Bitcoin is a cryptocurrency, a form of money that uses cryptography to control its creation and management, rather than relying on central authorities. The presumed pseudonymous Satoshi Nakamoto (the creator of bitcoin) integrated many existing ideas from the cypherpunk community when creating bitcoin.
Cypherpunks are activists who advocate the widespread use of strong cryptography (writing in code) as a route to progressive change.
In November 2008, a paper was posted on the internet under the name Satoshi Nakamoto titled bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as "a system for electronic transactions without relying on trust".
In January 2009, the bitcoin network came into existence with the release of the first open source bitcoin client and the issuance of the first bitcoins,with Satoshi Nakamoto mining the first block of bitcoins ever (known as the "genesis block"), which had a reward of 50 bitcoins. The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s.
On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren't properly verified before they were included in the transaction log or "blockchain" which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins. On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol. This was the only major security flaw found and exploited in bitcoin's history.
Organizations began to receiving bitcoins as donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about new currency systems. They reversed their decision and continued collecting bitcoin.
In February 2013 the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin.The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency.
In March the bitcoin transaction log or "blockchain" temporarily forked into two independent logs with differing rules on how transactions could be accepted. An exchange company briefly halted bitcoin deposits and the exchange rate briefly dipped by 23% to $37 as the event occurred before recovering to previous level of approximately $48 in the following hours.
In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity resulting in the bitcoin exchange rate dropping from $266 to $76 before returning to $160 within six hours.
Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment.
On 15 May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US.
On 23 June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to 21 U.S.C. § 881. It is the first time a government agency has claimed to have seized bitcoin.
The price of a bitcoin reached an all-time high of US$1124.76 on 29 November 2013, up from just US$13.36 on 5 January at the start of the year; the price subsequently dropped into the $200-$300 range.
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| A Bitcoin ATM |
Two companies, Robocoin and Bitcoiniacs launched the world's first bitcoin ATM on 29 October 2013 in Vancouver, BC, Canada, allowing clients to sell or purchase bitcoin currency at a downtown coffee shop.
Bitcoin value history (comparison to US$)
| Date | Price for 1 BTC | Notes |
|---|
| Jan 2009 – Jan 2010 | basically none | No exchanges or market, users were mainly cryptography fans who were sending bitcoins for low or no value. |
| Feb 2010 – May 2010 | less than $0.01 | On 22 May 2010, user "laszlo" made the first real-world transaction by buying two pizzas in Jacksonville, Florida for 10,000 BTC. User "SmokeTooMuch" auctioned 10,000 BTC for $50 (cumulatively), but no buyer was found. |
| July 2010 | $0.08 | In five days, the price grew 1000%, rising from $0.008 to $0.08 for 1 bitcoin. |
| Feb 2011 – April 2011 | $1 | bitcoin takes parity with US dollar. |
| 8 July 2011 | $31 | top of first "bubble", followed by the first price drop |
| Dec 2011 | $2 | minimum after few months |
| Dec 2012 | $13 | slowly rising for a year |
| April 11, 2013 | $266 | top of a price rally, during which the value was growing by 5-10% daily. |
| May 2013 | $130 | basically stable, again slowly rising. |
| June 2013 | $100 | in June slowly dropping to $70, but rising in July to $110 |
| Nov 2013 | $350 – $1250 | from October $150–$200 in November, rising to $400, then $600, eventually reaching $900 on 11/19/2013 and breaking $1000 threshold on 27 November 2013. |
| Dec 2013 | $600 – $1000 | Price crashed to $600, rebounded to $1,000, crashed again to the $500 range. Stabilized to the ~$650–$800 range. |
| Jan 2014 | $750 – $1000 | Price spiked to $1000 briefly, then settled in the $800–$900 range for the rest of the month. |
| Feb 2014 | $550 – $750 | Price fell following the shutdown of Mt. Gox before recovering to the $600–$700 range. |
| Mar 2014 | $450 – $700 | Price continued to fall due to a false report regarding bitcoin ban in China and uncertainty over whether the Chinese government would seek to prohibit banks from working with digital currency exchanges. |
| Apr 2014 | $340 – $530 | The lowest price since the 2012–2013 Cypriot financial crisis had been reached at 3:25 AM on April 11 |
| May 2014 | $440 – $630 | The downtrend first slow down and then reverse, increasing over 30% in the last days of May. |
| Mar 2015 | $200 – $300 | Price fell through to early 2015. |
| Early Nov 2015 | $395 – $504 | Large spike in value from 225-250 at the start of October to the 2015 record high of $504 |
| May - June 2016 | $450 - $750 | Large spike in value starting from $450 and reaching a maximum of $750.
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