While the world faced uncertainty in the midst of pandemic, Bitcoin community stood strong despite the occasional changes in its price. But what led to this monumental rise and fall in its price and how did Bitcoin grow over the past decade?
Bitcoin has existed since 2009 and the technology it is built on has roots going back even further. In fact if you had invested just $1,000 in Bitcoin the year it was first publicly available, you would now be richer to the tune of £36.7 million.
Bitcoin rallied and crashed multiple times since its existence, while at the same time paving the road towards turning finance completely decentralized. Everything begins with a mysterious creator who suddenly emerged on the internet, here is how he created a revolutionary piece of technology that will disrupt the system for decades to come.
1998–2008: Digital Currency Starting Point
The idea of having a digital currency is not a new one. Prior to cryptocurrencies, many attempts at creating one have taken place. The main issue most of them were facing, was the double spending problem. A digital asset somehow needs to be usable only once to prevent copying it and effectively counterfeiting it.
Over 10 years before cryptocurrencies, the concept had been introduced by computer engineer Wei Dai. In 1998, he published a paper where he discussed “B-money”. He discussed the idea of a digital currency, which could be sent along a group of untraceable digital pseudonyms. That same year, another attempt by the name of Bit Gold was drafted by blockchain pioneer Nick Szabo. Bit Gold equally looked into creating a decentralized digital currency. Szabo’s idea was spurred by inefficiencies within the traditional financial system, such as requiring metal to create coins and to reduce the amount of trust needed to create transactions. While both were never officially launched, they were part of the inspiration behind Bitcoin.
2008: The Birth of Bitcoin
2008 was a year of catastrophic economic turmoil that influenced the entire world for several years, if not even today. Coincidentally, 2008 marks the same year in which an anonymous and mysterious individual published a paper that introduces ‘blockchain technology.’
Called ‘Bitcoin: A Peer-to-Peer Electronic Cash System,’ an individual who calls himself Satoshi Nakamoto published the original Bitcoin whitepaper on October 31, 2008. Initially, Nakamoto shared the paper on a cryptography mailing list. Soon enough the paper spread to almost all parts of the internet, especially to the main circles of cryptography researchers.
Within the paper, Satoshi Nakamoto showcased blockchain networks and explained how they could massively improve the financial system, especially on the internet. Comparing it to a digital ledger, the creator explained blockchain as a decentralized peer-to-peer network that does not require trust. Moreover, he focused on how blockchains require no intermediary.
The very first sentences from the paper read:
“Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments. While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust-based model.”
Blockchain technology, at least the first network to be created, would offer potential users the ability to transfer monetary value through Bitcoin. With irreversible transactions which are cryptographically secured, Bitcoin would become the first viable digital currency in the history of mankind.
On January 3, 2009, Satoshi Nakamoto launched the blockchain network which spawned the first block to be mined, the genesis block. Users were free to participate in the network as miners and earn Bitcoin in return, but it had no value at the time.
But in just a year, we had the chance to see the first (public) economic transaction that exchanged value. On the Bitcointalk forum, a resident from Florida revealed that he spent 10,000 Bitcoins on two pizzas from Papa John’s. The transaction was made on May 22 and based on the price of the goods, was valued at $25.
But if we take a look at the current price, we see that the same transaction now costs $170 million. It appears that BTC was incredibly undervalued at the time, but who would have known?
2011: The Start of Cryptocurrency Markets
After the birth of Bitcoin as the first cryptocurrency, solutions had to be found in order to trade them. In March 2010, the first cryptocurrency exchange appeared in the name of bitcoinmarket.com (now defunct).
As Bitcoin increases in popularity and the idea of decentralized and encrypted currencies catch on, the first alternative cryptocurrencies appear. These are sometimes known as altcoin and generally try to improve on the original Bitcoin design by offering greater speed, anonymity or some other advantage. Among the first to emerge were Namecoin and Litecoin. Currently there are over 1,000 cryptocurrencies in circulation with new ones frequently appearing.
In the beginning, a single Bitcoin was valued at only $0.003. If time travelers were ever to exist, they would certainly return to this point in time to stack up on cryptocurrencies.
2013: Bitcoin Price Crashes
Shortly after the price of one Bitcoin reaches $1,000 for the first time, the price quickly begins to decline. Many who invested money at this point will have suffered losses as the price plummeted to around $300 — it would be more than two years before it reached $1,000 again.
2014: The Mt.Gox Disaster
At a similar time, the market saw the rise of a new Bitcoin exchange that would become the biggest one in the history of crypto.
In 2011, developer Jeb McCaleb converted his old website called Mt.Gox, designed as a marketplace for card game Magic: The Gathering, into an online Bitcoin exchange. Later on, McCaleb sold the exchange to another developer, Mark Karpeles.
Unfortunately in 2014, Mt.Gox became the first major cryptocurrency exchange hack, having 850,000 BTC stolen from it. This is the largest theft of BTC in Bitcoin history, which was valued at $460,000,000 at the time (current date value around $9,5 billion).
After this unprecedented situation, the Bitcoin price plummeted by 50% and did not recover to its initial value till late 2016. Cryptocurrency exchange hacks have remained ever-present since, though rarely of Mt.Gox’s caliber.
2015: Ethereum and ICOs
On July 30th 2015, The Ethereum network was launched. Currently the second crypto asset in terms of market capitalization, it brought smart contracts to the cryptocurrency world. These allow the Ethereum blockchain to run an entire ecosystem on its blockchain while also hosting its own native currency: Ether (ETH) to facilitate blockchain-based smart contracts and apps.
Ethereum’s arrival was marked by the emergence of Initial Coin Offerings (ICOs). These are fundraising platforms which offer investors the chance to trade what are often essentially stocks or shares in startup ventures, in the same manner that they can invest and trade cryptocurrencies. In the US the SEC warned investors that due to the lack of oversight ICOs could easily be scams or ponzi schemes disguised as legitimate investments. The Chinese government went one further, by banning them outright.
2017: The First Big Bitcoin Bubble
The cryptocurrency amassed a wide following that came with developers, miners, technology enthusiasts, and many other groups. As a digital currency that brought decentralization to the traditional financial system, Bitcoin was set to disrupt the world for the first time.
After years of turbulent price action, investors started a rally that would completely faze everyone, especially Bitcoin holders. In August 2015, the price reached a bottom which we would never see again. With strong support at $200, we saw the asset slowly rise in value over time. By June 2016, Bitcoin already came close to its previous all-time high and was valued at $770.
In March 2017, bullish investors led to an all-time high of $1345, slightly above the previous one. Giving absolutely zero chances for bears to recover, Bitcoin dropped only to $945 before bouncing radically in a short time.
We all know what happened next! Bitcoin entered a parabolic phase through which it successfully increased in value many times over. On December 11, 2017, Bitcoin reached its final ATH at $20,000.
Afterward, investors decided to utilize all the newly gained returns to invest in altcoins, the other cryptocurrencies in the market. Just like Bitcoin, these mostly Ethereum-based altcoins tremendously increased in price during January 2018. Some of them grew 20 times in value in the course of a single day.
Aside from prices, Bitcoin reached an ATH for all its other aspects as well. Retail buyers became interested in the ‘official internet currency.’ Many of them used their entire savings, sold possessions, and even houses to be ‘early adopters’ of a new disruptive asset. With many new investors buying at the very top, the story ended badly.
Bitcoin revealed to the entire world that, apart from having an investment value, it can also be reliably used for payments. Forked projects and altcoins also helped contribute to this factor by introducing a variety of use cases in almost all fields of life.
Smart contracts, a separate and new piece of blockchain technology, also gained traction as they were popularized by Ethereum. Its gigantic ecosystem supported a majority of the new cryptocurrencies. More than that, Ethereum has shown that blockchain technology can not only disrupt markets and banks but other institutions as well.
Final Word
Despite several dramatic events since the major crash in 2017, Bitcoin and the overall cryptocurrency market are alive and well. As a matter of fact, the crypto assets market experienced a complete revival in 2020 by rising to the same highs seen three years before. Although in the midst of 2021, cryptocurrencies’ price suddenly plummeted just like in 2017.
The world has changed a lot in the past decade and blockchain technology surely had a big influence on shaping the world. From a niche digital currency known only by cryptographers to an investment and currency with a price higher than any other asset, what does the future hold for Bitcoin and all other cryptocurrencies? Will they exist side-by-side with fiat currencies or will they completely replace them? With that in mind, can we expect blockchain technology to influence other aspects of our everyday lives and if so, what will decentralized networks disrupt next?
