Bitcoin's birthday is January 3
The basis for the creation of Bitcoin was based on such developments as:
- hash trees (1979),
- cryptographic timestamps (1991),
- public key cryptographic systems (1980),
- Proof of Work (1993),
- the problem of Byzantine generals (1999).
And the first ideas of cryptocurrencies started circulating in narrow circles as early as 1998.
The role of cryptocurrencies in the creation of bitcoin
In late 1992, Eric Hughes, a mathematician at the University of California at Berkeley, Timothy May, a former top researcher at Intel, and John Gilmore, a computer scientist and co-founder of the Electronic Frontier Foundation, invited 20 of their closest friends to an informal meeting to discuss some of the most essential programming and cryptography issues of the day.
This was the birth of the cryptopunk movement, a community interested in cryptography and preserving anonymity.
The cypherpunks oppose the total interference of the state, represented by its government and intelligence agencies, in the private lives of citizens. They see cryptography as a tool for protecting privacy and transferring power from bureaucratized centralized institutions to citizens.
Privacy and freedom led to unfettered discussions on broad topics from mathematics, cryptography, and computer science to political and philosophical debates.
According to the crypto-punks, the structure of a distributed network that could ensure complete trust between the participants and their equality could be the ideal payment system.
In one way or another, many people worldwide have been working on what would later be called blockchain since the 1990s.
Dr. Adam Back (today's CEO of Blockstream) made the first attempt to create an anonymous transaction system in 1997. This was Hashcash, a spam-proof system that required a lot of computing power to send email, making spamming uneconomical. It was the prototype of the Proof-of-Work mechanism.
The following year, Wei Dai published the B-Money project, where each member of the network had to keep a database of all users' accounts, and a small group had control over the data but had to deposit their own money into a particular account with the possibility of losing it if they abused their functions. This became the prototype for the Proof-of-Stake mechanism.
But on October 31, 2008, several hundred enthusiasts and cryptography experts in a closed cypherpunk email list received a letter signed by one Satoshi Nakamoto.
In his letter, Satoshi said that he was working on a new electronic money settlement system in which transactions are made directly between participants without the involvement of a third trusted party.
The first version of the document was heavily criticized, but the work was not stopped. On the contrary, constructive comments from colleagues led to improvements in blockchain mechanisms and the creation of Bitcoin as we know it today.
The global financial crisis
Bitcoin is believed to have been created as a response to the effects of the global financial crisis, which was accompanied by the collapse of central banks.
The global financial crisis of 2008 was a major world economic crisis. It was one of modern history's most significant financial and economic downturns.
The crisis originated in the United States due to the collapse of the housing market and the mortgage insurance crisis. Still, it quickly spread and became a global phenomenon affecting economies in every country.
Central banks implemented aggressive monetary policy measures to provide liquidity and support financial markets. Interest rates in most countries were cut to near zero, and central banks engaged in large-scale asset purchase programs.
The consequences were so severe that they undermined investor confidence in the traditional financial market and banking system for a long time. At the same time, the concept of cryptocurrency, a tokenized asset based on the blockchain network, emerged in the information space.
It is important to note that Satoshi Nakamoto did not create Bitcoin as a response to the global financial crisis 2008, but he certainly drew inspiration from it. The creator of the Bitcoin technical description started working on the concept of cryptocurrencies back in early 2007. At that time, the crisis had not yet affected the significant markets.
The direct link to the financial crisis is captured in the Genesis block (the first block of the network, translated as birth or emergence), which contains the date and a short excerpt from a recent Times article: "The Times 03/Jan/2009 Chancellor on the brink of second bailout for banks".
Which translates to "The Chancellor is on the brink of a second bailout for banks", directly referring to the devastating effects of the financial crisis on the economies of most of the developed world.
Bitcoin's birthday
Although the concept of blockchain is already more than 30 years old, and the first mention of bitcoin occurred in 2018, the birthday of the first cryptocurrency should be considered precisely January 3, 2009. On this day, the first block in the Bitcoin network was mined. The first block had a #0 and was named "Genesis". The Genesis block was mined on a small server in Helsinki, and the reward for mining it was 50 BTC.
The value of the first digital asset
The idea that cryptocurrency would become such a massive industry in the early days only elicited derision.
But the history of Bitcoin is fascinating, as a highly specialized project managed in such a short time to conquer the world and gather around him a whole army of fans. Its price has grown from absolute zero to tens of thousands of dollars per coin in a relatively short period.
The first transaction in the Bitcoin network occurred just a few days after its launch — January 12, 2009. Block #170 sent 10 BTC from Satoshi Nakamoto to developer Hal Finney (who passed away in 2014 at 58).
Nine months after its launch, on October 5, 2009, Bitcoin appeared on the New Liberty Standard exchange. At that time, for $1, you could buy 1309 BTC (today, their value is already $59 million); the price was determined solely as the cost of electricity spent on their mining at average rates in the United States.
But just a year and a half later, on May 22, 2010, the legendary exchange of 10,000 bitcoins for two pizza deliveries occurred. This event is celebrated as "Bitcoin Pizza Day" by many crypto community members.
Bitcoin provoked a heated discussion among the tech community on the very topic of cryptocurrencies. And by February 9, 2011, bitcoin equalled the value of the U.S. dollar for the first time.
A couple of months later, the new asset was first written about in Time magazine, allowing a broader audience to learn about the project.
But even though cryptocurrency was known only to a narrow circle of IT specialists for the first time, the New York Stock Exchange created a bitcoin index in a few years, and the Chicago Exchange launched trading in bitcoin futures.
It took only 12 years for Bitcoin to go from a few lines of code that were of no interest to anyone but a dozen cypherpunks to a digital asset with a capitalization of $1.2 trillion.
Today, the value of a single bitcoin is in the neighborhood of $43-48 thousand, which is about 65% of the historical peak of its price.
The future?
While most analysts are making their predictions on the bitcoin exchange rate, trying to guess the price movement in the market, it is much more important to note that for the past 15 years, approximately every 10 minutes, a new block has appeared on the network. This stability and independence represent the principal value of Satoshi's project, with dozens of enthusiastic developers and hundreds of thousands of followers worldwide.
As the Internet develops, we will realize more and more clearly that Bitcoin and other cryptocurrencies are becoming an integral part of our lives. Decades from now, people will remember January 3, 2009, as the beginning of the era of sovereign finance.
But it's also worth noting that thanks to blockchain technology, bitcoin doesn't need a single administrator or regulator, so it's not surprising that many nations worldwide view cryptocurrencies negatively. But technological progress is unstoppable, and technology's superiority over existing financial and political systems is only a matter of time - it may take decades. Still, bitcoin could one day become the backbone of the world's financial system.
What can be said today with certainty is that the concept of cryptocurrencies has long ceased to be a "geek toy", and now it is believed not only by big Wall Street financiers but also by millions of ordinary people around the planet.
If you, too, decide to touch the fintech revolution, you can always find a convenient way to buy any popular decentralized assets on our BestChange monitor.