Chapter 8.1

The age of cryptocurrencies officially began in January 2009 with the launch of the bitcoin network. Since then, we’ve seen cryptocurrencies rise and fall. We’ve seen some cryptocurrencies launch and dominate the market. We’ve seen other cryptocurrencies fizzle out within weeks of launch.

We could write an entire textbook on the history of cryptocurrencies. However, we’ll start with a basic timeline. Here are some of the major events in the history of cryptocurrencies.

The Pre-Bitcoin Era (1983 to 2004)

Many cryptocurrency timelines start in October 2008 (when the bitcoin whitepaper was released) or January 2009 (when the bitcoin network launched and the first bitcoin transaction took place). The real history of cryptocurrencies, however, traces back to a pre-bitcoin era. Some of the notable events that took place in the leadup to the development of bitcoin include:

1983: American cryptographer and computer scientist David Chaum proposed an anonymous, cryptographically-secured, electronic money system all the way back in 1983. The idea for ecash was published in a paper in 1983. Ecash software stored money on the user’s local computer in a digital format, secured by cryptography.

1989: In 1989, David Chaum created DigiCash, Inc., expanding on his ecash concept. Digicash allowed for anonymous electronic money transfers online, with anonymity secured by cryptography. The company declared bankruptcy in 1998.

1997: British cryptographer Adam Back proposed a proof-of-work system called Hashcash in 1997. The proof-of-work system introduced the idea of forcing computers to “do work” to provide a “proof” before accessing a service. Computers were forced to provide proof of work prior to sending an email or posting a forum message, for example. This was designed to combat spam. A decade later, bitcoin would use a similar proof of work system as part of its mining algorithm.

1998: Chinese computer engineer Wei Dai proposed B-money as an “anonymous, distributed electronic cash system”. B-money relied on a proof of work function similar to the one introduced by Hashcash. 10 years later, Satoshi Nakamoto would reference B-money when introducing bitcoin online.

1998: American computer scientist and cryptographer Nick Szabo introduced what may be the best-known predecessor to bitcoin. Called Bit Gold, the project was more similar to bitcoin than any other project that had come before it. Bit Gold, however, was never actually implemented. It was just proposed. Szabo described Bit Gold as a decentralized digital currency involving the use of cryptographic puzzles, Byzantine fault-tolerant public registries, and private and public keys.

2004: Hal Finney created the first reusable proof of work system before bitcoin. Finney, who would eventually become the first person to receive a bitcoin transaction from Satoshi Nakamoto, published the idea of a reusable proof of work (RPOW) system that used Hashcash as its proof of work algorithm.

The Bitcoin Era (2008 Onward)

The cryptocurrency industry, up to this point, was a mix of different projects that had never got off the ground. Satoshi Nakamoto and the bitcoin project were the first to implement all of the above technologies into a full-fledged cryptocurrency. The bitcoin era officially began in October 2008 when Satoshi Nakamoto published the bitcoin whitepaper online.

October 2008: Satoshi Nakamoto introduced the bitcoin whitepaper online at Bitcoin.org. The whitepaper was titled, “Bitcoin: A Peer-to-Peer Electronic Cash System.” Although just 9 pages long, the whitepaper outlined the fundamental features of bitcoin’s blockchain-based payment system.

January 2009: The bitcoin mainnet launched in January 2009. The first bitcoin transaction – which was sent from Satoshi Nakamoto to American developer and cryptographer Hal Finney – also took place in January 2009.

January 12, 2009: The world’s first bitcoin transaction takes place. You can view that transaction here, at block 170 on the bitcoin block explorer. Satoshi sent 10 BTC to Hal Finney to test the network’s capabilities.

October 2009: The first bitcoin exchange rate is established. New Liberty Standard opens an exchange to buy and sell bitcoin. The exchange rate was initially set at 1,309.03 BTC to one USD, which meant each bitcoin was worth about $0.0007 apiece. New Liberty Standard calculated this price based on the cost of electricity used by a computer to mine a single bitcoin.

February 2010: The world’s first “real world” bitcoin transaction takes place. One early bitcoin adopter famously purchases two pizzas from Papa John’s in exchange for 10,000 BTC.

July 2010: The price of bitcoin increases 10x, jumping from $0.008 per BTC to $0.080 per BTC over an exciting 5 day period starting on July 12.

July 2010: Mt. Gox, which would grow to become the world’s largest bitcoin exchange, is established by Jed McCaleb.

August 2010: An exploit in the bitcoin network generates 184 billion extra bitcoins. The bitcoin blockchain had to be forked to “fix” the problematic chain and reverse the issue. The unusual transaction was spotted by long-time bitcoin developer Jeff Garzik, who posted online, “We’ve had a problem here.”

Altcoins Emerge (2011 Onward)

Up until 2011, bitcoin was the only cryptocurrency in the industry. When you talked about bitcoin, you were talking about the cryptocurrency industry. However, this wouldn’t hold true for long. Starting in 2011, a number of legitimate competitors started to emerge to challenge bitcoin’s reign.

2011


Throughout 2011, a number of alternative coins – altcoins – emerged on the scene, including Litecoin, Namecoin, and Swiftcoin.

January 2011: Non-profit group the Electronic Frontier Foundation began accepting bitcoin in January 2011, then stopped accepting bitcoin in June 2011 due to a lack of legal precedent. By 2013, they had resumed accepting bitcoins.

February 2011: Bitcoin reaches parity with the USD for the first time in history. 1 BTC was worth $1 USD.

 June 2011: WikiLeaks and other organizations begin to accept bitcoin for donations, becoming some of the first organizations to officially accept bitcoin and allow bitcoin transactions.

July 2011: The first recorded bitcoin theft takes place. BitcoinTalkForum member Allinvain claims that 25,000 BTC had gone missing from his wallet. At this time, bitcoin had reached a price of around $14.50, which means the theft was valued at around $375,000.

September 2011: Vitalik Buterin co-founded Bitcoin Magazine at the age of 17.

October 2011: Litecoin is introduced by Charlie Lee, a Google employee, on October 13, 2011 via an open source client on GitHub. Litecoin was a fork of the bitcoin client and relied heavily on bitcoin’s code. Litecoin introduced faster transaction times (reducing block time from 10 minutes to 2.5 minutes), quadrupled total supply (from 21 million to 84 million coins), and used a different hashing algorithm (Scrypt instead of SHA-256).

2012


January 2012: Bitcoin begins inching its way into mainstream thought. CBS legal drama The Good Wife uses bitcoin as a central plot piece in its third-season episode called “Bitcoin for Dummies”.

September 2012: The Bitcoin Foundation launches with the goal of accelerating the growth of bitcoin “through standardization, protection, and promotion of the open source protocol.”

October 2012: By October 2012, bitcoin payment processing platform BitPay reported having 1,000 merchants in its network accepting bitcoin.

November 2012: WordPress begins accepting bitcoins. The popular online blogging platform became one of the first big names in the tech space to integrate bitcoin payments.

2013


February 2013: Coinbase, one of the most popular online payment platforms for bitcoin, claims to be selling $1 million worth of bitcoins every month.

March 2013: Bitcoin experiences its first major dispute leading to a fork. For six hours, two bitcoin networks operated at the same time, each with its own unique transaction history. Core developers called for a halt to transactions. The network was eventually downgraded to version 0.7 of the bitcoin software.

April 2013: The price of bitcoin rallies to a new all time high of $266 on April 11, 2013.

June 2013: The US Drug Enforcement Administration (DEA) listed 11.02 bitcoins as a seized asset, marking the first time a government agency reported seizing bitcoin as an asset.

October 2013: The FBI seizes approximately 26,000 bitcoin from dark web marketplace Silk Road after the arrest of its alleged owner, Ross William Ulbricht.

October 2013: The first bitcoin ATM appears in Vancouver, Canada, launched by Robocoin and Bitcoiniacs.

November 2013: Litecoin reaches a market capitalization of $1 billion.

December 2013: Overstock.com announces plans to accept bitcoin (starting in 2014), becoming the first major retailer to officially accept bitcoin.

December 6, 2013: Developers Billy Markus and Jackson Palmer introduce a “joke cryptocurrency” called Dogecoin based on the trendy “Doge” internet meme. The cryptocurrency quickly grows with its own online community, rising to a market cap of $60 million by January 2014.

End of 2013: The price of bitcoin surges spectacularly. One bitcoin was priced at around $140 in October 2013. By the end of November 2013, bitcoin was priced at over $1,100. Bitcoin’s price would gradually drop over the coming months, plummeting to around $300 by mid-2014. It would not break $1,000 again until 2017.

2014


February 2014: Mt. Gox, the Japan-based cryptocurrency exchange processing approximately 70% of the community’s transactions, suddenly goes offline and files for bankruptcy protection, leaving investors in shock. The exchange had been hacked, leading to the loss of $350 million in customer funds. A total of 744,000 bitcoins were reported stolen.

July 2014: Major computer retailers Newegg and Dell start accepting bitcoin.

2015


July 2015: Ethereum’s genesis block appears. The Ethereum mainnet officially launches, introducing “blockchain 2.0”, smart contracts, and programmable blockchain-based applications to the community.

2016


April 2016: Steam started accepting bitcoin as a payment within its digital platform.

July 2016: The DAO is hacked, leading to a fork that creates Ethereum (ETH) and Ethereum Classic (ETC).

2017


2017: The age of initial coin offerings (ICOs) begins, with companies raising hundreds of millions of dollars from ICOs in 2017.

May 2017: By May 2017, the cryptocurrency community had surpassed 1,000 different cryptocurrencies.

June 2017: The market capitalization of the cryptocurrency industry breaks the $100 billion mark.

August 2017: Bitcoin experiences its first major fork as the community struggles to decide on a scaling proposal. Bitcoin splits into bitcoin (BTC) and Bitcoin Cash (BCH). The price of Bitcoin Cash surges briefly at launch, rising from $200 to $1,000, then suddenly falls down to $200 and under within days. By the end of the year BCH had reached an all-time high close to $4,000.

September 2017: China officially bans bitcoin exchanges, with major Chinese bitcoin exchanges forced to shut down before the end of the month.

November 2017: Bitcoin (BTC) breaks the $10,000 mark for the first time in its history.

December 2017: Bitcoin futures launch. Major futures exchanges like the Chicago Mercantile Exchange and Chicago Board of Trade (CME) launch bitcoin futures trading, allowing investors to have a stake in the future price of bitcoin.

December 2017: The price of bitcoin (BTC) continues to surge, stopping just short of $20,000 in mid-December. The officially all-time recorded high of bitcoin is $19,783.

2018


January 2018: The price of bitcoin plummets during the early months of 2018, marking a sharp reversal from the all-time highs of the end of 2017.

May 2018: Wall Street giant Goldman Sachs is rumored to be developing a crypto trading desk.

June 2018: US-based financial firm Fidelity Investments posts an internal job posting searching for a developer for a cryptocurrency exchange, suggesting that another financial giant is jumping into the crypto markets.

Next, we’ll explore what may happen to bitcoin in the future – including upcoming challenges the cryptocurrency industry needs to face and opportunities it may embrace.

Written by Andrew T

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