The story of the formation of Bitcoin

The story of the formation of Bitcoin

Common

How the story was arise…

 

In the last article, we smoothly moved to the creation of the first cryptocurrency- Bitcoin. Many believe that this happened in 2009, but this information is erroneous. According to Satoshi, the idea of ​​creating such an electronic system came to him in 2007. The code development and the first information about Bitcoin appeared in 2008.

October 31, Friday, Satoshi sent e-mail newsletters to the group of cypherpunks, where was Bitcoin`s «white paper». In the explanation of the letter, he indicated that he had created a peer-to-peer electronic monetary system, with the help of which anyone can perform quick and anonymous transactions without the involvement of a third party.


October 31, 2008 – the date of the beginning of the great history.

Although many agree that 2008 is «zero year». But 2009 is considered as the first year.

 

 

The first steps

 

Further, Satoshi together with a group of cypherpunks started to work on the creation of a «client». On January 3, 2009, the first block in the Bitcoin network, the so-called «genesis block», was generated. The first 50 BTC as a reward for the computing power provided went to Satoshi’s wallet. On January 9 was presented the first official version of the code – Bitcoin 0.1.

Then the active revision of the code was started, which had a bunch of bugs and errors. In addition, the first client was supported only by Windows 2000, Windows NT and Windows XP.

In December 2009, version 0.2 was presented, which was already supported by Linux. In addition to cypherpunks, other community representatives started to think about code development and the development of the Bitcoin ecosystem. In November 2009, a bitcoin.org resource has appeared, which later became the famous forum «Bitcointalk». Gradually, then new participants joined, who offered their ideas for improving the system.

May 22, 2010, perhaps the most famous date in the cryptocurrency community. On this day, Bitcoins were used to calculate consumer goods for the first time. Programmer Laszlo Khanich decided to exchange his earned coins for 2 pizzas and he was succeeded. Papa John’s Pizzeria sold them for 10,000 bitcoins. Since then, every year on May 22, the community pays attention to how much those 2 pizzas cost at the current rate. In 2019, this is about $ 80 million, although the programmer paid $ 24 at that moment.

Summer 2010 – version 0.3 was presented. Emphasis was placed on the effectiveness of mining. There are suggestions appeared for the use of graphics processors graphics cards.

On August 6 of the same year -programmers discovered a serious vulnerability: transactions were not tested before being added to the blockchain, and because of it there was possibility to create an unlimited number of bitcoins. On August 15, the attacker created 184 billion bitcoins in one transaction. The developers of the code managed to track the sent funds within a few hours and delete the information from the blockchain. Then the error was corrected. It should be noted, that this was the only one serious error in the Bitcoin code for all the time that the hackers managed to use to please themselves.


Meanwhile, the question of the effectiveness of mining has become increasingly relevant. People started to pool and share the reward. Mining became some kind of gambling.
November 27, 2010-the appearance of the first mining pool «Bitcoin Pooled Mining (BPM)».

December 2010- the first mobile transaction was sent by using the Nokia N900 smartphone.

 

 

Satoshi Nakamoto’s leave

 

December 2010 was the same significant event in the history of Bitcoin as October 31, 2008 – Satoshi Nakamoto published his «farewell»version of Bitcoin 0.3.9 and disappeared. But surprisingly it didn`t make a serious blow to the project. He managed to create a completely decentralized system where each contributed to it. Therefore, other developers further continued to improve the code.

Many offered their ideas, but not all of them were implemented. Against this background, developers started to leave the project and create their own cryptocurrencies, which were more improved in something. The first such project can be considered «Neimkoin». Then experiments were with the creation of the block, as a result of which GeistGeld, iXcoin, SolidCoin and other alt-currencies arose.

Mining became more difficult and users started to move massively to farms from FPGA and GPU. We also started to criticize the SHA256 hash function, and as a result, the Tenebrix currency appeared «with reliable protection against mining on the GPU».

 

 

The origin of today’s popular Altcoins

 

Further, the release of the already well-known Litecoin cryptocurrency took place, the mining of which was carried out on conventional processors. Miners were divided into two camps, some were engaged in Bitcoin mining on the GPU and others were engaged in Litecoin mining on the processors.


In the summer of 2011, Proof-of-Stake (PoS) was presented to the community as a response to the unequal distribution of «votes». The point was that they are distributed in the system and not depending on the computing power provided, but on the number of coins that belong to the network participant. A little bit later, the PPCoin project (Peercoin) appeared, which combined PoW and PoS at once.

We would like to skip the creation of the first mobile applications and go to the significant event that most strongly influenced the subsequent history of Bitcoin- the creation of mining devices based on ASIC. This is probably one of the most controversial developments, because such devices contribute to the consolidation of computing power and this is a direct contradiction of the very philosophy of Bitcoin.

In 2011, there was another popular cryptocurrency- Ripple. The Ripple protocol was first presented in 2004 by Ryan Fugger. In 2005, he was involved in the development of the Ripplepay financial service for secure online payments on the global network. Later, after the creation of Bitcoin, people thought that the technology could solve a number of cryptocurrency problems, such as the use of centralized exchanges, long and expensive transactions, and electricity consumption. As a result, in 2011, Jed McCaleb decided to develop a new Ripple system. By the way, in August 2012, he hired Chris Larsen and then they jointly turned to Ryan Fugger with their idea of ​​digital currency. As a result, Fugger gave them the right to the concept and name.

 

 

Mt.GOX

 

By the way, Jed McCaleb had an important role in the development of the cryptocurrency industry. Besides of the Ripple, he is also the founder of the infamous Bitcoin exchange Mt.Gox, although everyone remembered the platform`s CEO -Mark Karpeles. It was the first platform where people could quickly change their coins for fiat currency. However, in early 2014, the exchange was hacked and as a result of 850,000 bitcoins were disappeared. Later, 200,000 coins were found, which are hope of the investors to get their money back. The liquidation process is still ongoing and probably it will last until the end of 2019.


In addition, McCaleb is the founder of «The Stellar project», the emergence of which was as result of constant criticism of the fully centralized and controlled by the Ripple structure.

In May 2011, a digital currency was presented, in which the approval of transactions is not based on mining, but on the consensus of participants.

 

 

Silk Road

 

Another truly significant project in the cryptocurrency ecosystem is Silk Road, which was created in 2011. The platform has become a main element for the final adoption of cryptocurrencies, in particular Bitcoin.

What began as a libertarian’s dream ended in prison.

The founder of the site is Ross Ulbricht. He wanted to create an absolutely free platform, where anyone could buy and sell any product. The main currency was Bitcoin, because it provided the ability to send anonymous payments. However, as a result of this, the platform has become a place for the sale of prohibited items (drugs, weapons). Ulbricht was eventually convicted guilty under seven articles by the US authorities, including money laundering, distribution of narcotic drugs and the organization of the criminal community. Nevertheless, one must admire him, because Bitcoin was widely publicized due to «The Silk Road», although many believe that it is negative and influenced the formation of the opinion that «Bitcoin is needed only for conducting illegal activities».
Whatever, «The Silk Road» is a significant project that had a strong influence on the emergence of Bitcoin as it is now.
At the end of 2011, Alan Reiner proposed BIP 0010 as multi-signature transactions. The idea was tested on Armory software and as a result, on March 30, 2012, they added to the bitcoin`s code.
In 2012, work was actively carried out on the creation of deterministic wallets, the idea of which was presented a year earlier.

 

 

Bubble of the cryptocurrencies

 

However, users,who don`t really understand the technical part of the cryptocurrency, remember exactly 2013- a year of the cryptocurrency market boom. This is how the Bitcoin chart looked like:


Seems familiar? The market grew at a tremendous pace. No one could understand the reasons of this phenomenon, people just bought Bitcoin (by the way at Mt.Gox), because they believed in its future. About «new money» talked almost everywhere, including all well-known media. However, in early 2014, the first negative news came from China, whose authorities recommended their citizens not to use the innovation in their work. Then the Mt.Gox exchange was hacked. At that time, it handled over 90% of the trades, so this was the strongest blow to the entire cryptocurrency world. If we draw an analogy with the current time, then this is the same thing that Binance (which processes 74% of trades) would have been hacked and all the funds were stolen.

 

Then «the cryptocurrency winter» came …


 

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How the story was arise…

 

In the last article, we smoothly moved to the creation of the first cryptocurrency- Bitcoin. Many believe that this happened in 2009, but this information is erroneous. According to Satoshi, the idea of ​​creating such an electronic system came to him in 2007. The code development and the first information about Bitcoin appeared in 2008.

October 31, Friday, Satoshi sent e-mail newsletters to the group of cypherpunks, where was Bitcoin`s «white paper». In the explanation of the letter, he indicated that he had created a peer-to-peer electronic monetary system, with the help of which anyone can perform quick and anonymous transactions without the involvement of a third party.


October 31, 2008 – the date of the beginning of the great history.

Although many agree that 2008 is «zero year». But 2009 is considered as the first year.

 

 

The first steps

 

Further, Satoshi together with a group of cypherpunks started to work on the creation of a «client». On January 3, 2009, the first block in the Bitcoin network, the so-called «genesis block», was generated. The first 50 BTC as a reward for the computing power provided went to Satoshi’s wallet. On January 9 was presented the first official version of the code – Bitcoin 0.1.

Then the active revision of the code was started, which had a bunch of bugs and errors. In addition, the first client was supported only by Windows 2000, Windows NT and Windows XP.

In December 2009, version 0.2 was presented, which was already supported by Linux. In addition to cypherpunks, other community representatives started to think about code development and the development of the Bitcoin ecosystem. In November 2009, a bitcoin.org resource has appeared, which later became the famous forum «Bitcointalk». Gradually, then new participants joined, who offered their ideas for improving the system.

May 22, 2010, perhaps the most famous date in the cryptocurrency community. On this day, Bitcoins were used to calculate consumer goods for the first time. Programmer Laszlo Khanich decided to exchange his earned coins for 2 pizzas and he was succeeded. Papa John’s Pizzeria sold them for 10,000 bitcoins. Since then, every year on May 22, the community pays attention to how much those 2 pizzas cost at the current rate. In 2019, this is about $ 80 million, although the programmer paid $ 24 at that moment.

Summer 2010 – version 0.3 was presented. Emphasis was placed on the effectiveness of mining. There are suggestions appeared for the use of graphics processors graphics cards.

On August 6 of the same year -programmers discovered a serious vulnerability: transactions were not tested before being added to the blockchain, and because of it there was possibility to create an unlimited number of bitcoins. On August 15, the attacker created 184 billion bitcoins in one transaction. The developers of the code managed to track the sent funds within a few hours and delete the information from the blockchain. Then the error was corrected. It should be noted, that this was the only one serious error in the Bitcoin code for all the time that the hackers managed to use to please themselves.


Meanwhile, the question of the effectiveness of mining has become increasingly relevant. People started to pool and share the reward. Mining became some kind of gambling.
November 27, 2010-the appearance of the first mining pool «Bitcoin Pooled Mining (BPM)».

December 2010- the first mobile transaction was sent by using the Nokia N900 smartphone.

 

 

Satoshi Nakamoto’s leave

 

December 2010 was the same significant event in the history of Bitcoin as October 31, 2008 – Satoshi Nakamoto published his «farewell»version of Bitcoin 0.3.9 and disappeared. But surprisingly it didn`t make a serious blow to the project. He managed to create a completely decentralized system where each contributed to it. Therefore, other developers further continued to improve the code.

Many offered their ideas, but not all of them were implemented. Against this background, developers started to leave the project and create their own cryptocurrencies, which were more improved in something. The first such project can be considered «Neimkoin». Then experiments were with the creation of the block, as a result of which GeistGeld, iXcoin, SolidCoin and other alt-currencies arose.

Mining became more difficult and users started to move massively to farms from FPGA and GPU. We also started to criticize the SHA256 hash function, and as a result, the Tenebrix currency appeared «with reliable protection against mining on the GPU».

 

 

The origin of today’s popular Altcoins

 

Further, the release of the already well-known Litecoin cryptocurrency took place, the mining of which was carried out on conventional processors. Miners were divided into two camps, some were engaged in Bitcoin mining on the GPU and others were engaged in Litecoin mining on the processors.


In the summer of 2011, Proof-of-Stake (PoS) was presented to the community as a response to the unequal distribution of «votes». The point was that they are distributed in the system and not depending on the computing power provided, but on the number of coins that belong to the network participant. A little bit later, the PPCoin project (Peercoin) appeared, which combined PoW and PoS at once.

We would like to skip the creation of the first mobile applications and go to the significant event that most strongly influenced the subsequent history of Bitcoin- the creation of mining devices based on ASIC. This is probably one of the most controversial developments, because such devices contribute to the consolidation of computing power and this is a direct contradiction of the very philosophy of Bitcoin.

In 2011, there was another popular cryptocurrency- Ripple. The Ripple protocol was first presented in 2004 by Ryan Fugger. In 2005, he was involved in the development of the Ripplepay financial service for secure online payments on the global network. Later, after the creation of Bitcoin, people thought that the technology could solve a number of cryptocurrency problems, such as the use of centralized exchanges, long and expensive transactions, and electricity consumption. As a result, in 2011, Jed McCaleb decided to develop a new Ripple system. By the way, in August 2012, he hired Chris Larsen and then they jointly turned to Ryan Fugger with their idea of ​​digital currency. As a result, Fugger gave them the right to the concept and name.

 

 

Mt.GOX

 

By the way, Jed McCaleb had an important role in the development of the cryptocurrency industry. Besides of the Ripple, he is also the founder of the infamous Bitcoin exchange Mt.Gox, although everyone remembered the platform`s CEO -Mark Karpeles. It was the first platform where people could quickly change their coins for fiat currency. However, in early 2014, the exchange was hacked and as a result of 850,000 bitcoins were disappeared. Later, 200,000 coins were found, which are hope of the investors to get their money back. The liquidation process is still ongoing and probably it will last until the end of 2019.


In addition, McCaleb is the founder of «The Stellar project», the emergence of which was as result of constant criticism of the fully centralized and controlled by the Ripple structure.

In May 2011, a digital currency was presented, in which the approval of transactions is not based on mining, but on the consensus of participants.

 

 

Silk Road

 

Another truly significant project in the cryptocurrency ecosystem is Silk Road, which was created in 2011. The platform has become a main element for the final adoption of cryptocurrencies, in particular Bitcoin.

What began as a libertarian’s dream ended in prison.

The founder of the site is Ross Ulbricht. He wanted to create an absolutely free platform, where anyone could buy and sell any product. The main currency was Bitcoin, because it provided the ability to send anonymous payments. However, as a result of this, the platform has become a place for the sale of prohibited items (drugs, weapons). Ulbricht was eventually convicted guilty under seven articles by the US authorities, including money laundering, distribution of narcotic drugs and the organization of the criminal community. Nevertheless, one must admire him, because Bitcoin was widely publicized due to «The Silk Road», although many believe that it is negative and influenced the formation of the opinion that «Bitcoin is needed only for conducting illegal activities».
Whatever, «The Silk Road» is a significant project that had a strong influence on the emergence of Bitcoin as it is now.
At the end of 2011, Alan Reiner proposed BIP 0010 as multi-signature transactions. The idea was tested on Armory software and as a result, on March 30, 2012, they added to the bitcoin`s code.
In 2012, work was actively carried out on the creation of deterministic wallets, the idea of which was presented a year earlier.

 

 

Bubble of the cryptocurrencies

 

However, users,who don`t really understand the technical part of the cryptocurrency, remember exactly 2013- a year of the cryptocurrency market boom. This is how the Bitcoin chart looked like:


Seems familiar? The market grew at a tremendous pace. No one could understand the reasons of this phenomenon, people just bought Bitcoin (by the way at Mt.Gox), because they believed in its future. About «new money» talked almost everywhere, including all well-known media. However, in early 2014, the first negative news came from China, whose authorities recommended their citizens not to use the innovation in their work. Then the Mt.Gox exchange was hacked. At that time, it handled over 90% of the trades, so this was the strongest blow to the entire cryptocurrency world. If we draw an analogy with the current time, then this is the same thing that Binance (which processes 74% of trades) would have been hacked and all the funds were stolen.

 

Then «the cryptocurrency winter» came …


 

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