Today is Bitcoin’s birthday.
The world’s most popular crypto-currency has turned 10 years old. In a decade, this digital token has made numerous headlines around the world, as either the scourge or saviour of the global financial system, and the increasing numbers of people that know about Bitcoin seem to either love it or loath it. Few are ambivalent about it and even less fully understand what it is and how it works. It is, and has been since its creation, an enigma.
On Oct 31st, 2008, someone called “Satoshi Nakamoto” sent an email that outlined the basis for a “new electronic cash system.”
The mail was sent to a list of so-called “cyberpunks” that lived mainly in the San Fransisco Bay area and who had started to meet to discuss concerns around how privacy can be retained in increasingly open, digitally-based societies. The group was proudly tech-based and broadly anti-authoritarian – hence their name – and while they debated maths, computer science, philosophy and politics, their real focus was cryptography.
A member of this group, Berkeley mathematician Eric Hughes, had in the early 1990s written in the Cypherpunk’s Manifesto that “the Cypherpunks are dedicated to building anonymous systems” because, he continued with considerable foresight, “we cannot expect governments, corporations, or other large, faceless organizations to grant us privacy out of their beneficence.”
The paper, entitled “Bitcoin: A Peer-to-Peer Electronic Cash System” outlined how a person-to-person online payment system, that would be “based on cryptographic proof instead of trust,” could bypass financial institutions. Nakamoto’s solution relied on a new decentralised digital platform called blockchain where, put in very simple terms, “coins” would be digitally “mined” via complex proof-of-work algorithms.
The first Bitcoin was created on 3rd January and it came with an embedded digital note that contained a headline from that day’s London Times. “Chancellor on brink of second bailout for banks” read the headline and as it was in the midst of the 2008 /2009 financial crisis, the note’s inclusion has been widely interpreted as criticism of the global banking system and cemented Bitcoin counter-culture roots.
Satoshi Nakamoto has always remained anonymous and the name is almost certainly a pseudonym. And while there has been much speculation about who the person was, or the group of people, that actually created Bitcoin, there can be be doubt about the influence it has had on our modern world.
However the blockchain technology that underpins crypto-currency has received serious attention, from the likes of Alibaba and IBM and also governments and institutions around the world. And it’s not too much of an exaggeration to say that its mainstream adoption is in a large part down to Bitcoin.
It didn’t happen overnight however. For the first three years of its life, Bitcoin was worth less than $1. On May 22, 2010, a US programmer called Laszlo Hanyecz wanted to prove that this new digital currency could be used for real-life purchases so exchanged 10,000 bitcoins for two pizzas. In today’s values that would work out at around $5 million per slice of pizza. It’s one of the earliest recorded Bitcoin transactions and May 22nd is now known across crypto-land as ‘Pizza Day’.
It’s price began to slowly rise around 2011 as both its transaction capabilities and its ability to give its users anonymity became better known.
Bitcoin began to be used more and more but the issue, however, was its prime use was for drug dealers and for other furtive dark web based criminal activities.
During 2015 and 2016, Bitcoin started to attract venture capital interest and the token’s value started to climb into the low hundreds. And then, in 2017, it’s price rise graph went close to vertical. As Bitcoin fans started to wear “To the Moon” t-shirts – implying it’s climb in value was not about to stop – the token grew in value from less than a thousand dollars at the end of 2016 to almost $20,000 at the end of 2017.
Not surprisingly by now Bitcoin had the attention of governments and banks and mainstream investors across the world but what then followed was a series of quickfire price plummets followed by a wild rollercoaster ride of rapid and sharp price swings.
It’s value has recently settled around $6,500 and it’s price volatility has significantly dropped too. However, despite having a market cap of roughly $115 billion, Bitcoin has never lost its anarchic aura and it’s popularity is clearly due, in part, to widespread global dissatisfaction with mainstream financial systems, especially among many millennials worldwide who are rejecting traditional banking systems.
Bitcoin exchanges have also been constantly hacked and the ever-increasing energy demands that the complex mining processes require are becoming a real environmental worry. China and India have effectively banned Bitcoin, the US is trying to reign it in through tough regulation while Japan and Korea is trying to work with it.
But, despite it all, it has endured. So what will the next ten years bring? That really is the billion dollar question.
So for now, happy birthday you odd little piece of computer code.