremy Sturdivant noticed a request on a cryptocurrency Internet forum: He could receive 10,000 bitcoins, at the time reportedly valued at roughly $41, in exchange for the delivery of two large pizzas to Florida resident Laszlo Hanyecz, 28. Sturdivant filled the order, sending him two large pizzas (cheese and supreme) from Papa John’s. Today, that 10,000 bitcoin would be worth roughly $850+ million AUD!
Silk Road is a key moment in Bitcoin’s history. Launched in February 2011 by Ross Ulbricht, Silk Road was an online darknet marketplace that used Bitcoin as the currency. The narrative of Bitcoin as a currency of choice for criminal activities stems from its use on Silk Road. Despite this, the darknet marketplace did exhibit Bitcoin’s capability of facilitating peer-to-peer trade in an open market.
RIVAL CRYPTOCURRENCIES EMERGE
As Bitcoin increased in popularity and the idea of decentralized and encrypted currencies caught on, the first alternative cryptocurrencies (commonly referred to as altcoins) appeared. Among the first to emerge were Namecoin and Litecoin. As of today, over 10,000 of these altcoins have been created worldwide.
THE END OF MT. GOX
Launched in July 2010, The Gathering Online eXchange, better known as Mt. Gox, became the largest Bitcoin exchange in the world. It facilitated around 70% of the network’s transactions at its peak from 2013 into 2014.
But in January 2014 it went offline and its users, with a combined total cryptocurrency portfolio of 850,000 Bitcoins, never saw them again. At today’s prices, those missing coins would be worth over $6.8 billion AUD.
THE INTRODUCTION OF THE HARDWARE WALLET
It's no coincidence that 2014 was the year hardware wallets first hit the market. Bitcoin became an attractive and lucrative target for criminals, as seen in the Mt. Gox hack, and people were rightfully very worried about how to best store their assets. Enter the hardware wallet.
The first consumer hardware wallet as we know them today was the Trezor, arriving on the market in August 2014. It was soon joined by a number of other options, including Ledger’s early models, the HW.1 & Nano.
The Nano S quickly stood out thanks to its attractive price and security features – specifically, its use of a second 2-factor authentication (2FA) card. Ledger’s CEO at the time, Eric Larchevêque, said:
"Hardware wallets are essential to the development of bitcoin. We strongly believe in decentralized, open, and affordable products.”
BITCOIN’S CONTINUED GROWTH
A gradual increase in the places where Bitcoin could be spent contributed to its continued growth. As more uses emerged, it became clear that more money was flowing into the Bitcoin and cryptocurrency ecosystem.
In the last year, we have seen a huge spike in large-scale companies such as Tesla, PayPal, and Mastercard getting on board the cryptocurrency train. In another major step toward global Bitcoin adoption, El Salvador has become the first country in the world to adopt bitcoin as legal tender. El Salvador's move to accept Bitcoin as a legal tender could have global impact. We may just see a domino effect in which other countries adopt Bitcoin as part of their currency reserves. In a press release, Strike, a mobile payments app set up in El Salvador, stated:
“Making bitcoin legal tender is a leapfrog moment that can help countries like El Salvador shift from a largely cash economy to an innovative, inclusive, and transparent digital economy where your bank account is your phone.”
Whatever your opinion on Bitcoin and cryptocurrency, there is no denying looking at its history, that it’s here to stay. One thing is for sure, the race for the only 21 million bitcoins that will ever exist is well and truly on.
Make sure you are securing yours safely with a hardware wallet. To check out the full range of wallets Coinstop offers, visit our online store. And if you would like further one-on-one support, we offer in-depth remote consultations. You can book here.