While Bitcoin emerged in 2008, rising from the ruins of a global economic crisis, it isn’t actually the first cryptocurrency. From the admission of its creator(s), Bitcoin took inspiration from the early models of b-money and Bit Gold from the late 1990s, digital currencies that utilized cryptographic protocols.
That’s not to say Bitcoin is wrongly seen as the father of cryptocurrencies – but Bitcoin is probably more accurately seen as the first successful progeny of many failed predecessors.
This success was not immediate, either. From the very first Bitcoins created in 2009, the earliest transactions were simply test payments sent from its creators and developers. There were early users – people who mined Bitcoin for fun (we’ll come to mining later) mostly – who were credited with creating demand and assigning value to Bitcoin.
Because the concept was so new, it’s perhaps logical that the very first monetary value assigned to Bitcoin in late 2009 by (now defunct) New Liberty Standard exchange was based on the estimated cost of electricity to run a computer that generated (mined) Bitcoin. Then, 1 USD was valued at 1,309.03 BTC.
People continued to exchange and trade Bitcoins, but for modest purchases. One of the most famous is an event still celebrated every year as Bitcoin Pizza Day, thanks to programmer Laszlo Hanyecz, who offered 10,000 BTC to anyone who would deliver two pizzas to his house. On 22 May 2010, someone finally did, recording a historical first for a real-world transaction using Bitcoin.
After a frenzy of computer geek adoption from slashdot later that year, Bitcoin’s real introduction to mainstream consciousness arrived in 2011, when dark market Silk Road opened the door to the illicit trade of narcotics, guns and all manner of contraband. But because Bitcoin became the media scapegoat for illegal online activity, people largely stayed away and it remained within the confines of its growing but small community.
The year 2011 was eventful, being featured on TIMES magazine, experiencing a 66% drop in what was called the“Great Bubble of 2011”, being accepted on WikiLeaks and the first Bitcoin Conference.
In 2013, US FinCEN issued a first statement on Bitcoin in 2013 as the total market cap passed USD 1 billion. The first Bitcoin ATMs appeared as Bloomberg terminal added a Bitcoin ticker (denoted as XBT).
The following years saw Bitcoin gain wider recognition and further adoption, with more exchanges coming to fill the void left by Mt. Gox’s spectacular fall in 2014 (then the world’s largest Bitcoin exchange). Bitcoin hype began to build, popularized by films like Dope (2015) that continued to portray it as criminal currency, but when Bitcoin price crashed from over $1,000 thanks to a ban from China’s central bank in late 2013 and continued to fall to as low as $200 by early-2015, the dream was temporarily forgotten.
It would take almost two years for Bitcoin to recover, finally breaking past $1,000 in January 2017. By now, Bitcoin was primed for mass adoption – governments like those in Switzerland and Japan had formally begun accepting it as legal tender, exchanges saw record volumes of trade, alternative cryptocurrencies had flooded the market, and the Bitcoin network was processing almost 10 million transactions a month.
The year 2017 was a watershed period, as Bitcoin marked nine years of existence. Beyond recognition, Bitcoin was gaining legitimization among lawmakers. GitHub marked more than 10,000 Bitcoin-related projects, while new blockchain startups raised billions of dollars in “initial coin offerings. New users were arriving in droves, with a congested Bitcoin network forced to hasten scaling efforts.
Everyone who could, bought Bitcoin. By the end of the year, Bitcoin had touched $20,000.