HISTORY OF BITCOIN

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities.[1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Pre-history Edit

Prior to the release of bitcoin there were a number of digital cash technologies starting with the issuer based ecash protocols of David Chaum [2] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai's b-money[3] and Nick Szabo's bit gold.[4][5] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm.[6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some additional enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions.[5]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials.[7][8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been discussed.[9]

Creation Edit

In November 2008, a paper was posted to a cryptography mailing list[10] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as "a system for electronic transactions without relying on trust".[11][12][13][14] In January 2009, the bitcoin network came into existence with the release of the first open source bitcoin client and the issuance of the first bitcoins,[12][15][16][17] with Satoshi Nakamoto mining the first block of bitcoins ever (known as the genesis block), which had a reward of 50 bitcoins.

One of the first supporters, adopters, contributor to bitcoin and receiver of the first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received 10 bitcoins from Nakamoto in the world's first bitcoin transaction.[18][19] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold.[20]

In the early days, Nakamoto is estimated to have mined 1 million bitcoins.[21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense handed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the 'anarchic' bitcoin community's closest thing to an official public face.[22]

The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John's.[12]

On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren't properly verified before they were included in the transaction log or blockchain, which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins.[23][24] On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol.[25][26] This was the only major security flaw found and exploited in bitcoin's history.[23][24]

Growth Edit

2011 Edit
Based on bitcoin's open source code, other cryptocurrencies started to emerge.[27]

The Electronic Frontier Foundation, a non-profit group, started accepting bitcoins in January 2011,[28] stopped accepting them in June 2011,[29] and began again in May 2013.[30]