Bitcoin Turns 10: A Brief History of Its First Decade

Francisco Memoria
  • 31 Oct 2018
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  • 4093 views
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  • In #Bitcoin

Bitcoin, the flagship cryptocurrency, has turned ten years old today as back in 2008 Satoshi Nakamoto, its pseudonymous creator, submitted the “Bitcoin: A Peer-to-Peer Electronic Cash System” to a cryptographic mailing list.

The cryptocurrency is seen as the most important innovation to money by its proponents, as it allows for peer-to-peer payments to be processed without the need of a trusted third party. It solves the Byzantine Generals’ Problem, and sparked a revolution that “will not be centralized.”

Currently, there are over 2,000 cryptoassets in the industry, which despite a months-long bear market is still worth over $200 billion. Bitcoin currently accounts for 54.2% of the market. Here’s a brief rundown of the cryptocurrency’s history so far.

Bitcoin’s First Years

Initially few people knew about Bitcoin or what it could become. The first transactions were made between proponents to test out the cryptocurrency, which wasn’t widely available. There weren’t cryptocurrency exchanges; so it didn’t have a quote price either.

The first Bitcoin exchange, BitcoinMarkets, came only in March 2010. At the time it was possible to acquire BTC through faucets – websites that gave bitcoin away to spread the word, as these were mostly worthless.

Similarly, in March 2010, Laszlo Hanyecz created a thread on the popular Bitcointalk forum wondering if anyone would be willing to buy him pizza in exchange for bitcoin. Someone took his offer, and bought 2 pizzas for 10,000 BTC – now worth $63 million.

The Rise of Dark Net Markets

It’s well-known that some of the first bitcoin-related businesses were dark net marketplaces where users could use the cryptocurrency to buy pretty much anything – including illegal drugs, weapons, hacked accounts, and more.

The most popular dark web marketplace is the now-defunct Silk Road. It’s estimated over $1 billion worth of the cryptocurrency went through it before it was shut down by the Federal Bureau of Investigation (FBI) in 2013. The Silk Road’s founder, who worked under the “Dread Pirate Roberts” account, is allegedly Ross Ulbricht.

At the time, Bitcoin became known outside of its proponents’ circles as a currency used only by criminals who wanted to buy illegal goods and services. The cryptocurrency’s price climbed to over $100 at the time, as demand started surging.

In 2013, in fact, Overstock revealed it was going to accept Bitcoin payments in 2014, and the University of Nicosia announced it would accept BTC as payment for tuition fees. Media attention from their moves, coupled with the takedown of the Silk Road, saw BTC climb to over $1,200. Coinbase, a San Francisco-based cryptocurrency exchange, revealed at the time it sold over $1 million worth of BTC in one month.

The Collapse of Mt Gox

While in 2013 the flagship cryptocurrency’s ecosystem was growing at a record pace, things quickly took a turn in 2014. In late 2013 the People’s Bank of China (PBoC), China’s central bank, prohibited Chinese banks from using BTC, which saw some local businesses stop accepting it as a payment method.

Adding to that, the largest cryptocurrency exchange at the time, Mt Gox, suspended deposits and withdrawals over “technical issues.” Soon after, amid claims of insolvency and security breaches, it collapsed. Hundreds of millions of dollars worth of BTC were stolen, which saw the cryptocurrency’s price crash.

Recovery efforts reportedly recovered 200,000 BTC, which were then held by a trustee, Nobuaki Kobayashi. Earlier this year, the Tokyo District court moved Mt Gox’s case from criminal bankruptcy to civil rehabilitation, which means its creditors will be able to be paid in bitcoin, and not the fiat equivalent of Bitcoin's exchange rate at the time, of about $500 per coin.

The collapse of Mt Gox saw Bitcoin drop from $1,000 at the start of 2014 to about $300. Despite the crash, companies like Dell, Newegg, and Microsoft started accepting bitcoin.

Growing Adoption

In 2015 and 2016 venture capital firms notably started betting on the cryptocurrency ecosystem. At the time Coinbase raised $75 million in what was then the “largest-ever VC round” for a cryptocurrency-related company.

Less than a year after Mt Gox collapsed, UK-based exchange Bitstamp announced it was taking its platform offline while it investigated a security breach that saw hackers take $5 million (19,000 BTC at the time) from its wallets. Bitstamp, as CryptoGlobe covered, was acquired by a European investment firm.

Later on, in 2016, gaming platform Steam started accepting bitcoin payments through Bitpay. During that year, the number of bitcoin ATMs in the world surged to over 700, while the number of merchants accepting cryptocurrencies surpassed 100,000.

Notably, popular cryptocurrency exchange Bitfinex was also hacked that year for 120,000 bitcoin, around $72 million at the time. The incident’s aftermath is still felt today, as critics claim Tether’s USDT stablecoin isn’t backed by any USD and was used to help Bitfinex recover, leading to premiums and arbitrage opportunities.

2017's Explosive Growth

Bitcoin’s price exploded in 2017. It started the year at about $1,000 after slowly climbing thanks to adoption in 2016. That year, retail investors were attracted to the cryptocurrency ecosystem thanks to the initial coin offering (ICO) boom and the incredible returns some investors were having.

This saw some pour in money over fear of missing out (FOMO), which according to analysts created a speculative bubble. Bitcoin reached its all-time high of about $19,800 in late 2017, before its price started dropping. The CME and CBOE, two leading global exchanges, launched Bitcoin futures at the time.

Notably, 2017 also saw Bitcoin's blocks become full. This created large transaction backlogs, that forced users to compete to get their transaction in the next block. As a result, transaction fees skyrocketed to over $50 and a debate over how Bitcoin should scale – known as the scaling debate – reached its peak, leading to the creation of Bitcoin Cash (BCH).

While Bitcoin only has 1 MB blocks to keep on being as decentralized as possible, Bitcoin Cash currently has 32 MB blocks. Bitcoin’s notable rise, coupled with its rising transaction fees, saw various businesses stop accepting it as a payment method. These include Steam, which cited the high fees and volatility.

2018's Market Crash

In 2017, China’s communist government cracked down on cryptocurrencies and banned initial coin offerings (ICOs) from the country, forcing crypto exchanges to abandon it. Despite the crackdown the country has seen numerous developments, including an arbitration court ruling cryptos like bitcoin should be protected as property by law.

This year, most articles about Bitcoin or the cryptocurrency ecosystem have been focusing on the price crash, as some cryptoasset are down over 90% from their all-time highs. Despite the market’s downturn, there have been quite a few developments during the last few months.

Notably, the Lightning Network (LN) was launched and already has a capacity of over $700,000, as well as thousands of open payment channels. Meanwhile, various countries have already revealed they plan on regulating cryptocurrencies and blockchain technology, with Malta being the first to establish a full regulatory framework.

Moreover the Intercontinental Exchange (ICE), owner of the NYSE, is launching a platform called Bakkt that has revealed it’ll offer physically settled daily bitcoin futures contracts this December.

Fidelity Investments, one of the world’s largest financial services providers with over $7.2 trillion in client assets, has announced the launch of a new company called Fidelity Digital Asset Services, which will offer crypto custody and brokerage solutions for institutional investors.

Notwithstanding the bear market that took bitcoin down to the $6,300 mark, crypto acquisitions are up over 200% this year. Bitcoin’s volatility, often cited as a reason for merchants to stop accepting it, has now fallen to levels it hadn’t seen since December 2016.

Despite the criticism and being pronounced dead over 300 times by experts throughout the world, Bitcoin has been thriving.