Bitcoin’s History is colourful, more colourful than some received wisdom might have it. Some Bitcoin proponents say ‘Bitcoin (the protocol) has never been hacked,’ but they are wrong. Bitcoin has been hacked. Here is a selection of events from historyofBitcoin.org120 and the Bitcoin Wiki121 with my personal comments about these events.

Contents

1 The Genesis of Bitcoin: Tracing the Early History of the World’s Most Popular Cryptocurrency

The Genesis of Bitcoin: Tracing the Early History of the World’s Most Popular Cryptocurrency

Here are 6 key milestones in Bitcoin history

Bitcoins history 2007

A pseudonymous Satoshi Nakamoto began working on Bitcoin.

Bitcoin history 18 Aug 2008: The publishing of Satoshi Nakamoto’s paper outlining the concept of Bitcoin in 2008

The website bitcoin.org was registered using anonymousspeech.com, a broker that registers domains on behalf of customers who can choose to remain anonymous. This shows how important privacy was to the person or group involved in Bitcoin, in 31 Oct 2008 the Bitcoin whitepaper, written under the pseudonym Satoshi Nakamoto, was released on an obscure but fascinating mailing list metzdowd.com that is much loved by cypherpunks. Wikipedia has this to say about cypherpunks:

A cypherpunk is any activist advocating widespread use of strong cryptography and privacyenhancing technologies as a route to social and political change. Originally communicating
enhancing technologies as a route to social and political change. Originally communicating through the cypherpunks electronic mailing list, informal groups aimed to achieve privacy and security through proactive use of cryptography.

This short whitepaper is regarded by Bitcoin believers as sort of bible.

Bitcoin’s history 3 Jan 2009: The mining of the first Bitcoin block, known as the Genesis block, in January 2009

The genesis (first) block was mined. At that moment, the first bitcoins, fifty of them, were created out of thin air and recorded on Bitcoin’s blockchain in the first block—block zero. The transaction that contains the mining reward, the so called ‘coinbase’ transaction, contains the text:

‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks’

The text refers to a headline of the UK newspaper The Times. This is regarded as proof that the block cannot have been mined significantly earlier than that date, and the headline was presumably chosen deliberately for its implication: When banks fail, their losses are socialized; here is Bitcoin—it doesn’t need banks.

So beware of people who say they were ‘in Bitcoin’ before 2009! I have been on a number of panels where other panellists try to establish credibility by saying just how early they were involved in Bitcoin. Sometimes, in their enthusiasm, they try to convince eager listeners that they were there before 2009…

An interesting aside:

The 50 BTC mined in the first block are unspendable. They sit in address 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa, but the account holder, presumably Satoshi, whoever he, she, or they may be, is unable to transfer them to anyone else due to some quirk in the code.

In 9 Jan 2009, version 0.1 of the Bitcoin software was released by Satoshi Nakamoto, along with its source code. This allowed people to review the code, and download and run the software, becoming both bookkeepers and miners. Bitcoin was thus accessible to anyone who wanted to download and use it. Developers were able to scrutinise the code and build on it if they wanted to contribute.

In 12 Jan 2009, the first Bitcoin history payment was made from Satoshi’s address to Hal Finney’s address in block 170123, the first recorded movement of bitcoins. Hal Finney was a cryptographer, cypherpunk, and coder, and some people believe he was partly behind the Satoshi pseudonym.

Bitcoin’s history 6 Feb 2010: The establishment of the first Bitcoin exchange, BitcoinMarket.com, in 2010

The first Bitcoin exchange, ‘The Bitcoin Market,’ was created by bitcointalk.org forum user ‘dwdollar’.

Previously, people traded bitcoins, but in a relatively unstructured way in chat rooms and message boards. An exchange is the first step towards making it easier for people to buy or sell bitcoins and increasing price transparency.

In 22 May 2010

Bitcoin Pizza day! This was the first documented time bitcoins were used to pay for something in the real world. Laszlo Hanyecz, a programmer in Florida, USA, offered to pay 10,000 BTC for a pizza on the bitcointalk forum.

Another developer Jeremy Sturdivant (‘jercos’) took up the offer and called Domino’s Pizza (not Papa Johns as frequently reported) and had two pizzas delivered to Laszlo. He received 10,000 BTC126 from Laszlo.

Laszlo kept the offer open and, over the next month, received a number of pizzas for 10,000 BTC each time, before cancelling the offer.

This is the first transaction where bitcoins were used for economic activity other than a straight buy or sell.

In 17 Jul 2010

Jed McCaleb (who has more recently founded Stellar, a cryptocurrency platform based on Ripple), converted his card trading exchange into a Bitcoin trading exchange. ‘Mt Gox,’ usually pronounced ‘mount gox,’ stands for ‘Magic: The Gathering Online eXchange’. Magic: The Gathering is a collectable card game, and the website was used initially to trade cards before it was converted to a Bitcoin exchange. Initially, you could fund your Mt Gox account using PayPal, but in October, they switched to Liberty Reserve. Mt Gox would eventually collapse in Nov 2013–Feb 2014, but in its heyday, it was the largest and most well-known and well-used exchange.

in 15 Aug 2010

Bitcoin’s protocol got hacked. Beware the popular narrative that says, ‘Bitcoin itself has never been hacked’. A potential vulnerability was discovered, and someone exploited this vulnerability in block 74,638 to create 184 billion bitcoins for themselves. This strange transaction was quickly discovered and, with the consent of the majority of the community, the whole blockchain was ‘forked,’ reverting it to a previous state (we will discuss forks later).

So much for the immutability of Bitcoin’s blockchain: there are always exceptions.

The bug was fixed. Bruno Skvorc has written a good explanation of how it happened on his blog bitfalls.com128, and the bitcointalk forum has a thread129 where key developers discussed the bug.

If anyone says Bitcoin hasn’t been hacked, ask them ‘What about the integer overflow bug in August 2010 where someone sent themselves 184 billion bitcoins?’

in 18 Sep 2010

The first mining pool, Slush’s pool, mined its first block. A mining pool is an organisation where multiple participants combine their hash power to give themselves a better chance of winning a block. The participants split the rewards between them in proportion to their hash power contributions, a bit like a lottery syndicate. Mining pools have grown in significance over time.

Bitcoin’s history: 2011: Bitcoin’s initial price rally, in which its value reached parity with the U.S. dollar for the first time in 2011

Bitcoin is a digital currency that was introduced in 2009 as an open-source software. In 2011, Bitcoin saw its first major price rally, as its value reached parity with the U.S. dollar for the first time. This event marked a significant milestone in the history of Bitcoin, as it demonstrated the potential of the digital currency to disrupt the traditional financial system.

Bitcoin’s initial price rally was fueled by a combination of factors, including growing adoption by businesses and individuals, media attention, and increased investor interest. As more people became aware of Bitcoin and saw its potential as a decentralized and secure currency, demand for the digital asset grew, driving up its price.

The 2011 rally was a turning point for Bitcoin, as it proved that the digital currency had real-world value and could be used as a medium of exchange. Today, Bitcoin is a widely accepted form of payment and investment, with a market capitalization of over $900 billion as of August 2021.

In summary, Bitcoin’s initial price rally in 2011 was a major milestone in the history of the digital currency, as it demonstrated its potential to disrupt traditional financial systems and paved the way for its widespread adoption as a form of payment and investment.

Bitcoin’s history: 2013: The closure of the Silk Road, a major dark web marketplace that primarily used Bitcoin for transactions, by the FBI in 2013

The closure of the Silk Road, a major dark web marketplace that primarily used Bitcoin for transactions, by the FBI in 2013, the massive price rally in late 2013, in which the value of Bitcoin rose to over $1,000 per bitcoin for the first time, the increasing mainstream adoption of Bitcoin, with companies like Microsoft and PayPal beginning to accept it as a form of payment, bitcoin’s current market capitalization of over $1 trillion, solidifying its position as one of the most valuable assets in the world.

Conclusion

Bitcoin history is a fascinating tale of innovation, perseverance, and resilience. From its humble beginnings as a concept outlined in a paper, to its massive success as one of the most valuable assets in the world, Bitcoin has come a long way in a relatively short amount of time. The network’s decentralized nature and ability to facilitate secure, anonymous transactions have made it a popular choice for individuals and businesses alike. Despite some setbacks and controversies, Bitcoin’s trajectory has been mostly positive, and its potential applications continue to expand. It will be exciting to see where the future of Bitcoin leads and how it will shape the world of finance in the years to come.