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Bitcoin is the most established of cryptocurrencies available today. And despite a short history compared to the likes of gold or even the British Pound, there are a number of key events that have contributed to Bitcoin’s dominant position in the cryptocurrency marketplace. In this post, we take a look at just a few of Bitcoin’s significant dates and briefly explain the impact of each.
31 August 2008: Satoshi Nakamoto published a research paper entitled, Bitcoin: A Peer-to-Peer Electronic Cash System to a cryptography mailing list. The paper outlines the intended functionality and purpose of Bitcoin. Nakamoto’s paper proposed a viable solution to the issue that has hindered cryptocurrency development to this point, being the potential double-spending, by recommending that the concept of proof-of-work be used to ensure verified transactions.
22 May 2010: Laszlo Hanyecz, a programmer based in Florida, paid 10,000BTC for home delivery of 2 large pizzas. This is the first ‘real-life’ transaction recorded on the blockchain in so far as it reflects an actual product purchased using bitcoin. The exchange rate at the time put the price for the pizzas at $25.
While its impact may seem a bit trivial now, it certainly deserves a mention in Bitcoin’s milestone moments as the first public display of bitcoin’s utility for a material purchase.
25 March 2013: In the hope of addressing a dwindling economy, Cyprus President Nicos Anastasiades, accepted austere conditions from the Eurogroup, the European Commission, the European Central Bank and the International Monetary Fund for a €10 billion bailout. One such condition entailed a haircut of bank accounts holding more than €100,000, an understandable worry for wealthy locals and internationals using Cyprus as a tax haven at the time. These account holders turned to Bitcoin in droves in an attempt to protect their holdings before conditions came into force, resulting in a surge in price from around $80 to over $260 through the early weeks of April, before settling at the $130 mark.
This event can be considered as the first grand show of faith in Bitcoin as a viable store of value during political and economical instability. Since then, we have seen numerous occasions where citizens lose trust in their governments to deliver favourable monetary policies and seek financial refuge in bitcoin.
2 October 2013 - 29 November 2013: A series of events led to a mainstream media frenzy around Bitcoin, with a major impact on awareness and price.
Firstly, the FBI shut down The Silk Road, a now-notorious online marketplace on the dark web for dealing in drugs and other contraband products and services, with bitcoin accepted as payment. The Silk Road’s alleged founder, Ross Ulbricht, with an online alias of Dread Pirate Roberts, is arrested and faces numerous criminal charges. The FBI seized 30,000 BTC from The Silk Road's bitcoin holdings and an additional 144,000 BTC from Ulbricht’s private holdings 3 weeks later. He has subsequently been sentenced to life imprisonment without parole.
Thereafter, the US Senate hosted a panel discussion named Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies. The outcomes and response surprised the Bitcoin community as many of the Senators and panelists concurred that Bitcoin holds great promise, and they theoretically gave the innovation a ‘stamp of approval’.
Fuelled by widespread coverage of The Silk Road’s demise, the US Senate’s hearing and new found curiosity in Bitcoin, the price climbed rapidly to break through the $1,000 mark to reach an all time high of $1,242, eclipsing the spot gold price for the first time.
7 - 24 February 2014: 3 key bitcoin exchanges, namely Bitstamp, Mt. Gox and BTC-e, all experienced trading outages as their systems came under DDoS attacks from hackers looking to take advantage of transaction malleability issues in the exchanges’ software. This translated into a sharp drop in price.
Mt.Gox, arguably the largest bitcoin exchange at the time, failed to get the website back online and the trading platform disappearing without comment. With market tension brewing, several Bitcoin-based businesses and other exchanges issued a joint statement condemning the executives of Mt.Gox for severe mismanagement, deception and eventual collapse, after a leaked internal document indicated that the company lost more than 744,000 BTC.
These events highlighted a number of core issues around the security and regulation of virtual currency. Firstly, while the Bitcoin network itself is secure, holdings on exchanges or with 3rd parties is an investment risk. Secondly, because there is little in the way of regulation of these businesses, and depending on their location, they may claim absolution to any claims from clients regarding lost holdings. It is for this reason that we, as Bitstocks, ensure our clients’ holdings are not stored online, but rather in offline terminals (deep cold storage) as well as advocating regulation of Bitcoin-backed businesses.
31 October 2015: The popular economic liberalism publication, The Economist, featured Bitcoin as The Trust Machine. The accompanying article detailed Bitcoin and the utility of blockchain technology, with a special focus on its potential role in banks and government institutions.
While the Bitcoin community at large is not all that concerned with mainstream media, its coverage undoubtedly plays a role in driving awareness, broader adoption, and therefore the ultimate success of Bitcoin. The Economist shone a light on the fundamental and inherent benefits to Bitcoin and as such, brought interest from a new, largely untapped, demographic at the time.
3 January 2017: After a steady climb through the latter of 2016, the bitcoin price broke through the psychologically significant $1,000 mark a few days into 2017. At this point, $1,000 / BTC had not been seen in 3 years. This was once again followed by a wave of media coverage and infused a fresh rush of positive sentiment into the market.
1 April 2017: Japan took the lead in embracing Bitcoin by becoming the first nation to formally legalise bitcoin as legal tender. This opened the door for retailers to embrace bitcoin as a payment method, as accounting systems and financial software were updated to cater for cryptocurrency transactions.
This move also paved the way for other forward-thinking countries to reexamine their own rulings on cryptocurrency as legal tender, as they looked to Japan as a blueprint for adoption and regulatory practices. Following the announcement, the bitcoin price rallied as demand and volumes from Japanese exchanges rose sharply.
1 August 2017: Following heated, long-standing debate around the pressing need for a viable solution to Bitcoin’s scalability woes, a group of Bitcoin developers, in favour of a hard fork from the main blockchain, created a Bitcoin derivative called Bitcoin Cash. A primary differentiator is the fact that Bitcoin Cash does not make use of Segregated Witness, a proposed scalability solution. Instead it enabled an immediate increase in the block size, allowing for more transactions to be processed at once.
Despite initial fears and hype, the hard fork went ahead smoothly, with little to no disruption to the Bitcoin network. Those holding Bitcoin at the time of the chain split were awarded an equal number of Bitcoin Cash and it is reported that to date, more than 80% have not been traded.
The preceding scaling debate, as well as the hard fork, represent some of the struggles of decentralisation. Whilst certainly one of Bitcoin’s most valued qualities, decentralisation means that consensus is required in order for development to move ahead in a single direction. This has not been easy to come by for Bitcoin. Essentially, it is human involvement that has hindered its ability to reach its full potential, in so far as the need for security enhancements to be deployed to enable new use case opportunities.
As it stands, Bitcoin has recently activated Segregated Witness (SegWit), which offers a fix to transaction malleability and promises to enable further application deployment to expand Bitcoin utility. This concludes one aspect of an agreement reached in May this year, dubbed the New York Agreement, where several key Bitcoin businesses and miners committed to the implementation of SegWit as well as a hard fork increase in block size in November this year. It remains to be seen whether the second phase will go ahead as planned (considering that Bitcoin Cash essentially offers this already). Irrespective, it has been encouraging to see the bitcoin price respond positively throughout these events, with record all time highs being reached regularly and support remaining steady around the $4,400 - $4,600 range in recent weeks.
With an already illustrious history in its short lifespan, it is exciting to imagine where it could be a few months ahead, let alone a couple of years. With this in mind, I certainly consider myself fortunate to be an active participant in such a pioneering journey to financial sovereignty for all!