Bitcoin was born from a crisis

In the middle of the 2008 banking crisis, a group of anarchists, libertarians, and other tech-savvy true believers created digital cash.

In August 2008, bitcoin dot org was registered as a domain. On Halloween the same year, Satoshi Nakamoto put up a whitepaper describing a decentralised system of electronic transactions that did not involve a financial institution.

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  • Bitcoin is a peer-to-peer money network. You don't have to pay a fee to a bank when you send money to another party.
  • Bitcoin is finite. There can only be 21 million bitcoin in the world. More than 17 million have already been mined while the rest will be released at a predictable mining rate.
  • Anyone can access the public parts of the ledger of transactions or "blockchain." If you can keep your wallet anonymous, no institution need to know who you are.

Bitcoin highlights how fundamentally bizarre money is. Money is a value token that makes exchange easier. It isn't real in a tangible way. But it's real enough that people fight and die for it.

Bitcoin's ideology is that of a specific distrust of financial institutions. In 2009, many people were looking for alternatives to the mainstream financial system that had disastrously failed. Bitcoin was the first successful attempt for an alternative financial system.

In order to make your investment in bitcoin worthwhile, you have to convince others that the investment is valuable too.

The most significant community for early bitcoin was dark web marketplace Silk Road, founded by Dread Pirate Roberts (Ross Ulbricht). The idea was that anything could be traded, regardless of whether the state viewed it as legal. The trade included marijuana, fake IDs, etc. In 2013, the US government seized Silk Road. The seizure included 144,336 bitcoins that belonged to Ulbricht.

Magic: The Gathering Online eXchange (Mt.Gox) launched a bitcoin exchange in 2010. It let people buy bitcoin and sell using bank transfers.

The early years of Mt.Gox revealed that online currency meant new risks, such as hacks, outages, and a run-in with the US government. In 2014, clients complained that they couldn't withdraw their bitcoin and Mt.Gox filed for bankruptcy. Later it was discovered that an attacker had slowly been draining all of Mt.Gox's bitcoins. Mt. Gox was responsible for 70% of all bitcoin ever traded as of February 2014.

Despite Mt.Gox and the Silk Road, bitcoin continued to enter the mainstream. At the end of 2014, Microsoft began accepting bitcoin payments. In 2015, other cryptocurrencies such as Ethereum - also based on the blockchain - began to emerge.

Ethereum changed the focus from bitcoin per se to blockchain as a technology. Using the blockchain, Ethereum lets users write applications and make money from their work. The most known application is the "smart contract" - a technology that bills itself as a way of replacing lawyers.

  • Ethereum was the most meaningful of the ICOs (initial coin offering). Many other companies followed, such as NXT Neo, Spectrecoin that were often tied to specific businesses and products.
  • In 2017, the US Securities and Exchange Commission (the money police) announced that financing events for digital currencies would be regarded as securities under some circumstances.
  • But bitcoin left behind its original community of true believers, and in 2017, the price surged more than 1,000 percent.

On January 3rd, 2009, a few months after the publication of the original whitepaper, the first lines of code were committed to the bitcoin blockchain by Satoshi Nakamoto. But Nakamoto vanished. No one has discovered who Satoshi was or is, though many have tried.

The initial idea of bitcoin was to work without trust. As the bitcoin's price has risen, it became another investment vehicle for the financial system. The biggest winners from the new bitcoin era may be the people the system was designed to bypass - the institutional investors and banks.

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