The Birth And Evolution Of Bitcoin

The idea of Bitcoin was created by an anonymous programmer who goes by the name “Satoshi Nakamoto.” The idea came to this person back in 2008, when the world economy was looking at a major recession. Satoshi first registered the bitcoin.org domain name then went on to release a paper about Bitcoin in October of 2008. They wanted to come up with a new currency that held onto the good points of previous currencies - divisibility, portability, durability, uniformity, quality and scarcity. The paper Satoshi published in 2008 described a mathematical problem with 21 million possible solutions. This finite number of solutions fit well with his idea of making Bitcoin scarce - just like real money. Even though bitcoins had no value when they were first released, he hoped this would change over time as more people became involved. Satoshi registered the project for Bitcoin at SourceForge.net on November 9, 2008, deciding to keep the code open source. This helps by allowing others to view and study the code, even making their own contributions. Strict controls were put in place to make sure everyone is on the same page when it comes to the direction the software behind Bitcoin is moving. By January 9, 2009, Bitcoin v0.1 was released and announced on a cryptography mailing list online. A lot of people noticed, but Bitcoin didn't really take off quickly. For over eight months, work on the code continued but the problem of bitcoins not having any value continued. Then, in October of 2009, exchange rates for bitcoins were published by New Liberty Standard. They listed the value at 1,309.03 BTC = $1 USD. While many people laughed at the idea of starting a new currency, the fact that bitcoins now had value changed everything. The Bitcoin peer to peer network was up and running. And due to the fact that only a certain number of Bitcoins were created, this gave the new currency scarcity, which helped it tremendously. On December 16, 2009, Bitcoin v0.2 was released to the world. The main users of Bitcoin at this time were computer programmers, but they actually began to trade BTC back and forth for money and services. By January of 2010, the first Bitcoin Exchange was established online, allowing people to buy, trade and sell BTC in a marketplace. By July of that year, MtGox, what would become one of the largest BTC marketplaces, was launched. Over the next three years, Bitcoin would become even more popular, reaching many milestones along the way. From the first pizza bought with BTC to it finally reaching parity with the US dollar on February 9, 2011. Slashdot also took notice of Bitcoin in February of 2011, causing the Bitcoin.org website to crash due to the number of people checking out the website. Over 5 million BTC had been created by this time, but it was still well under the 21 million to be created

Many new marketplaces opened in 2011 and 2012 as more and more people began to find out about Bitcoin. While it had started as a tech curiosity for programmers, Bitcoin was slowly but surely attracting all types of people. And as the media coverage of Bitcoin continued, the number of people interested also rose considerably. On June 2, 2011, the exchange rate for bitcoins reached $10 USD per BTC, an unheard of level up to that point. Some speculated that the value would hold around $10, but this wasn't the case as bitcoins became even more popular - and valuable. As the value of bitcoins increased, criminals also started to take interest. On March 1, 2012, a large theft of bitcoins occurred. Close to 50,000 BTC were pilfered after a security breach at the web host Linode. This furthered the idea that bitcoins had value and made them more valuable. Unfortunately, this wouldn't be the only theft of BTC during its lifetime, but it was the largest up to that point, and one that made a lot of people notice Bitcoin for the first time. In September of 2012, the Bitcoin Foundation was set-up. A lot of Bitcoin conferences had taken place over the previous two years, but the Bitcoin Foundation was formed to standardize, protect and promote Bitcoin worldwide. This is now the organization that votes to make major decisions about the future of Bitcoin around the world. Keep reading as we take a look at how you can get involved with Bitcoin as well as what the future holds for cryptocurrency around the world.

WHAT IS BITCOIN?

Bitcoin is called virtual currency, but a better term is cryptocurrency. Unlike physical money, there are no coins or paper money officially produced. No government entity decides how much and when to release it into the world. Bitcoins are created digitally by people as they solve complex math problems with their computers. In many senses, it is truly decentralized. One of the interesting things about this virtual currency is that all transactions are stored and published publicly. The currency is traded via a vast peer-to-peer network that encompasses the entire globe. While there aren't a lot of rules regarding Bitcoin, there are some, and this helps with making bitcoins a genuine currency that works like "normal money."

BITCOIN EXCLUSIVES

Next, we're going to take a look at some of the ways that Bitcoin is different than traditional currencies. It's these differences that make Bitcoin such a powerful possibility. One of the main differences is that Bitcoin is decentralized. No one person, corporation or government controls the Bitcoin network. This isn't the only difference, however, so let's take a look at some things that are exclusive to Bitcoin.

Bitcoin vs. Conventional currencies

1. Bitcoin is Decentralized

Unlike traditional currency, which is controlled by a central authority - usually an arm of the government - Bitcoin is decentralized. Because it operates as a peer-to-peer network, all transactions and verification of transactions are done by various people in the network.

2. Bitcoin is Virtual Currency

The other thing that sets Bitcoin apart from traditional currency is the fact that it's virtual. That is to say coins and paper money aren't produced to represent the value. Instead, all bitcoins exist in virtual space. This means you can't go to an ATM and withdraw physical money. Some people have created unofficial physical representations of bitcoins, but first and foremost, Bitcoin is virtual.

3. Bitcoin has Scarcity

Because only 21 million bitcoins will be created, BTC has scarcity, unlike traditional currency that can be printed when governments decide to print more. To spread out the creation of bitcoins being released into the world, the number that are created by "mining" will half every four years. This means that people will still be able to create them until the year 2140. At that time, no new bitcoins will be created and the existing stockpile will enjoy the benefits of scarcity - i.e. becoming more valuable.

5. Bitcoin transactions cannot be reversed

In order to preserve the block chain of all transactions in sequential order, Bitcoin transactions are not reversible. Additionally, a Bitcoin transaction can take ten minutes or more to confirm. This is different than other currencies that typically process transactions in seconds and also allow for reversing a charge to a credit or debit card.

6. Bitcoin is not Ubiquitous

Wherever you go in the world, you're going to run into local currencies. In most places, you'll be able to trade your country's money for bills of the country you're visiting. And no matter where you go in the world, you're going to be able to trade your money for goods and services. Bitcoin hasn't yet been embraced by the world at large. This may change in years to come as more businesses begin to accept Bitcoin for payment, but for now it's a difference that matters to a lot of people.

Good and Bad of Bitcoin As you can see from the points above, Bitcoin has a lot of positives and negatives attached to it currently. Because it's decentralized and generally has low fees for transactions, many people are starting to take notice and get excited about this and other cryptocurrencies. Another thing to note is that some people worry about who controls the Bitcoin network. The reality is that because it uses peer-to-peer technology, no one person or corporation can own the Bitcoin network. This may seem scary to some while it's revolutionary and exciting to others. The need for all versions of Bitcoin software to be compatible and be able to communicate with each other is paramount to Bitcoin's success. Luckily, most people who are involved realize this and have worked together to improve the Bitcoin software and network considerably in just a few short years.