History of bitcoin

Bitcoin is a cryptocurrency, a digital asset that uses cryptography to control its creation and management rather than relying on central authorities. Originally designed as a medium of exchange, Bitcoin is now primarily regarded as a store of value. The history of bitcoin started with its invention and implementation by Satoshi Nakamoto, who integrated many existing ideas from the cryptography community. Over the course of bitcoin's history, it has undergone rapid growth to become a significant store of value both on- and offline. From the mid-2010s, some businesses began accepting bitcoin in addition to traditional currencies.

Background Prior to the release of bitcoin, there were a number of digital cash technologies, starting with the issuer-based ecash protocols of David Chaum and Stefan Brands. The idea that solutions to computational puzzles could have some value was first proposed by cryptographers Cynthia Dwork and Moni Naor in 1992.

Adam Back The idea was independently rediscovered by Adam Back who developed hashcash, a proof-of-work scheme for spam control in 1997. The first proposals for distributed digital scarcity-based cryptocurrencies were Wei Dai's b-money and Nick Szabo's bit gold. Hal Finney developed reusable proof of work (RPOW) using hashcash as proof of work algorithm. In the bit gold proposal which proposed a collectible market-based mechanism for inflation control, Nick Szabo also investigated some additional aspects including a Byzantine fault-tolerant agreement protocol based on quorum addresses to store and transfer the chained proof-of-work solutions, which was vulnerable to Sybil attacks, though.

Creation and launch, 2008–2009 On 18 August 2008, the domain name bitcoin.org was registered. Later that year, on 31 October, 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. 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". On 3 January 2009, the bitcoin network came into existence with Satoshi Nakamoto mining the genesis block of bitcoin (block number 0), which had a reward of 50 bitcoins. Embedded in the genesis block was the text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." The text refers to a headline in The Times published on 3 January 2009. This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking. The first open source bitcoin client was released on 9 January 2009, hosted at SourceForge. One of the first supporters, adopters, contributors 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 on 12 January 2009 (block 170). Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. One of the first miners included James Howells, who subsequently lost thousands of Bitcoin to a landfill in Newport. 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.

Satoshi Nakamoto

"Satoshi Nakamoto" is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in 2007 then released the whitepaper in 2008 and finally launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the bitcoin forum. There has been much speculation as to the identity of Satoshi Nakamoto and their real identity remains a matter of dispute.

Early adoption and infrastructure, 2010–2012

2010

The first notable retail transaction involving physical goods took place on 22 May 2010. Laszlo Hanyecz, a programmer in Jacksonville, Florida, posted on the Bitcointalk forum offering 10,000 of his mined bitcoins in exchange for two pizzas. A 19-year-old in California named Jeremy Sturdivant accepted the offer and ordered two Papa John's pizzas for delivery to Hanyecz's home, receiving the 10,000 BTC in exchange. At the time, the bitcoins were worth around $41. The date is commemorated annually as "Bitcoin Pizza Day". On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. While the protocol did verify that a transaction's outputs never exceeded its inputs, a transaction whose outputs summed to more than 2 64 {\displaystyle 2^{64}} would overflow, permitting the transaction author to create arbitrary amounts of bitcoin. On 15 August, the vulnerability was exploited; a single transaction spent 0.5 bitcoin to send just over 92 billion bitcoins ( 2 63 {\displaystyle 2^{63}} satoshis) to each of two different addresses on the network. Within hours, the transaction was spotted, the bug was fixed, and the blockchain was forked by miners using an updated version of the bitcoin protocol. Since the blockchain was forked below the problematic transaction, the transaction no longer appears in the blockchain used by the current Bitcoin network.

2011 Based on bitcoin's open-source code, other cryptocurrencies started to emerge. The Electronic Frontier Foundation, a non-profit group, started accepting bitcoins in January 2011, then stopped accepting them in June 2011, citing concerns about a lack of legal precedent about new currency systems. The EFF's decision was reversed on 17 May 2013 when they resumed accepting bitcoin. In May 2011, bitcoin payment processor, BitPay was founded to provide mobile checkout services to companies wanting to accept bitcoins as a form of payment. In June 2011, WikiLeaks and other organizations began to accept bitcoins for donations.

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