The History of Bitcoin

What is Bitcoin?

Bitcoin is a type of digital currency eliminating the need for financial institutions due to a decentralized authority. The currency offer anonymity, high security and low transaction fees. Bitcoin is not a physical commodity. A public ledger called blockchain is used to store balances on the cloud. A tremendous amount of computing power is necessary for the confirmation of balances and transactions. Bitcoin represents the beginning of hundreds of subsequent cryptocurrency launches. These are referred to as altcoins.

We have watched the turbulence of bitcoin escalate. In 2017, one bitcoin was valued at $20,000. By 2019, the trading value decreased by half. Bitcoin tokens are stored in a cryptocurrency wallet using a private key. This is a lengthy string of letters and numbers. The public key is similar to a bank account number. This secret code is used for the authorization of cryptocurrency transmissions. This address is used to send bitcoin. Bitcoin is often abbreviated as BTC.

Bitcoin Mining

A miner is a company or individual responsible for the computing power necessary to make bitcoin. They receive rewards for their participation. Transaction fees and rewards are both paid using bitcoin. A miner is like an enforcer for the decentralized authority to ensure the network remains credible. Since its inception, approximately 21 million bitcoins have been mined. There is approximately three million bitcoin waiting to be mined. To maintain the stability of the pricing, the release rate matches the growth.

An algorithm is used to determine the release rate for bitcoin mining. Mining enables this release. Miners must have the ability to solve difficult puzzles to be able to discover a new bitcoin block. Upon discovery, new blocks are added to the decentralized ledger or blockchain. Transaction records for the entire network are verified through mining. The mining reward is cut by fifty percent after the discovery of every 210,000 blocks. In 2009, the miner received 50 bitcoins. By 2009, this had decreased to 12.5.

The amount of computing power required is referred to as the difficulty. In 2009, the mining difficulty was 1.0. By October of 2019, this had increased to more than 12 trillion. The standard desktop computer was originally sufficient. Mining now requires complicated and expensive hardware and advanced processing units. These are referred to as mining rigs. The smallest bitcoin unit is a Satoshi. This is 100 millionths of a single bitcoin.

Bitcoin Historical Prices

Bitcoin took off in 2013. The value was approximately $13.50 per bitcoin when 2013 began. In April, the price reached $220 prior to decreasing to $70 later in the month. The value at the beginning of October was $100. By the end, the value increased to $195. The price fluctuated wildly in November, from $200 to more than $1,120. This resulted from the entrance of China miners into the bitcoin exchange. This was when the bitcoin historical prices volatility really began. On December 4th of 2013, the value was $1,230. By December 7th, this decreased to $750.

Bitcoin stabilized in January 2014 at roughly $920. In February, another substantial crash occurred. By February 16th, the price crashed to $260. The price recovered to approximately $620 in March. This was the beginning of a gradual drop in value. Between July of 2014 and the beginning of 2015, the price decreased to $315. Bitcoin spiked again in November. The value on October 23rd was $275. By November 4th, this increased to $460. By November of 2015, the value was $360. We tracked the value for 2017 because this was the first time bitcoin exceeded $1,000.

Bitcoin prices spiked during the autumn of 2017. By October, the value exceeded $5,000. This doubled to $10,000 in November. By December the world saw bitcoin value reach $20,000. This was referred to by critics and commentators as the price bubble. The resulting crash took place in April of 2018. The value fell to less than $7,000. By November, bitcoin was at a low of $3,500. The price made a comeback in 2019 with an overall value of $10,000. This remains the average current price today.

The price is linked to the mining network. The difficulty is greater for larger networks with a higher cost. The pricing has increased the production cost. The aggregate processing power of the mining network is referred to as the hash rate. This is how many times each second attempts can be made to complete a puzzle. Once complete, the new block is added to the blockchain. The ultimate high was reached on October 23rd of 2019 at 114 quintillion hashes for each second.

The Origin of Bitcoin

The creation of bitcoin technically began in August of 2008. This was when the bitcoin.org domain name was registered. The first cryptocurrency mailing list was sent two months later. This was the first time we heard the name Satoshi Nakamoto linked to bitcoin. We saw the future start to change due to 30,000 lines of code on January 3rd of 2009. Bitcoin had officially arrived. Bitcoin is a lottery-based system run by an autonomous software program. The first bitcoin miner we heard about was Hal Finney. He heard about bitcoin from the cryptocurrency mailing list and became fascinated.

Satoshi Nakamoto sent Hal Finney ten bitcoins as a test from block 70. When Finney passed away from ALS in 2014, the true identity of Satoshi Nakamoto was still a mystery. His family inherited his bitcoin in an offline wallet. The current value of a single bitcoin is over $10,000. We watched history being made when the first physical cryptocurrency purchase occurred. The bitcoin paid for a pizza at this time is now worth $100 million. What we found interesting is bitcoin was legitimized due to illegal trade.

The anonymity of cryptocurrency was used for drug trafficking, which proved bitcoin was an effective type of commerce. Bitcoin is a self-governed form of digital cash. In 2012, $10 million in bitcoin was purchased by Tyler and Cameron Winklevoss. According to bitcoin Reddit, the twins now own approximately one percent of all bitcoin. On April 23rd of 2011, Mike Hearn received an email from Satoshi Nakamoto stating he was no longer interested in the bitcoin project. Although the true creator was believed to be Dorian Nakamoto, this was disputed by Satoshi Nakamoto in an online forum.

The identity of Satoshi Nakamoto is still a mystery although Nick Szabo, Dorian Nakamoto, Craigh Wright and others were all believed to be the creator. We believe the only way for the true creator to make themselves known is to release the PGP key (encryption program) associated with the name Satoshi Nakamoto. For now, this is one mystery that has not been solved.

The Rise and Destruction of Mt. Gox

Mt. Gox was launched in 2006. In 2010, the site started receiving attention. This was when the programmer decided an online exchange was required to buy bitcoin and sell the cryptocurrency. In 2011, the site was purchased by Mark Karpeles. This was the start of negligence, security breaches and operating deficiencies. Bitcoin prices decreased for purchases made on-site in June of 2011 due to a security breach. In excess of 2,500 bitcoins were permanently lost in October because the email addresses they were sent to were invalid.

Trade was suspended by Mt. Gox in April of 2013 due to the quickly increasing prices. During this time, the value of bitcoin decreased to under $55. In May of 2013, Coinlab sued Mt. Gox for breach of contract. Withdrawals in United States dollars were suspended by Mt. Gox in June. Although the suspension was lifted in July, months or weeks were necessary for the clearance of withdrawals for many users. By the end of the month, bankruptcy was filed by Mt. Gox. The company said its account holders lost over &50,000 bitcoins in addition to the 100,000 lost by Mt. Gox.

During this period, the bitcoin value decreased by 36 percent. During the peak of the company, Mt. Gox was responsible for 70 percent of all bitcoin traded across the globe. Mt. Gox lost seven percent of all bitcoin being circulated during this time.

The Many Uses of Bitcoin

Self-employed individuals can receive their pay in bitcoin. This is possible through numerous job boards and websites. This includes, full-time, part-time and freelance work. Certain casinos are now accepting bitcoin for numerous games including spread betting, jackpots and online lotteries. Bitcoin has become a viable alternative for traditional commodities such as silver or gold and fiat currency. The IRS made a statement in March of 2014. All virtual currency would be taxed as property as opposed to currency. Using bitcoin to purchase or sell services or goods became taxable transactions.

Businesses can accept bitcoin as payment using touch screen apps, QR codes, wallet addresses and hardware terminals. Online businesses simply add bitcoin to their acceptable forms of payment. This requires an external processor and bitcoin merchant tool. To buy bitcoin, the individual either earns bitcoin or visits a bitcoin exchange.

The Risks of Investing in Bitcoin

Once bitcoin began increasing in price in 2011 and 2013, numerous individuals purchased the currency as an investment as opposed to an exchange medium. Due to the digital nature and no guarantee regarding value, this presented a risk. Agencies including the SEC, FINRA and CFPB have issued warnings regarding bitcoin. Virtual currency is still relatively new, without the long history or credibility of traditional investments. Many experts classify bitcoin as an investment with both the highest potential for return and the biggest risk.

Bitcoin is an alternative to government currency, has been used legitimately and for tax evasion and illegal activities. This has resulted in bans, restrictions and regulations placed on bitcoin by many governments. The rules regarding bitcoin are dependent on each country. At this time, there are no uniform regulations. Most people using or in possession of bitcoin received their tokens through mining. Bitcoin exchanges are the markets used for purchasing and selling the digital currency. A bitcoin exchange is completely digital.

This means the exchanges are at risk for operational glitches, malware and hackers. Private encryption keys must be guarded to eliminate the possibility of being stolen. This would enable the thief to transfer the bitcoin into a different account. The best way to protect a private encryption key is by storing it on a computer unable to access the internet or printing out the private keys for storage in a safe or highly secure location. Bitcoin exchanges can also be the target of hackers. Successful hackers can steal thousands of digital wallets and accounts.

This is a major issue considering transactions using bitcoin are irreversible and permanent. The only way to reverse a transaction is if the individual receiving the bitcoin authorizes a refund. As opposed to credit and debit cards, bitcoin does not use a payment processor or third party. If an issue occurs, there is no appeal or protection available. Government and federal programs are used to insure a wide range of investments. There are no programs currently in place to insure bitcoin exchanges. There are steps being taken by some of the trading platforms to enable insurance for cash transactions.

Bitcoin transactions are registered and owners verified through the use of private keys. This has not prevented scammers from trying to sell fake bitcoins. Legal action has already occurred regarding a Ponzi scheme related to bitcoin. Bitcoin fraud has been documented for cases of price manipulation. Part of the issue is price fluctuations. In 2014 alone, the price of bitcoin crashed by 80 percent. Bitcoin may lose value if the rate of acceptance decreases too much. Hundreds of new digital currencies are competing against bitcoin. Bitcoin also presents a tax risk because investments are unable to legally be hidden from taxation.

Bitcoin Forks

When there is a disagreement between bitcoin developers and miners, a split can result in the bitcoin community. When the miners and users change the network protocols, it is referred to as a bitcoin fork. In some instances, this led to the creation of a new token such as the Bitcoin Cash, Bitcoin SV and Bitcoin Gold created during 2017. This is referred to as a hard fork. A soft fork is when the protocol changes remain compatible with the previously established rules of the system. Block size has been increased due to a soft fork.

The Pros and Cons of Bitcoin

The most popular and widely used cryptocurrency is currently bitcoin. Bitcoin is responsible for the potential of anonymous transactions. The pros of bitcoin include:

• Bitcoin offers anonymity. Users are able to send money all over the world for a minimum cost.

• Bitcoin offers more speed than fiat currencies.

• Even with the bitcoin crash, the value offers more stability than the hyperinflation resulting from the currency used in certain countries.

• Impressive skill is required to steal bitcoin due to the complex technology backing the cryptocurrency.

• Bitcoin is one of the most secure forms of digital currency currently available. Thousands of individuals are consistently working to ensure bitcoin remains safe from hackers and scammers.

The cons of bitcoin include:

• The options for anonymous transactions have expanded. This has provided cryptocurrency investors with numerous options with the potential to decrease the popularity of bitcoin.

• There are currently more than 10 altcoins available offering almost immediate transactions. The fact this has not been achieved by bitcoins may be what significantly damages the popularity.

• The complexity and algorithm of bitcoin are currently nearly impossible to hack or decipher. This may become obsolete due to new technology. To remain at the top, innovation will be necessary.

• Although bitcoin offers more stability than some of the fiat currencies, cryptocurrency is not currently able to effectively compete with fiat currency. Popularity will be lost if bitcoin does not become the preferred investment option.

• Bitcoin is secure, but not free of risks. Numerous individuals have lost money due to exchanges being hacked and bitcoin scams such as trading robots based on bitcoin. Solutions for these issues must be found.

The Most Surprising Bitcoin Facts

The Honey Badger: The unofficial mascot of bitcoin is the honey badger due to the renown toughness and resilience of the animal.

Etherium Smart Contracts: The security and design of bitcoin contracts deliberately prevent, customized and complex smart contracts. Despite this, smart contracts compatible with Etherium can be executed for bitcoin payments. This is the result of a bitcoin sidechain.

The First Bitcoin Faucet: The first bitcoin faucet was created by Gavin Andresen in June of 2010. Due to the low value of bitcoin at this time, anyone interested could receive five bitcoins free every day. The faucet contained more than 1,000 bitcoin.

The Accidental Bug: In August of 2010, 184 bitcoin were accidentally created due to a bug. Five hours were required to fix the error through a patch created to ignore the extra coins. The error was eventually eliminated from the blockchain by being forked out.

The Mystery of Satoshi Nakomoto: The disappearance of the creator occurred after the CIA was visited by Satoshi Nakamoto. The purpose of the visit was to reveal information regarding bitcoin. According to bitcoin Reddit, the disappearance of Nakomoto may have been linked to this meeting.

Bitcoin Core Developers: The main bitcoin reference client is Bitcoin Core. Despite the many cryptocurrency wallets available, this company maintains the compatibility. In excess of 366 coders have made free contributions to developing Bitcoin Core.

The Ban on WikiLeaks: The banking block on Wikileaks was circumvented in 2011 by the Obama administration. This was when key American payment services and banks imposed this ban. Bitcoin became a currency resistant to censorship due to the ability to circumvent the ban.

Bitcoin Politics: A study conducted in 2018 revealed most of the 1,200 bitcoin users lean towards the right as liberals. Despite this, the attitude of every community is different. Of the participants included, 55 percent stated they were to the political right. We believe this is because the earliest adopters of bitcoin were crypto-anarchists and libertarians. The bitcoin trends are also against big and centralized governments. The statistics for Etherium are the exact opposite, with 55 percent leaning towards the left.

The Maximum Bitcoin Number: The number of bitcoins will not reach 21 million. The expected number is 20,999,987.4769. This should occur between 2128 and 2140. The number is less than the block reward mechanism devised by Satoshi. Creating new bitcoin has also been affected by mining errors. The total number may be even less due to the potential for future errors.

The Satoshi Unit: Due to the potential value of bitcoin, one satoshi may cease to become the smallest transaction possible in the future. We expect the decimal to be altered to enable even smaller units. This does not mean any additional bitcoins will be created. The only concept affected will be the size of the transactions.

Annual Bitcoin Transactions: The transaction rate for bitcoin is now higher annually than PayPal or Discover. Approximately $1 trillion bitcoin transactions were processed during 2017. This number is expected to continue increasing. The transactions currently processed by major credit cards are in the multi-trillion dollar range.

The Satoshi Candidates: Hal Finney was one of the first cypherpunks and one of the first to mine and receive bitcoins through the network and use a bitcoin wallet. Until he passed away in 2014, he was dedicated to improving the code used for bitcoin. Due to his cryptographic and coding skills and his early involvement with bitcoin, many individuals believe he was Satoshi Nakamoto.

Wei Dai was also a cypherpunk. He was responsible for the creation of b-money, an alternative monetary system. The concept of b-money was similar to bitcoin. He is a computer engineer, has made numerous advancements in the industry and worked for Microsoft conducting cryptographic research. Due to his private lifestyle, cryptographic skills and the creation of b-money, a lot of people believe he is Satoshi Nakamoto.

Nick Szabo is yet another early cypherpunk. In 1998, he created Bit Gold. This is a decentralized monetary system. His system has been classified as the precursor leading to bitcoin. He also developed the smart contracts concept, used for numerous cryptocurrencies including bitcoin. His knowledge encompasses many fields such as law, cryptography and computer science. He is also believed to be a candidate for Satoshi Nakamoto due to his development of smart contracts and the Bit Gold project.

Adam Beck is both a cypherpunk and a cryptographer believed to be Satoshi Nakomoto. He runs a software company based on bitcoin called Blockstream. He was cited in the white paper as inventing the Hashcash system. This is the basis for the Bitcoin’s Proof of Work regarding mining. His invention of HashCash and his important role in Blockstream have led to questions regarding his identity. The numerous other potential candidates include Tim May and Ian Grigg.

One of the most amazing possibilities is Satoshi Nakomoto was not an individual. Some believe this was the name of a group. This group may have included many of the potential candidates collaborating using a pseudonym for the creation of bitcoin. Analysis has been conducted regarding the writing styles of all the potential candidates in comparison to the Satoshi writings. This includes forum posts, emails and the bitcoin white paper. The similarities found were very interesting.

The Crime Rate of Bitcoin: According to the DEA, only 10 percent of all bitcoin transactions were related to illegal activities. The concept that the main purpose of bitcoin is conducting illicit transactions through the darknet is nothing more than supposition and myth. The collaboration of the ATF, FBI and DEA determined a minimum of 90 percent of all bitcoin transactions have no connection to purchasing drugs. The myth linking the darknet to bitcoin originated between 2011 and 2012.

The Ratio Between Millionaires and Bitcoins: As of 2017, only 36 multi-millionaires were in existence anywhere in the world. At this time, there were only 17 million bitcoins. This means every millionaire does not own bitcoin. Individuals in possession of one bitcoin are considered members of the 21 million club. Those who own 21 bitcoin are members of the one in a million club.

Venezuelans and Bitcoin: When private property was seized by Venezuela, the result was monetary hyperinflation, scarcity of resources and economic collapse. Some Venezuelans survived the collapse by using subsidized and cheap power to mine bitcoin. Electricity in Venezuela is cheaper than almost anywhere else on the globe. Individuals able to access mining equipment made enough to survive. Mining is frowned upon by the Venezuelan government. Despite the attempts of the government to stop mining, credible reports show bitcoin mining is being used by the government for enrichment.

Milton Friedman: Milton Friedman is the Nobel Laureate and economist who predicted bitcoin. In 1999 he made a prediction the future would offer a monetary internet system not controlled by the state.

The Four Nines Range: The uptime for bitcoin has reached the four nines range. This means since the creation of the network, it has been functional for 99.99 percent of this period. The creation of bitcoin in 2009 compares exceptionally well to traditional centralized services. These services perform well when four nines are reached within the same month. The downtime in 2013 was caused by the LevelDB bug resulting in a hard fork. To ensure efficiency throughout the network, the bitcoind client version 0.8 was upgraded.

The problem was there were compatibility issues relating to the BerkeleyDB. This led to the split among users between the old and new versions. The pool operators and developers started notifying major miners which version they wanted them to run. More blocks were than accumulated by the miners using the old version. The split was resolved in approximately six hours.

Energy Usage for Mining: The amount of energy required for mining bitcoin is the equivalent of a mid-sized country. Mining requires approximately 73 TWh (Terawatt-hours). This is greater than the consumption of the 18 million people in Chili. The only way to ensure mining is economical is to use extremely cheap power. This is generally geothermal, hydro or renewable power. The scaling of bitcoin is accomplished through the use of different layers. Despite the potential energy costs, bitcoin may become a more efficient way to use the resources of the future than the standard monetary system.

The Silk Road Investigation: The FBI Agents conducting the investigation into the darknet were criminals. The darknet drug market enabling people to obtain bitcoin by trading narcotics became famous. Two formers agents of the Secret Service were supposed to shut Silk Road down. Although the site was dismantled in October of 2013, both of the agents were sent to prison due to their misconduct regarding the investigation. The charges included obstruction of justice, money laundering and extortion.

The 70 Bitcoin Forks: A minimum of 70 altcoins have resulted from the launch of bitcoin. The most commonly known include BTG (Bitcoin Gold) and BCH (Bitcoin Cash). This trend has died down due to the diminishing returns for new forks. Forkgen was even established as a fork coin generator for bitcoin. This enabled an automated creation of a bitcoin fork. The fee for the generation of a new fork is 0.017.

The Second Bitcoin Pizza: In February of 2018, Laszlo purchased a second pizza using bitcoin through the LN (Lightning Network). Due to the newness of this technology, all of the edges had not yet been smoothed out. Using this network with bitcoin was considered reckless. This does not change the fact that Laslo made bitcoin history twice.

The Average Bitcoiner: According to survey statistics from 2013 until 2015, the average Bitcoiner is American or European between the ages of 25 and 34. Despite the time these statistics were taken, they appear to remain consistent. These are the same types of individuals most often encountered at bitcoin events all over the world or on bitcoin social media.

The Core Developer: Mike Hearn is the former developer of Bitcoin Core. In 2016, he stated bitcoin was nothing more than a failed experiment. He strongly disagreed with the other developers regarding the scaling path proposed for bitcoin. He wrote a long pessimistic article in January of 2014. His decision to quit was called a whiny ragequit by the creator of BitTorrent.

The First Bitcoin Transaction: The first transaction took place in 2010 when two pizzas from Papa Johns were purchased by Laszlo Hanyecz for 100,000 bitcoins. The value of the bitcoins at this time was roughly $25. The transaction took place in America through a transatlantic payment from the British user prior to the delivery of the pizzas. On May 22nd of every year, this transaction is commemorated by Bitcoiners across the globe.

The Sync Time of the Blockchain: The original sync time of the blockchain has been improved due to optimizations and consistent growth. The IBD (initial blockchain download) is the time required for a new cryptocurrency wallet to be downloaded and complete the entire blockchain process. Due to new software versions, the IBD for Bitcoin Core has substantially increased in speed. This is amazing due to the growth of the blockchain of hundreds of megabytes every single day. The increase in speed resulted due to the years of optimizations made by the developers.

Satellites and the Bitcoin Blockchain: Satellites are used to beam the bitcoin blockchain all over the world. The most feared bitcoin attacks are shutting down the internet or taking action negatively impacting the bitcoin data transmission. The Blockstream Satellite project has neutralized the possibility of an attack by directly beaming down the blockchain data. There are four regions covered by the satellites. These are Europe, Africa, South America and North America. Once Phase 2 is completed, the entire planet will be covered. The satellite dish enables the transmission to be received. The transactions are broadcast using other methods to the network.

The Growing Acceptance of Bitcoin

The acceptance of bitcoin as an alternate currency is growing despite the link to illegal activities and issues experienced in the past. The rise of bitcoin all over the world is unparalleled to anything occurring in the history of the planet. Bitcoin is not issued by any country. There is also no intrinsic or tangible value. Despite this, the price of bitcoin continues to increase. Merchants and individuals across the globe are using bitcoin as a medium of exchange.

Bitcoin is currently being accepted for an extremely wide range of services and goods. This includes guns, real estate and gold from some of the biggest corporations in the world. Some of the experts believe bitcoin is once again approaching a cryptocurrency bubble. Very few of the venture capitalists, investors and cryptography experts ever believed bitcoin would reach the height of acceptability and success currently being seen. We plan on sitting back and watching what happens next.

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