On 3 January 2009, the Bitcoin network came into existence with Nakamoto mining the genesis block of Bitcoin.
As the world’s most popular crypto-currency, Bitcoin turned 10 last week, there will be many more bubbles, booms and busts.
That’s according to industry players as the crypto-currency marked its tenth anniversary.
“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original Bitcoin protocol in 2008 and launched the network in 2009.
On 3 January 2009, the Bitcoin network came into existence with Nakamoto mining the genesis block of Bitcoin (block number 0), which had a reward of 50 Bitcoins. The recipient of the first Bitcoin transaction was programmer Hal Finney, who received 10 Bitcoins from Nakamoto.
From January 2009 to March 2010, Bitcoin’s value was basically zero and in May 2010, it was less than $0.01.
Over the course of Bitcoin’s history, it has undergone rapid growth to become a significant currency both on and offline – from the mid-2010s, some businesses began accepting Bitcoin in addition to traditional currencies.
Since then, based on Bitcoin’s open source code, thousands of other crypto-currencies have emerged.
Below are some of the highlights in Bitcoin’s history:
In June 2011, WikiLeaks and other organisations began to accept Bitcoins for donations. In October 2012, BitPay reported having over 1 000 merchants accepting Bitcoin under its payment processing service. In November 2012, WordPress had started accepting Bitcoins.
In February 2013, the Bitcoin-based payment processor Coinbase reported selling $1 million worth of Bitcoins in a single month at over $22 per Bitcoin.
In early February 2014, one of the largest Bitcoin exchanges, Mt Gox, suspended withdrawals citing technical issues. By the end of the month, Mt Gox had filed for bankruptcy protection in Japan amid reports that 744 000 Bitcoins had been stolen.
Less than one year after the collapse of Mt Gox, UK-based exchange Bitstamp announced that its exchange would be taken offline while they investigate a hack which resulted in about 19 000 Bitcoins (equivalent to roughly $5 million at that time) being stolen from its hot wallet.
In February 2015, the number of merchants accepting Bitcoin exceeded 100 000. In August 2016, a major Bitcoin exchange, Bitfinex, was hacked and nearly 120 000 BTC (around $60 million) was stolen.
In March 2016, the Cabinet of Japan recognised virtual currencies like Bitcoin as having a function similar to real money. Bidorbuy, the largest South African online marketplace, launched Bitcoin payments for both buyers and sellers.
In September 2016, the number of Bitcoin ATMs had doubled over the previous 18 months and reached 771 ATMs worldwide.
Price fluctuations have also been a major issue in Bitcoin’s history. Its peak was $20 000 in December 2017. However, the price has dramatically dropped since then. At the time of publishing, it was trading at $4 042.
Regulation of Bitcoin has also been a thorny issue in many jurisdictions. In December 2014, the South African Reserve Bank issued a position paper on virtual currencies whereby it declared that virtual currency had “no legal status or regulatory framework”. The South African Revenue Service classified Bitcoin as an intangible asset.
World Wide Worx MD Arthur Goldstuck comments that the true triumph of Bitcoin is the extent to which it popularised blockchain, and in effect evangelised it far beyond the world of crypto-currency.
“Long before Bitcoin and other crypto-currencies become mainstream, blockchain will be a standard tool in business, especially in financial services, trade and contracts,” says Goldstuck.
He believes the low point of Bitcoin was, without a doubt, the explosion in its value to $20 000, and the subsequent inevitable implosion.
“While there can be little sympathy for the professional speculators who knew they were gambling, many gullible people lost their life savings falling for impossible promises when they bought at the height of the bubble.
“There will be many more bubbles, booms and bust, but it remains a good long-term investment if one is not buying during a period of frenzy.”
Goldstuck points out that Bitcoin is not the only crypto-currency in town, and it is even possible it will no longer be around a decade from now.
“It’s not Bitcoin, but crypto-currency, that awaits the mainstream. When that time comes, it is also likely that all crypto-currencies will be interchangeable, not only with each other, but also with traditional currency. That will ultimately define it going mainstream.
“Some purists believe that crypto will only succeed when it replaces so-called fiat currency, but that is a silly, childish and blinkered viewpoint. In the same way that credit cards did not replace cash, and mobile money has not killed cash, it is likely that these formats of financial instrument will coexist for the foreseeable future.”
Alan Robertson, co-founder of YOU#, says Bitcoin has forever changed the way people see value exchange and store in the modern world.
“Freed from the grip of institutions who charge billions in fees while selectively providing financial services to those with means, everyone with a mobile device can, for the first time in history, do international banking almost instantly and for next to nothing.”
Nonetheless, he points out that Bitcoin’s lows are perhaps the emergence of so many scam artists who have been successful in separating people from their hard-earned money through hacking, multi-level marketing and Ponzi schemes, and in the process have left them disillusioned about the greatest technological and societal advance since the Internet.
Commenting on Bitcoin’s 10 anniversary, crypto-currency company Luno, says that “currently, Bitcoin miners get rewarded with a ‘block reward’ of 12.5 Bitcoin”.
A block reward refers to new Bitcoin granted by the blockchain network to miners. After the discovery of every 210 000 blocks, the block reward is halved, which happens around four years.
According to Luno, on average, 144 blocks are mined each day. “For those whose best friend is the calculator app on your phone, that amounts to 1 800 Bitcoin.
“Interestingly enough, research done by company Chainalysis finds that as much as 20% of all the Bitcoin in existence is missing. Therefore, while there are 17.3 million Bitcoin currently in circulation, only 11 million are accessible,” Luno says.
It explains that this block was the starting point for Bitcoin, for the crypto-currencies that followed, and for a new financial system – one which puts your own money back into your hands.
“While it may have taken a while for some to grasp the idea of crypto-currency, this momentous decennial anniversary is definitely one to celebrate.
“We’ve seen the adoption of crypto-currency explode and shrink in equal measure, but overall the industry has made incredible progress. With the community investing in building the infrastructure, we have a feeling that, although Rome wasn’t built in a day, it may be built much quicker than the haters previously thought,” Luno adds.