Recall that in the previous write- ups, our Financial Expert Columnist, Sani Michael Omakoji, dealt with essential things you need to know about cryptocurrency and he did promised in one of his write-ups that he was going to also talk about “Bitcoin” thus, the preceding write-ups are series on Bitcoin to fulfill his promise.
In this particular article, he tells us what is Bitcoin and how come about Bitcoin.
This implies that, in this article, you expected to learn what is Bitcoin and the history of Bitcoin all courtesy of our noble Columnist, Sani Michael Omakoji.
Let us read him:
“ Bitcoin simply means cryptocurrency. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.
From the above statement, it is clear stated that middlemen in conventional banks that create administrative bottleneck is automatically eliminated.
Here, transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
From available investigation, it is on record that Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto and was officially released as open-source software in 2009.
Note, Bitcoins are created as a reward for a process known as mining and they can be exchanged for other currencies, products, and services…that is, it is suitable for barter arrangement.
From the research produced by University of Cambridge estimates that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
However, Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, thefts from exchanges, and by reputable economists stating that “it should have a zero price”.
It is worthy of note that Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.
Having introduced what is Bitcoin, let us now look at the history of Bitcoin.
The domain name “bitcoin.org” was registered on 18 August 2008.
On 31 October 2008, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list
Nakamoto implemented the bitcoin software as open-source code and released it in January 2009.
Note, till the time of write-up as 25th july, 2019, the Nakamoto’s identity remains unknown hence, reason why some people categorize it as a ‘gambling digital currency’
On 3rd January 2009, the bitcoin network was created when Nakamoto mined the first block of the chain, known as the genesis block.
Embedded in the coinbase of this block was the text “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
This note references a headline published by The Times and has been interpreted as both a timestamp and a comment on the instability caused by fractional-reserve banking.
The receiver of the first bitcoin transaction was cypherpunk Hal Finney, who created the first reusable proof-of-work system (RPoW) in 2004.
Finney downloaded the bitcoin software on its release date, and on 12 January 2009 received ten bitcoins from Nakamoto.
Other early cypherpunk supporters were creators of bitcoin predecessors: Wei Dai, creator of b-money, and Nick Szabo, creator of bit gold.
In 2010, the first known commercial transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John’s pizzas for 10,000.
Blockchain analysts estimate that Nakamoto had mined about one million bitcoins before disappearing in 2010, when he handed the network alert key and control of the code repository over to Gavin Andresen.
Andresen later became lead developer at the Bitcoin Foundation.
Andresen then sought to decentralize control.
This left opportunity for controversy to develop over the future development path of bitcoin, in contrast to the perceived authority of Nakamoto’s contributions.
2011–2012
After early “proof-of-concept” transactions, the first major users of bitcoin were black markets, such as Silk Road.
During its 30 months of existence, beginning in February 2011, Silk Road exclusively accepted bitcoins as payment, transacting 9.9 million in bitcoins, worth about $214 million.
In 2011, the price started at $0.30 per bitcoin, growing to $5.27 for the year.
The price rose to $31.50 on 8 June. Within a month the price fell to $11.00. The next month it fell to $7.80, and in another month to $4.77.
Litecoin, an early bitcoin spin-off or altcoin, appeared in October 2011. Many altcoins have been created since then.
In 2012, bitcoin prices started at $5.27 growing to $13.30 for the year.
By 9 January the price had risen to $7.38, but then crashed by 49% to $3.80 over the next 16 days.
The price then rose to $16.41 on 17 August, but fell by 57% to $7.10 over the next three days.
The Bitcoin Foundation was founded in September 2012 to promote bitcoin’s development and uptake.
2013–2016
In 2013, prices started at $13.30 rising to $770 by 1 January 2014.
In March 2013 the blockchain temporarily split into two independent chains with different rules due to a bug in version 0.8 of the bitcoin software.
The two blockchains operated simultaneously for six hours, each with its own version of the transaction history from the moment of the split.
Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software, selecting the backward compatible version of the blockchain.
As a result, this blockchain became the longest chain and could be accepted by all participants, regardless of their bitcoin software version… perhaps, this marks turning point in Bitcoin acceptance and platform.
During the split, the Mt. Gox exchange briefly halted bitcoin deposits and the price dropped by 23% to $37 before recovering to previous level of approximately $48 in the following hours.
The US Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American bitcoin miners who sell their generated bitcoins as Money Service Businesses (MSBs), that are subject to registration or other legal obligations.
In April, exchanges BitInstant and Mt. Gox experienced processing delays due to insufficient capacity resulting in the bitcoin price dropping from $266 to $76 before returning to $160 within six hours
The bitcoin price rose to $259 on 10 April, but then crashed by 83% to $45 over the next three days.
On 15th May 2013, US authorities seized accounts associated with Mt. Gox after discovering it had not registered as a money transmitter with FinCEN in the US.
On 23rd June 2013, the US Drug Enforcement Administration listed 11.02 as a seized asset in a United States Department of Justice seizure notice pursuant to 21 U.S.C. § 881. 56 better source needed.
This marked the first time a government agency had seized bitcoin.
The FBI seized about 30,000 in October 2013 from the dark web website Silk Road during the arrest of Ross William Ulbricht.
These bitcoins were sold at blind auction by the United States Marshals Service to venture capital investor Tim Draper.
Bitcoin’s price rose to $755 on 19 November and crashed by 50% to $378 the same day.
On 30th November 2013 the price reached $1,163 before starting a long-term crash, declining by 87% to $152 in January 2015.
On 5th December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins.
After the announcement, the value of bitcoins dropped, and Baidu no longer accepted bitcoins for certain services.
Buying real-world goods with any virtual currency had been illegal in China since at least 2009.
In 2014, prices started at $770 and fell to $314 for the year.
On July 30th, 2014, the Wikimedia Foundation started accepting donations of bitcoin.
In 2015 prices started at $314 and rose to $434 for the year. In 2016 prices rose to $998 on 1st January 2017.
2017–2018
Prices started at $998 in 2017 and rose to $13,412.44 on 1st January 2018, after reaching its all time high of $19,783.06 on 17 December 2017.
China banned trading in bitcoin, with first steps taken in September 2017, and a complete ban that started on 1 February 2018.
Bitcoin prices then fell from $9,052 to $6,914 on 5th February 2018.
The percentage of bitcoin trading in the Chinese renminbi fell from over 90% in September 2017 to less than 1% in June 2018.
Throughout the rest of the first half of 2018, bitcoin’s price fluctuated between $11,480 and $5,848.
On 1st July 2018, bitcoin’s price was $6,343.
The price on January 1, 2019 was $3,747, down 72% for 2018 and down 81% since the all-time high.
Bitcoin prices were negatively affected by several hacks or thefts from cryptocurrency exchanges, including thefts from Coincheck in January 2018, Coinrail and Bithumb in June, and Bancor in July.
For the first six months of 2018, $761 million worth of cryptocurrencies was reported stolen from exchanges.
Bitcoin’s price was affected even though other cryptocurrencies were stolen at Coinrail and Bancor as investors worried about the security of cryptocurrency exchanges”.
This article is to be updated as the development in Bitcoin unfolds.
Sani Michael Omakoji
Financial Expert Columnist
Abuja – Nigeria
Contact: omakogibizventures@gmail.com
