Bitcoin and Cryptocurrency: A Short History Everyone Should Read
Bitcoin has existed since 2009, and the technology upon which it is built has roots dating back even further. Investing just $1,000 in Bitcoin the year it was first publicly available would have made you £36.7 million richer today.
History repeats itself if we don’t learn from its mistakes — that’s why a brief overview of Bitcoin and cryptocurrency is provided.
1998–2009 The pre-Bitcoin years
Although Bitcoin was the first cryptocurrency, there had been attempts to create online currencies with ledgers that were encrypted in the past. B-Money and Bit Gold, both of which were formulated but never fully developed, are two examples.
2008 — The Mysterious Mr Nakamoto
On a mailing list discussion on cryptography, a paper called Bitcoin — A Peer to Peer Electronic Cash System was posted. It was posted by someone claiming to be Satoshi Nakamoto, whose identity remains a mystery to this day.
2009 — Bitcoin begins
publication of the software and mining — the process by which new Bitcoins are created and transactions are recorded and verified — commences.
2010 — Bitcoin is valued for the first time
Since it had never been traded, only mined, it was impossible to assign a monetary value to the units of the emerging cryptocurrency. For the first time in 2010, someone traded 10,000 of them for two pizzas. At today’s prices, those bitcoins would be worth more than $100 million if the buyer had held onto them.
2011 — Rival cryptocurrencies emerge
As Bitcoin’s popularity increases and the idea of a decentralized, encrypted currency catches on, the first alternative cryptocurrencies emerge. Alternate currencies are sometimes called altcoins, and they try to improve on the original Bitcoin design by offering greater speed, anonymity, or some other advantage. Namecoin and Litecoin were among the first to emerge. Over 1,000 cryptocurrencies are currently in circulation, with new ones appearing frequently.
2013 — Bitcoin price crashes.
As soon as the price of one Bitcoin reaches $1,000 for the first time, the price quickly begins to decline. Those who invested at this point will have suffered losses as the price plummeted to around $300 — it would be over two years before it rose again to $1,000.
2014 — Scams and theft
Bitcoin has proven to be an attractive and lucrative target for criminals unsurprisingly for a currency designed with anonymity and lack of control in mind. Mt. Gox, the world’s largest Bitcoin exchange, went offline in January 2014, and 850,000 Bitcoins were never recovered. The investigation is ongoing but whatever the story is, someone dishonestly got their hands on a haul that at the time had a value of $450 million dollars. Those missing coins are worth $4.4 billion at today’s prices.
2016 — Ethereum and ICOs.
This year, the Ethereum platform came close to stealing Bitcoin’s thunder. Ether is a cryptocurrency used for blockchain-based smart contracts and apps. The emergence of Initial Coin Offerings (ICOs) marked Ethereum’s arrival. Investors can trade what are often essentially stocks or shares in startups, just as they can invest in and trade cryptocurrencies. In the US, the SEC warned investors that due to ICOs’ lack of oversight, they could easily be scams or ponzi schemes masquerading as legitimate investments. They were outright banned by the Chinese government.
2017 –Bitcoin reaches $10,000 and continues to grow
A gradual increase in the places where Bitcoin could be spent contributed to its continued growth in popularity during a period when its value remained below previous peaks. The Bitcoin and cryptocoin ecosystem became increasingly popular as more and more uses emerged. During this period the market cap of all crypto coins rose from $11bn to its current height of over $300bn. Banks including Barclays, Citi Bank, Deutsche Bank and BNP Paribas have said they are investigating ways they might be able to work with Bitcoin. Meanwhile the technology behind Bitcoin — blockchain — has sparked a revolution in the fintech industry (and beyond) which is only just getting started.
Whatever your opinion of Bitcoin and cryptocurrency is — and educated commenters have described them as everything from the future of money to a scam — they appear to be here to stay. Will it succeed in doing what its early adopters and evangelists say it is destined to do — replace government-controlled, centralised money with a distributed and decentralized alternative, controlled by nothing but market forces? Well, 2018 may provide some clues, but we are not likely to know the answer for some time.
