After decades of economic growth and prosperity in developed countries, the late 2000s hit the financial markets as nothing else could. In particular, the beginning of the Great Recession prompted many banks to close which in turn led to a massive loss of savings across the globe. This was the perfect time to create a new trustless system which would eliminate the middlemen and give people a safer alternative for storing and exchanging their assets. As such, this system would have to satisfy the properties of money: portability, divisibility, scarcity, uniformity, and acceptability. The emergence of the Internet and the rapid digitization of societal institutions suddenly allowed a piece of computer code to be able to satisfy all these conditions. There had been many earlier forms of digital money with cryptographic signatures, such as eCash (1983), B-money (1998), and Bit Gold (1998). These had failed to go mainstream, as they never escaped the limited circles of the cypherpunks community, and thus were never available to the general public. Moreover, even once implemented, they were vulnerable to all sorts of attacks and couldn’t prevent double spending.
In October 2008, Satoshi Nakamoto, a pseudonymous individual or a group of individuals, had submitted a whitepaper to the Cryptography Mailing List. It was titled “Bitcoin: A Peer-to-Peer Electronic Cash System”, they outlined a novel solution to the double spending problem, proposing a trustless network that could be used both as a payment system and for the secure storage of saving and other assets. The whitepaper consisted of 12 parts, including the introduction and conclusion, and each chapter described the protocol bit by bit. It is a beautiful piece of academic literature, which could be one of the reasons for the networks’ rapid success. The most striking feature of the paper is the following excerpt from the conclusion: “the network is robust in its unstructured simplicity”. In January 2009, Bitcoin was finally born. The genesis block, or the first block ever to be produced, contained just one transaction, specifically a reward of 50 BTC for mining it. Since this generation transaction had no parent, it also included an arbitrary coinbase parameter, referring to the date the block had been mined:
“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”
This line of text has led to speculation on whether Satoshi Nakamoto had lived in the UK, or whether the message contained any unknown reference. It is clear, however, that he used the line to emphasize the dysfunctionality of the global banking system,
A few days after the genesis block was produced, Satoshi performed the first real transaction, having sent 50 BTC to a crypto enthusiast Hal Finney. Back then the only way to receive or transfer coins was by mining them, which carried a 50 BTC reward per block. In October 2009, Martti Malmi, one of earliest first Bitcoin developers, performed the first crypto-to-fiat trade by selling 5050 BTC for just $5.02. On May 22, 2010, BTC saw its first use as a medium of exchange when Laszlo Hanyecz had bought two pizzas for about 10,000 BTC. The date became known as the Bitcoin Pizza Day and is still commemorated today, reminding everyone what the cryptocurrency has achieved in such a short time. Since then, a lot has changed. The crypto world has seen a multitude of large transactions, hacks, and interesting quirks one can only observe due to the nature of Bitcoin’s public ledger.
Bitcoin inspired the creation of countless new cryptocurrencies, which became known as altcoins, short for alternative coins, all with varying functionality and use cases. There are now three generations of cryptocurrencies, and the first one includes Bitcoin, as well as all of its forks that had taken the original codebase and oftentimes even a copy of its blockchain, using a different name and maybe a hash function. The most popular Bitcoin forks include Litecoin, Dogecoin, and Bitcoin Cash. It is hard to compare BTC to second-generation coins, and the third one is just on the horizon. These cryptocurrencies differ significantly both in design and in their codebase, but they would never exist had Satoshi Nakamoto not released their brainchild to the public.
All in all, Bitcoin and crypto, in general, have come a long way since the late 2000s, but it has consistently been delivering freedom and opportunities to people in need, and it has sparked the mass adoption of blockchain technology around the world.