- Bitcoin is a digital currency created in January of 2009.
- Bitcoin was created by a mysterious person or group of people known as Satoshi Nakamoto.
- Bitcoin is created, distributed, stored and traded through the usage of a decentralized ledger known as the blockchain.
- Bitcoin is currently the #1 cryptocurrency on the market.
The History of Bitcoin
Before bitcoin was even released back in 2008, there were a lot of digital cash technologies. One of these was the issuer-based e-cash protocols by David Chaum and Stefan Brands. The idea to these solutions of computational puzzles that could bring value was proposed by cryptographers Moni Naor and Cynthia Dwork back in 1992. It was later on rediscovered by Adam Back who worked on hashcash, which was a proof-of-work scheme for spam control all the way in 1997.
The first proposals for these digital scarcity-based cryptocurrencies originated with Wei Dai and his b-money, as well as Nick Szabo and bit gold. Hal Finney, later on, developed reusable proof of work or RPOW using hashcash as its proof of work algorithm.
On the 18th of August, in 2008, the domain name bitcoin.com was registered, and on the 31st of October, a paper by Satoshi Nakamoto, a group of people or an individual who is to this day unknown, was released known as “Bitcoin: A Peer-to-Peer Electronic Cash System” on the mailing list.
This paper is extremely important, as it detailed the methods of using peer-to-peer networks in order to generate a system for electronic transactions that do not rely on trust or a third party.
As we move forward to 2009, specifically on the 3rd of January of that year, the bitcoin network came into existence with Satoshi Nakamoto mining the genesis block of bitcoin. The genesis block is block number 0 and had a reward of 50 bitcoin. The first open-source bitcoin was also released on the 9th of January in 2009 and was hosted on a website known as SourceForge.
Remember Hal Finney from the story above? Well, he is one of the first supporters and adopters, as well as one of the first people to receive the first bitcoin transaction. Finney received 10 bitcoins from Nakamoto. This first transaction occurred on January the 12th of 2009.
Nakamoto estimates that they have mined over 1 million bitcoins throughout its infancy, but later on disappeared from any involvement in bitcoin. The project was handed over to Gavin Andersen who became the lead developer at the Bitcoin Foundation.
Now, one of the coolest stories about all of this is that the value of the first bitcoin transactions was negotiated by individuals on the forum itself. A transaction of 10.000 BTC was used to purchase two pizzas. This, in today’s value of Bitcoin, would make them two of the most expensive pizzas ever bought.
Not everything throughout the history of Bitcoin was fine and dandy however, as on the 6th of August, 2010, a vulnerability within the bitcoin protocol was spotted and as a result, transactions were not properly verified before they were included in the transaction log or blockchain.
The blockchain is a shared public ledger where the entire bitcoin network relies on. All of the confirmed transactions are included on the blockchain and it allows bitcoin wallets to fully calculate their spendable balances so that the new transactions can be verified and ensure that they are indeed owned by the spender. The integrity and the chronological order of the blockchain are enforced with cryptography.
This let users bypass bitcoin’s economic restrictions and in turn, increase the infinite number of bitcoins, which was truly something unexpected and unintended to ever happen. On the 15h of August in 2010, this vulnerability was exploited and 184 billion bitcoins were generated within a transaction and sent out to two addresses within the network as a whole.
A few hours passed before it was spotted and erased from the transaction log, after which the bug was fixed and the network was forked to an updated version. This is a notable flaw due to the fact that it was the only major security flaws that managed to get exploited throughout the entirety of Bitcoin’s history.
Let’s talk about Satoshi Nakamoto….