A Brief History of BitcoinThe birth of cryptocurrency.
Bitcoin rises from the ashes of a financial crisis
Today, Bitcoin stands as the third-largest currency globally, behind none other than the mighty US dollar and euro. Despite Bitcoin’s status as a household name, its rapid rise from obscure internet money to the first truly global digital currency is still shrouded in mystery. Owing in large part to the widespread failings of banks and a pandemic-fueled transition toward digitalism, Bitcoin’s arrival on the world stage epitomizes being at the right place at the right time. However, to understand the history of Bitcoin, you must start at the beginning. In 2008, the world was coming to grips with the global economic downturn dubbed the Great Recession. Primarily caused by the banking industry’s greed and excess, the Great Recession wreaked havoc upon the lives of billions of ordinary people. Simultaneously, an idea for a new type of currency called Bitcoin was being hatched, described, and coded by an anonymous developer (or group of developers) known only as Satoshi Nakamoto. Shortly after explaining Bitcoin as a peer-to-peer electronic cash system, Nakamoto mined the first Bitcoin in 2009, a moment widely regarded as the birth of cryptocurrency. Enshrined in the foundational genesis block (i.e., the beginning of the Bitcoin Network) is a message pointing to the conditions that spurred the development of BTC: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” As such, Nakamoto appears to have created Bitcoin in response to the control, monetary policy, and centralization governments and banks exert over traditional currencies.
Bitcoin is a cryptocurrency (digital money) and a blockchain (decentralized network). To remain decentralized and circulating without using a central bank-like authority, Bitcoin uses a distributed governance system called proof of work. After the network’s genesis block in 2009, participants from around the world called miners joined in to host the Bitcoin network, earning BTC rewards in a process known as mining. Bitcoin’s early days between 2009 and 2013 are characterized by slow but steady growth of the network as more miners joined, and BTC became adopted as an internet currency. However, Bitcoin’s slow growth days changed forever when, during 2013, BTC prices climbed from $80 to just shy of $1,000.
Bitcoin’s evolution into digital gold
Despite experiencing a few hiccups en route to global acceptance, Bitcoin’s ascendance in value has, in large part, been due to its role as a hedge against currency inflation. Similar to the way gold has been bought and traded as a store of value for centuries, Bitcoin has emerged as a form of digital gold used to store wealth during periods of volatility. It should come as no surprise that the emergence of the COVID-19 pandemic in 2020 catalyzed Bitcoin’s most significant price appreciation, taking BTC prices from $3,000 to $60,000 within a single year. While central banks continue inflating US dollars, euros, and pounds, Bitcoin’s decentralized infrastructure halves the inflation rate every four years, thus reducing the already finite supply of BTC. The programmed reduction in inflation means that Bitcoin is provably scarce and will continue rising in value as supply decreases further. In 2021, Bitcoin’s total valuation surpassed the $1 trillion mark, making it more valuable than Facebook, Tesla, and most of the world’s national currencies. Ironically, the very banks who created the financial crisis from which Bitcoin was born, such as JP Morgan and Goldman Sachs, are now buying as much BTC as they can.
Whoever and wherever Satoshi Nakamoto is, they are undoubtedly enjoying the twist of fate wrought by history.