The Unbelievable Story of Bitcoin – [Part 1]

July 7, 2017

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Part 1 – The Inception

Before Bitcoin

In 2007, a person or group by the name Satoshi Nakamoto began outlining an idea for the first global digital currency ¹. It was not the first time someone attempted to create a digital currency protected by strong encryption. As early as in 1983, a man by the name David Chaum conceived the digital currency ecash ² . His idea of anonymous electronic money became the foundation for Bitcoin.

Ecash and several other digital currencies failed between the years of 1983 and 2007 as the e-commerce customers of the era prefered credit cards. During the late ’90s and earely 2000s, Wei Dai ³ and Nick Szabo ⁴ proposed similar ideas of distributed digital scarcity based cryptocurrencies, later on a fundamental part of Bitcoin. Hal Finney introduced the proof of work scheme that Bitcoin runs on today ⁵.

Satoshi Nakamoto combined these ideas and presented them in the Bitcoin white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System ⁶. Bitcoin became the first decentralized digital currency and to this day remains the biggest.

Who was Satoshi Nakamoto?

The true identity of Satoshi Nakamoto is still unknown.

Szabo, Dai and Finney are all rumored to be Satoshi Nakamoto and it is easy to understand why as the Bitcoin protocol utilizies many of their ideas.

Other speculations include Dorian Prentice Satoshi Nakamoto, after Newsweek released an article claiming him to be the true founder of Bitcoin ⁷. In an interview with The Associated Press he denied any connection to the Bitcoin project and claimed that he misunderstood the Newsweek reporters question, thinking it was related to his previous work as a military contractor. ⁸.

An Australian businessman by the name Craigh Wright claimed to be Satoshi Nakamoto in 2014. Wright claimed he would transfer bitcoin from one of the first wallets created on the network in order to prove his claim. Instead he posted an excuse, saying he was not brave enough to continue his efforts to prove he was indeed Satoshi. ⁹

White paper 10,000 BTC pizza

In August 2008, someone registers the domain Bitcoin.org. Following shortly, in the end of October, Satoshi Nakamoto publishes the white paper through an encrypted emailing list. The white paper provided an answer to the problem of double spending, thus protecting the currency from being copied. Only a few months later on January 3rd in 2009, the genesis block of the Bitcoin blockchain is mined and the first transaction follow shortly after on January the 12th ¹⁰

The spring and summer months are rather uneventful, until late 2009 when an exchange rate is set for the first time, based on the cost of electricity to mine bitcoins at the time. $1 equaled 1,300 BTC ¹¹. Now more people start to pick up on Bitcoin. Satoshi Nakamoto releases the 0.2 version of Bitcoin and in March 2010 Bitcoin Market, the first currency exchange for bitcoin, opens.

In May of 2010, a programmer by the name Laszlo Hanyecz from Florida buys a pizza for 10,000 BTC. This was the first real world adoption of Bitcoin, and a huge milestone for the currency ¹².

Bitcoin trouble

In mid 2010, Bitcoin gain a lot of interest in the online tech community. Large blogs raise awareness and the Bitcoin community grows substantially. One bitcoin is still only worth about one cent but on July the 12th, the value skyrockets 1000% in the currency’s first price rush ¹³

MtGox, which came to play a main part in the history of Bitcoin, opens for customers on July the 17th of 2010.

In August of 2010, Bitcoin faces its first major problem. A hacker found a vulnerability in the Bitcoin protocol which enabled them to create an infinite amount of bitcoins by making multiple transactions before logging them in the block chain. The user sent bitcoins to their own address, but before the blockchain verified the transaction, they ran a code that told the network to ignore the transaction and allow them make another transaction before telling the network. The user managed to create 184 billion bitcoins over the course of a few hours but the developing team hard forked ¹⁴ the Bitcoin network just hours later, invalidating the transactions ¹⁵.

To this day, this is the only serious vulnerability exploited on the Bitcoin network.

Stay tuned for part 2 of The History of Bitcoin, here at Coinworld!