This article is a short history of Bitcoin. Our goal is to give the reader a reliable abbreviated overview of Bitcoin. We will reference places where the interested reader can learn more about specific topics or dive deeper.
The history will be structured around Bitcoin’s trade price (as a reflection of market sentiment) and page views of wikipedia (as a reflection of broader awareness).
2008/2009: Bitcoin’s birth
In November 2008, someone going by the user name ‘Satoshi Nakamoto’ released a paper to a cryptography mailing list. The 9-page paper was entitled “Bitcoin: A Peer-to-Peer Electronic Cash System“, and it laid out a vision for a distributed digital money system.
Email Satoshi Nakamoto sent to about his paper
In January 2009, Satoshi Nakamoto released the first version of the open-source bitcoin core software on SourceForge and the bitcoin protocol started running. Nakamoto mined the first 50 bitcoins. The protocol was a breakthrough in cryptography, though it drew on developments that had preceded it but hadn’t been combined yet.
Bitcoin ran quietly in the background—a topic of excitement and fascination for a dedicated crowd of coders but largely off the world’s radar. Discussion was distributed across different forums, and it wasn’t until the end of the year that the first dedicated forum was established. This helped coders could more easily coordinate with other coders as the underlying code got tweaked. By mid-2009, people other than Satoshi Nakamoto were actively contributing to the open-source codebase in Github.
The protocol was a breakthrough in cryptography, though it drew on many cryptography innovations that preceded it. A community of cryptography experts and privacy advocates known as the Cypherpunks (cypher not cyber) played a key role in recognizing the technical genius of Bitcoin and understanding its implications. Many members of this community would become torchbearers later in Bitcoin’s history.
As 2009 ended, Bitcoin did not have a ‘trade price’ and 309 people viewed the Wikipedia page.
2010: Bitcoin’s very early years
The Bitcoin ‘ecosystem’ was largely just a record of Bitcoin transactions (the blockchain), a set of online forums where users communicated and organized transactions, and the open-source software code. There were no wallet services, payment processors, or real user interface beyond actual command prompts and raw code. This limited involvement to a dedicated and savvy crowd who organized transactions through online forums and initiated them on the blockchain with code. For example, the first commercial transaction took place in May 2010: a programmer in Florida spent 10,000 BTC on a pizza.
Bitcoin's first commercial transaction was a pizza
However, beginnings of a market support system began to emerge. In early 2010, the first exchange opened, which allowed structured trading of bitcoins. The first “article” on bitcoin appeared on Slashdot and stoked interest beyond the initial insider cryptocurrency crowd. Users grew. In late 2010, Mt. Gox launched as the second exchange and became the dominant place to trade Bitcoins for a couple years.
As 2010 ended, the price of 1 Bitcoin was $.3 and 309 people viewed the Wikipedia page.
2011: Bitcoin finds niche uses and awareness grows
In 2011, Bitcoin began to mature as a digital payment system, though its use was limited by the aspirations of early adopters.
The perceived anonymous nature of the digital currency made it perfect for online black markets. That year saw the emergence of the Silk Road, an ebay for illicit goods (predominantly drugs) that used Bitcoin as a payment method. The Silk Road was one of the public’s primary introductions to Bitcoin, prompting several politicians cast the currency as a vehicle for money laundering and drugs.
Mainstream media also began covering it. Forbes, Bloomberg, and TIME all wrote articles. Politicians warned against it. Academics wrote about it. At the end of the year, CBS aired an episode of the “The Good Wife” that focused on bitcoin.
Other consumer services were also starting to emerge. WikiLeaks started accepting Bitcoin donations. An iPad app was launched. Bitpay, a service that let merchants accept bitcoins over the phone, was founded and claimed to have 100 merchants. More exchanges opened, letting people trade bitcoins for other currencies.
The Bitcoin code also underwent a major change. Through 2011, Satoshi Nakamoto had overseen the maintenance of the codebase. Satoshi never called or met anyone and only communicated on forums and direct messages. In April 2011, Satoshi Nakamoto wrote his last verified email, leaving Gavin Andreson in charge of the project, and left, never to be (verifiably) seen or heard from again. Andreson quickly selected four others to share this responsibility and introduced some structured ways of updating the underlying code.
“He told myself and Gavin that he had moved on to other things and that the project was in good hands.”
– Mike Hearn describes the last thing he heard from Nakamoto
Also in 2011, the first alternative digital currency or “altcoin”, Litecoin, launched.
The world was in an awkward time in which financial markets were doing well but workers were not. Occupy Wall Street started in September and soon Occupy protests had taken place in almost 1000 cities worldwide. It is easy to see how the idea of a bankless currency could take root.
By the end of the year, the world was deeply ambivalent about the digital currency. A currency for the 21st Century that could topple banks? A tool for laundering money and buying illicit substances?
As 2011 ended, the price of 1 Bitcoin was $4.60 and 2185 people viewed the Wikipedia page.
2012: Bitcoin matures
Bitcoin was riding a wave of legitimacy in many circles, and these were having conflicting effects.
The currency became a popular target for hackers and thieves. Mt. Gox had been hacked in 2011, and now more major attacks on exchanges and other databases led to millions of dollars worth of Bitcoin theft. Several Ponzi schemes ended with theft.
Black markets utilizing bitcoin as a payment method continued to operate. It’s estimated that $15 million worth of Bitcoin passed through the Silk Road this year. A popular online gambling site, Satoshi Dice, launched and flooded the bitcoin network with very small gambling transactions (bets worth less than $.0001). This sparked a debate on how to deal with such ‘transaction dust.’
More generally, the community was feeling the impacts of having no central authority. There were no dedicated funds to support core development of the code and no sanctioned gathering places places other than online forums.
The Bitcoin Foundation was also established. Its role was to fund core development, represent the currency to governments, and conduct outreach and education. Late that year, a Bitcoin exchange Bitcoin-central.net was licensed similar to a bank in Europe.
As it garnered the attention of more governments, its legal ambiguity became more obvious and more awkward. People were trading it like an asset, using it like a currency, and downloading it like open-source software. Gambling and the Silk Road didn’t help. Some services started dropping bitcoin out of fear of its legality.
Broadly, this is a year in which the industry also saw the promise of banking the unbanked with Bitcoin. Forbes runs one of the first mainstream articles discussing Bitcoin’s use in remittance payments. WordPress started accepting Bitcoin, explaining that traditional payment processor restrictions were preventing international bloggers from participating in the blogosphere.
As 2012 ended, the price of 1 Bitcoin was $13.44 and 2809 people viewed the Wikipedia page.
2013: The world wakes up to bitcoin
2013 was one of the most tumultuous years for Bitcoin. It had two period of incredible volatility in which people literally woke up to almost 100% price increases.
The first occurred in early 2013. A bail-out deal between the EU and Cyprus included a levy on bank accounts with sizeable sums of money, inspiring Cypriot account holders to buy bitcoin en masse. The Bitcoin price almost doubles, and Cypress sets a precedent for using Bitcoin as a means of capital flight.
Bitcoin survived one of its first major crises of legitimacy this year: the shutting down of the Silk Road and the arrest of its founder. The government seized all assets and helped cement public association of Bitcoin with online black markets. After a quick price drop, the price quickly recovered, but Bitcoin has lived in the Silk Road’s shadow ever since.
Globally, governments began to take Bitcoin more seriously but reactions were mixed.
The People’s Bank of China, after initially approving Bitcoin, banned financial institutions from using it or working with customers whose businesses involve it.
The US Department of Homeland Security declared Mt. Gox a ‘money transmitter’ (a heavily regulated entity) and moved to seize some of its assets.
US Financial Crimes Enforcement Network (FINCEN) issued some of the world’s first bitcoin regulation in the form of a guidance report for persons administering, exchanging or using virtual currency. In particular, exchanges must comply with money laundering laws and register as Money Services Businesses.
The US Senate held a hearing which was (to the surprise of many) open to the long-term prospects of Bitcoin.
The second period of volatility occurred in November. In 30 days, the price went from just over $100 to just over $1200. Searches for bitcoin spikes. News outlets covered it. In 30 days, it went from a successfully digital currency proof-of-concept to a new technology in the eyes of the world. The price plummeted back down in December, but it never stayed below $200 again.
The swell of popularity led to an explosion of “altcoins”—digital currencies based on modified or different underlying protocols. Litecoin had been the first, back in 2011, but 2013 saw hundreds of these new altcoins launch. Many turned out to be scams, but many are also still traded today.
As 2013 ended, the price of 1 Bitcoin was $764 and 26354 people viewed the Wikipedia page.
2014: Bitcoin beyond cryptocurrencies and cryptocurrencies beyond Bitcoin
In early 2014, Bitcoin survived another major crisis of legitimacy: the closure of Mt. Gox. Mt. Gox had been the longest-running and most successful virtual currency exchange to date. It was a pillar of both the bitcoin economy and the community. In February, Mt. Gox abruptly shut trading, and leaked documents show it had lost 744,000 BTC (approximately $40 million). Bitcoin naysayers had a field day on forums, and it was widely seen as a blow to the digital currency’s ability to operate safely without any oversight or regulation.
Governments began to pass regulation this year. The wild end to 2013 woke many regulators up to the volatility of this currency. The IRS declared Bitcoin to be taxed as property. The People’s Bank of China forced Chinese banks to close the bank accounts of major Chinese exchanges, though many exchanges exploited legal loopholes to keep operating. New York announced its Bitlicense: a legal licensing framework for businesses that interact with Bitcoin and cryptocurrencies. This is largely decried by the cryptocurrency community. The dream of unregulated cash was quickly fading.
The currency also traveled more into the payment mainstream, and a wave of major retailers accepted the currency. Overstock, Tiger Direct, Newegg, Dell, and Microsoft all announced acceptance of Bitcoin. Near the end of the year, a subsidiary of PayPal announced it will work on integrating Bitcoin on their platform.
Another development in the world of cryptocurrencies is that many many people began imagining Bitcoin without the digital currency part: how could the underlying technology be used for other purposes?
A wave of new protocols emerged with applications beyond digital currency, presaging a so-called “Bitcoin 2.0” era in which people would repurpose blockchains (Bitcoin’s and others) to store all kinds of information. Some notable ones included
Ethereum, a platform for software that could run on a distributed network.
Maidsafecoin, a protocol to allow distributed file storage built on top of the Bitcoin blockchain
Factom launches to create a data layer on top of the blockchain to enable simple, verifiable, and secure record keeping.
This reflected the rising awareness of what early enthusiasts had thought: the technology of cryptocurrencies could be the foundation of the next Internet. Today is like the early 90s, and in the coming years, blockchains could remake everything. The idea was planted, but with it, a sobering realization: this process would take time.
Despite these developments, Bitcoin’s price began a slow decline this year that would bottom out in early 2015 below $200 and stay relatively dormant for months. Part of this decline was a shift in capital from bitcoin to other digital currencies. Bitcoin’s contribution to the total market value of all cryptocurrencies fell from a higher of 95% in August to 78% in December. Another was the realization that upending global financial markets wouldn’t happen overnight. Bitcoin was not above the law, and financial law was very complicated. Bitcoin had the potential to be disruptive but disruption can be slower than founding visionaries hoped. In many ways, cryptocurrencies faded from the public eye.
AS 2014 ended, the price of 1 Bitcoin was $314 and 6162 people viewed the Wikipedia page.
2015: The business blockchain
The basic features of this industry mostly continued. Hacks and theft continued, including a high-profile loss of close to $5 million from a major exchange at the beginning of the year.
Regulators around the world continued to explore the implications of this technology while also proving that users of Bitcoin are not beyond the reach of the law. Ross Ulbricht, founder of The Silk Road, is sentenced to life in prison without parole for actions that were “terribly destructive to our social fabric.” Mark Karpeles, CEO of Mt. Gox, is arrested in Japan. Two federal agents who stole Bitcoin during the Silk Road investigation plead guilty.
The biggest shift came from banks and industry. Many industry executives began talking about “blockchains” and “distributed ledgers” rather than Bitcoin. Microsoft launched blockchain-as-a-service (BaaS) on its Azure cloud-computing platform. This allows companies to experiment with blockchains and explore how they could be used in different areas of their business.
This likely contributed to the growth in interest in Bitcoin among the broader public and among traders. Bitcoin’s price began a steady ascent as people started realizing Bitcoin and blockchains were still around.
However, a crisis was brewing in the form of the “block size debate.” The Bitcoin protocol was designed to process approximately 7 transactions per second; the blocks in the blockchain were not large enough to store more. Members of the community realized Bitcoin was on pace to reach that in 2015. If nothing was done, it could stymie the currency’s growth in popularity.
What followed was a bitter and divisive debate about whether to increase the size of the Bitcoin blocks (allowing more transactions per second) or to reposition the Bitcoin blockchain as a ‘settlement layer’ while allowing other services to process transactions that happen off-chain. In Bitcoin, there are no democratic rules, public sanctioned spaces to gather, or Robert’s rules of order. Reddit, Bitcointalk, and a couple other online forums were serving as venues for ‘public’ discussion, and the Bitcoin Foundation began hosting events toward the end of the year.
No one could agree, and the debate was fierce. This deadlock struck a blow to Bitcoin’s perceived legitimacy. If it couldn’t deal with a challenge like this, how could it deal with others? People started talking seriously about other currencies that might be viable alternatives to Bitcoin. Ethereum topped that list, and in early 2016, its price would increase tenfold.
As 2015 ended, the price of 1 Bitcoin was $426 and 4730 people viewed the Wikipedia page.
2016: A Year of Promise
It is too early to tell the story of 2016 for Bitcoin. Many of the trends that coalesced in 2015 continued: more enterprise and corporate interest in blockchain technology, more uncertainty over the block size debate, and some price volatility.
Security remains an issue. Just this year, Gatecoin, a major exchange based in Hong Kong, lost $2 million and suspended trading. Shapeshift, a major US-based exchange, suffered a series of hacks in a saga that reads like a crime novel.
Broadly, industry players in finance and technology remain bullish on blockchains and ambivalent about Bitcoin. More and more startups are branding themselves as blockchain companies rather than bitcoin companies. A new ambivalence about Bitcoin has emerged: not as a dangerous quasi-legal currency but as a good proof-of-concept that ultimately won’t be ready for primetime. As they say, “the pioneers get the arrows, the settlers get the land.” At a premier industry conference, some compared Bitcoin to Netscape.
But Bitcoin’s price continues to rise.
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The Bitcoin Timeline
I’ve been searching for a timeline on Bitcoin for a while now and I finally found an excellent one at historyofBitcoin.org. For the Bitcoin enthusiast and maybe even for someone new to the whole mind-blowing idea of Bitcoin that wants the whole story, this timeline is absolutely brilliant. Once you have consumed this blog, I recommend that you spend some time taking a good long look. There was certainly some work put into the timeline and it maps the progress of Bitcoin beautifully. However, for a good potted version or a run-through if you like with just the highlights, then please read on…
Bitcoin, Basic Facts
For those new to Bitcoin completely that want a potted history that delivers a concise run-down of what Bitcoin is all about, delivered as bullet points well, you have that below if you read on past the image.
The highlights are that Bitcoin is the world’s first de-centralised currency. Bitcoin is controlled by no-one, no bank, no government no individual or group or corporate entity. It is self-sustaining computer code that is literally unbreakable and cannot be hacked. Why? Because it has been stress tested by thousands and because each new “block” of Bitcoin (which must be opened using sophisticated computer hashing programmes – this is referred to as Bitcoin mining) must match up with the previous block on the chain and be verified by several independent sources for the “block” to be confirmed and declared as the next real Bitcoin block. This all happens, of course, in nano-seconds because of the advancement of computer processing power and each block opened strengthens the validity of the next block coming along and the last block that came by. The more blocks there are, the stronger they and the chain becomes.
Once verified the contents of the block (Bitcoins) then belong to the code cracker (miner). Every movement of Bitcoin from one place/person to another has also to be verified in this same way so Bitcoin miners and other “entities” that are linked into the Bitcoin Blockchain also serve as its policing system. You can only acquire Bitcoin by mining it or buying it and it will come as no surprise to those that understand a little about Bitcoin that all the problems and bad press that has ever surrounded Bitcon has been to do with Bitcoin people and services for buying and spending Bitcoin and not the programme’s integrity itself.
If a transaction cannot be verfiied properly then it simply did not happen. And the verification process precludes any possiblilty of spending the same Bitcoin twice (or more than twice of course), The technicalities and detail of how all this happens would bore the pants off of anyone that wasn’t an out and out techy. So, what we need to know, all we need to know is that Bitcoin is real. It has a real value (as I write this, one Bitcoin is worth $437) and it is here to stay and as the timeline and my potted history will show. It is increasing in value. The image immediately below shows Bitcoin’s value graph over the last 12 months. The direction is very plain to see.
Coindesk Price 20th April 2016
Bitcoin, Potted History
January 3, 2009
Bitcoin was a theory until January 2009 when its inventor Satoshi Nakamoto released what is now known as the “genesis block” on to the Internet. Bitcoin then passed out of academic theory into reality and the first real digital currency (or crypto currency, as some refer to it) had arrived. No-one to this day knows who Nakamoto really is or even if he was even one person or a group of people working together except of course, the man himself or the group themselves (whoever they may be).
The first (unofficial) transaction involving the transfer of Bitcoin from one person to another (Nakamoto to a man named Hal Finney) happened on January 12th 2009.
On October 5th 2009 the first Bitcoin exchange rate was established by New Liberty Standard. Giving 1,300.03 Bitcoin the value of one US Dollar. Oh how I wish I had acquired Bitcoin then!
On December 16th 2009 Bitcoin version 0.2 is released further strengthening the Bitcoin computer protocol and several more updates to strengthen the code occur over the years that follow. Two weeks later on December 30th 2009 the first increase in mining difficulty occurs in Bitcoin. In short, cracking the code to open a new block of Bitcoin (at that time the only way to acquire Bitcoin of your own) became harder (albeit still massively more simple than what it is today). This hardening of difficulty is an essential aspect of Bitcoin growth and its development over time and will continue throughout the life of Bitcoin. The more it is mined, the harder it will be to mine. And. in addition, as we will discover as we move on, if mining subsides and slows down, the difficulty lessens.
February 6th 2010 sees the introduction of the very first Bitcoin exchange when DWDOLLAR is created. It didn’t last as too few people were even aware of Bitcoin’s existence at that stage. Many other exchanges will appear over time. Some famously crashing amid suspicion of foul play. As with all things though, the viability and ethicacy of Bitcoin services improves as the currency establishes itself. But bent folk are bent folk and there will always be those that will latch on to any opportunity to defraud and steal.
May 22nd 2010 became a very famous day for Bitcoin when a man in Florida, Laszlo Hanyecz, paid another man in London 10,000 Bitcoin to have a Pizza ordered and delivered to his door. This became the first real point of value for Bitcoin establishing a value based on using Bitcoin for a real-world purchase. By my calculation, a $25 pizza payment for 10,000 Bitcoin equates to $1 = 400 Bitcoin. Or 1 Bitcoin equals 0.0025 of a dollar.
On July 11th 2010, fuelled by increasing chatter about the new age currency and its potential, along with increasing talk about the Pizza transaction, SLASHDOT (call it an online digital radio station for techies and nerds) raves about Bitcoin and several more users are drawn into the Bitcoin world.
On July 12th 2010 as a result, the value of Bitcoin officially increases ten-fold from 0.008 dollars per Bitcoin to 0.08 dollars per Bitcoin. We can now quantify Bitcoin in a real sense as it has a worth of 8 cents.
On September 18th 2010 the first “pooled” mining operation mines its first Bitcoin block. This is the beginning for the advent of the biggest single factor to affect the value of Bitcoin. Individuals could now join together as a group and mine Bitcoin effectively. Previosuly, individuals would mine Bitcoin blocks from a PC or even a laptop. But now the age of Bitcoin mining on a larger scale had begun and the acceleration of mining difficulty moves with it.
Throughout all of this early period on Bitcoin’s evolution of course, problems, bugs and inconsistencies were discovered, exploited and tested and this constant “stress testing” of Bitcoin by many different and diverse sources led to the constant strengthening of the Bitcoin programme or protocal. That is why Bitcoin has now become the unbreakable code that it is today. In October 2010 after, no doubt, throwing much computerised muscle at trying to break Bitcoin, the first signs of any Government body taking an interest in this new age currency becomes appparent. The US Financial Task Force (as you’d expect) warns of the dangers of an unchecked, de-centralised, computer based currency and the effect it could have on money laundering, crime etc. (so cash, property, bearer bonds and so on are never used for money laundering then?). You don’t need to be a cynic to conclude that any financial system that isn’t totally controlled by “Governments” is going to be sniped at by our esteemed leaders. Governments love to control and Bitcoin to them is anarchy!
October 7th 2010 after a longish period of no changes in value, Bitcoin value does start to increase. It had been around $0.06 = 1 Bitcoin for months up until this point.
On October 17th 2010 the first real Bitcoin trading channel opens and it is possible to buy and sell between the movement of Bitcoin value.
November 6th 2010 and the market capitalisation of Bitcoin finally exceeds $1 million. One Bitcoin is now worth $0.50 after being just 6 cents one month earlier. What we see today with Bitcoin has really begun in earnest.
December 8th 2010 and the first mobile phone based Bitcoin transaction takes place.
December 9th 2010 sees the first Bitcoin CALL option sold on the Bitcoin-OTC market and financial institutions begin taking an interest.
In 2011 the infamous Silk Road on-line marketplace opens. Sometimes referred to as the e-bay of drugs. Nothing in the history of Bitcoin does more to damage the fledgling currency’s development as a serious financial tool. Fortunately and inevitably (in October 2013), Silk Road is shut down again albeit after blackening Bitcoins image for a long time to come.
By January 28th 2011, 25% of all Bitcoin that will ever be generated has beem reached. Of the overall 21 million Bitcoin that will ever exist, 5.25 million of them have now been mined.
February 9th 2011 sees Bitcoin get to parity with the US Dollar. One Bitcoin = 1 USD and there is no holding back the flood of interest in the new age crypto currency.
Want to buy a 1984 Toyota Celica Supra? The first recorded offer of a car in exchange for Bitcoin occurs on February 14th 2011 as an Australian chap asks for 3,000 Bitcoins in exchange for his car.
On March 25th 2011 following a very slow period of activity and a decline in Bitcoin price from $1 to around 60 cents, for only the second time ever since creation, Bitcoin mining difficulty reduces by 10%. Yes, mining difficulty can also reduce when mining activity reduces. People are reminded that the programme is clever enough to compensate for real time activity and will increase difficulty when more mining occurs and reduce when less occurs. This is critically important because when Bitcoin block rewards halve (and they will through pre-set automation built into the programme over time) and if mining drops off as a result then difficulty will reduce until mining picks up again. In short, when difficulty reduces, smaller and less capable machines with less hashing power can successfully mine Bitcoin. When diffculty increases, those smaller machines cannot compete.
It is interesting to note that, not for the first time, there are many loud voices in the world now proclaiming the death of the Bitcoin revolution following the fall in value from $1 to 60 cents. This becomes a recurring theme just about every time any bad news or slow down in Bitcoin value growth occurs.
Britcoin opens for trading on 27th March 2011 and the first trading between GBP and Bitcoin is enabled. On March 31st 2011, Brasil follows suit with Bitcoin Brasil and now Bitcoin can be exchanged and traded against Brazilian Reals. Similar trading environments start to appear across Europe commencing in Poland on April 5th 2011.
The first PUT option is sold on the Bitcoin-OTC market on April 12th 2011.
Another landmark occurs on June 2nd 2011 as Bitcoin hits a US Dollar value of $10 = 1 Bitcoin.
On June 8th 2011, market capitalisation of Bitcoin exceeds $206 million and Bitcoin hits a new all-time high of $31.91 = 1 Bitcoin.
What became known as “the Great Bubble” occurs on June 12th 2011 and, having hit an all-time high of $31, Bitcoin price slides to $10 in 4 days flat. The doom brigade have a field day, Bitcoin, they say, is 100% dead and buried now. The next few months see probably the hardest and most challenging period of all for Bitcoin.
June 14th 2011 and Wikileaks starts to accept annonymous Bitcoin donations, well there’s a surprise.
June 29th 2011 and Bitpay, perhaps surprisingly given the recent decline in Bitcoin fortunes, launch the first smartphone based Bitcoin wallet and it serves as a timely reminder that many people and organisations were still very much behind Bitcoin and its inevitable success. This is followed on July 20th 2011 by the first ever Bitcoin app for iPad and iPhones.
The first Bitcoin conference and World Expo was held on August 20th 2011 in New York City.
On February 27th 2012, Bitcoin magazine is launched. The first ever magazine devoted entirely to news matters relating to the digital currency. It appears on-line at first and produces its first printed edition in May 2012.
The Coinbase Bitcoin platform and wallet service is launched in June 2012.
The first Bitcoin conference in London occurs on September 15th 2012.
On Septmeber 27th 2012 a group of Bitcoin enthusiasts set up the Bitcoin Foundation as a self-governing body to implement a core development team for the protocol and a body to oversee the digital currencies ongoing development.
The first halving day occurs with Bitcoin on November 28th 2012. Block 210,000 is the first Bitcoin block to produce 25 Bitcoins instead of the previous 50 Bitcoins from every block prior to that. Now Bitcoin halving is proven to be more than just a theory. It is halving that will insure Bitcoin scarcity into the future and will eventually lead to more demand than supply and a probable massive increase in Bitcoin value over time as a result. The next halving is due to occur in or around July 2016. This will take the Bitcoin block reward down to 12.5 coin per block.
Bitpay annnounces on January 22nd 2013 that its merchant platform (a platform that enables Bitcoin transactions in exchange for goods and services) hits 10,000 transactions completed. Merchants around the world are starting to see the bigger picture and possibilities with Bitcoin.
In the run up to version 0.8 of Bitcoin being released on February 19th 2013, the worldwide acceptance of Bitcoin is growing at pace.
On February 22nd 2013, Bitcoin has got back to $30 in value.
For the first time since June 8th 2011, some 601 days earlier, Bitcoin once again breaks its previous all-time high price and goes past $32 on February 28th 2013 and by March 21st 2013 it has spiked at $74.90 = 1 Bitcoin.
The market capitalisation of Bitcoin surpasses $1 Billion on March 28th 2013.
Nothing seems to put a dent in Bitcoin’s progress now as it hits a value of $100 in April 2013 much to the stunned amazement of those that had previously and frequently declared the project dead. They would have plenty of other oppotunities, however, to make that declaration again as time goes on.
April 10th 2013 and Bitcoin hits another peak of $266 = 1 Bitcoin.
Following a hacking scandal, on April 20th 2013, Bitcoin crashes back to around $120, The doomsayers are back out in full voice.
In May 2013, Coindesk is launched and will become one of the most popular of all Bitcoin news sources.
On May 2nd 2013, the first Bitcoin ATM in the world is sited in California, USA.
The biggest funding of any Bitcoin based operation occurs on May 7th 2013 as Coinbase receive an investment of $5 million.
Bloomberg gets a Bitcoin price ticker on August 9th 2013 so it can track the price of Bitcoin. Is big finance starting to take a real interest?
Following on from an August 6th 2013 ruling by a judge in Texas, USA that Bitcoin was a currency, Germany announces that Bitcoin is “private money” on August 20th 2013 and exempt from tax after being held for 1 year. Who’s for moving to Germany then?
October 2nd 2013 and the FBI shut down Silk Road and Bitcoin price drops from $139 = 1 Bitcoin to $109.71 = 1 Bitcoin in less than three hours in response to the Silk Road shutdown. It then recovers to $128 = 1 Bitcoin.
November 6th 2013 and another new all-time high in Bitcoin price after the Silk Road revelations settle down. Bitcoin hits $269 = 1 Bitcoin.
Subway starts accepting Bitcoin on November 10th 2013 at its restaurant in Allentown, Pennsylvania. High profile names are coming to the party at long last.
Bitcoin price hits a landmark figure at 11.50am GMT on 17 November 2013, reaching $503.10 = 1 Bitcoin on the exchanges. Bitcoin evangelists believe there is no turning back but the Bitcoin story is nothing if not surprising and the Bitcoin price is shooting up as more people want in on what the early adopters have been holding on to for the last few yers.
Against all expectations following the Senate hearings in the wake of the Silk Road case, the price of Bitcoin surges to a record $1,242 = 1 Bitcoin on November 19th 2013 and several overnight (short-term) millionaires are created. This naturally heralds the beginning of a massive selling spree. Some sources attribute the sudden burst in value to rumours about controls coming in China to restrict the use of the digital currency and the rapid movement of Bitcoin around and out of that region. Bitcoin officially now moves more money around the world than Western Union.
Academia accepts Bitcoin. On November 21st 2013 the University of Nicosia in Cyprus becomes the first university to accept Bitcoin for tuition.
On November 22nd 2013, Richard Branson’s Virgin Galactic begins accepting Bitcoin for space travel.
November 27th 2013 and Shopify officially integrates Bitcoin as a payment option for its 70,000+ merchants.
December 5th 2013 and China’s central bank bars financial institutions from handling Bitcoin transactions, causing a price drop of more than 20 percent to below $1,000 = 1 Bitcoin.
The Biggest Dip
December 17th 2013 and Bitcoin crashes to nearly $500 = 1 Bitcoin following further bans on Bitcoin transactions in China. The Bitcoin doom brigade are setting up parties everywhere!
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Moving on, the news surrounding Bitcoin after this comes at us too fast and too furious to note in individual snippets. So, as we enter the current stage of Bitcoin, running up to the next halving we note that it has been a period of price stabilisation and investment into the Bitcoin space. The huge growth in mining operations (strangely – particularly in China) and the realisation that the Bitcoin Blockchain technology is tough enough to survive and improve.
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The price continued to fall after the “China Syndrome”, with the odd correction taking it back up a little for a time. Ultimately, the drop in price continued almost unabatted right up, that is, until Januaary 12th 2015 and it seemed quite possible that the Bitcoin dream was running out of steam. That is until you remove the crazy hike in price from the equation that saw Bitcoin soar past $1,000 = 1 Bitcoin and you understand that spike for what it really was. I’m going to call it an anomaly.
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The world had started moving Bitcoin around like mad and a whole bunch of early movers on Bitcoin had, literally started to become millionaires. Suddenly, this thing they had been storing on their computers was not a novelty. It had real value and people were prepared to buy it from them for hundreds of dollars per Bitcoin.
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If you’d acquired Bitcoin at zero cost or for just a few pennies per coin, wouldn’t you have sold it when you were all of a sudden being offered hundreds of dollars for it? Of course you would. And it appeared, for a time, to those that were just discovering Bitcoin, that all it could do was increase in value as more and more people started to buy it in anticipation of just that. Then, of course, the inevitable meltdown occured when all that were prepared to sell had sold out and the boost to supply came to an end.
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Enter the announcements from China following on the back of this and then those that had been buying were suddenly in a rush to sell. As we always see when there is panic selling in any market, once it starts it takes a lot to stop it. The cynic in me believes that the price hike was fuelled mostly by the those that had acquired so many Bitcoin in the early days when you could mine it from your own laptop. They realised that they could now sell and be rich!
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At the peak of this price hike, you could sell 1,000 Bitcoin and get $1,000 per coin. That is enough to make you a millionaire. Now imagine if you had 5,000 or 10,000 or 100,000 Bitcoin…
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But the illustration below shows you quite clearly that Bitcoin has not finished what is actually a very clear and determined and longer-term increase in value that has been occuring since the last block reward halving in November 2012. It had a value then of around $11/$12 = 1 Bitcoin. So, if we remove what I have called the “anomaly” when the Bitcoin world went crazy and we add in what I call the “reality line” that starts at the last halving point, it seems that Bitcoin is still moving quite determinedly towards great future value.
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From the November 2012 halving at a price of $11 = 1 Bitcoin roughly, we see a reality line taking us up to today’s level of over $430 = 1 Bitcoin. If the line stays even close to that trajectory then Bitcoin will be worth $1,000 = 1 Bitcoin again but I believe next time it will hit that level on a sustainable trajectory and with most of the early Bitcoin adopters out of the way.