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Guide: How Bitcoin Started

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Bitcoin Singh

Bitcoin is one of the most famous cryptocurrencies and a valuable digital asset. It works like an  exchange medium on a decentralized system., i.e it is not under the control of central authorities. The credit for Bitcoin’s beginning goes to Satoshi Nakamoto, who was the one to introduce this digital currency. While creating the currency, he was able to integrate many relevant ideas from within the cypherpunk community.

Since the beginning of Bitcoin, growth has been a common feature of this currency, with a rising market cap both off and online. It was from the mid 2010s that certain businesses started to accept the currency as one of its major form of payments.

Scenario prior to Bitcoin

Before Bitcoin saw its release, some other digital cash systems dominated the FinTech landscape. This environment employed eCash protocols using issuer-based system and used the protocols of Stefan Brands and David Chaum. Adam Back created the hashcash, helpful for spam control and using a proof-of-work system.

The earliest proposals were b-moneyby Wei Dai and bit gold by Nick Szabo. These coins settled the cryptocurrencies, filling the digital scarcity of cryptocurrencies. Another development was that of Hal Finney who created the RPOW (Reusable Proof of Work). This employed hashcash as its algorithm for proof-of-work.

Nakamoto’s role in Bitcoin’s Beginning

The registration of bitcoin.org as an autonomous domain name occurred on August 18, 2008. The same year on October 31, a post including the link to the whitepaper by Satoshi Nakamoto appeared in a cryptographic mailing list. The name of the whitepaper was Bitcoin: A Peer-to-Peer Electronic Cash System. It included details regarding the use of a peer-to-peer support network. The purpose of the network was the generation of a system where electronic transactions didn’t rely on trust.

The presumption is that Satoshi Nakamoto isn’t the real name, but rather the pseudonym of the people / person who gave Bitcoin its start. Nakamoto gained fame as the key designer of original protocol of Bitcoin in 2008. In 2009, he was also the one to launch the network. He played an active and key role in the creation of the official software of the currency. He has also been a major member posting technical data and creating modifications within the Bitcoin forum.

The next year on January 3, 2009, the Bitcoin currency network took its first breath with the help of Nakamoto. He mined the block 0, also known as the ‘Genesis Bitcoin block’. This block constituted a reward value of 50 Bitcoins.

One special note which was embedded on its coin base is subject to dual interpretations. One is as the timestamp designating its date of genesis. The other is taken as a derisive comment pointing to the instability resulting from the fractional- reserve bank system.

The resulting events following Bitcoin’s Beginning

The first Bitcoin client on an open-source network saw its release at Source Forge on January 9,2009. Hal Finney, a programmer, was the earliest adopter, contributor, and supporter of the currency. Finney ended up downloading the first available software on the day of its release. With that, Nakamoto sent him 10 Bitcoins on January 12, 2009. Other early supporters included the creator of bit gold,  Nick Szabo, and the creator of b-money, Wei Dai

During the earliest transactions of Bitcoin, Nakamoto mined and estimated 1 million coins. Later Nakamoto ceased his involvement in any activities involving Bitcoin. The notion is that the Nakamoto transferred the reins of the company to another developer named Gavin Anderson. Mr. Anderson became the foundation’s lead developer.

During the earliest transactions of the currency, two individuals entered in a negotiation regarding its value on a Bitcoin forum. One of the notable transactions involved 10,000 BTC, which paid for the purchase of two Papa John’s pizzas.

Issues coming to the fore

Over time, the image of Bitcoin didn’t remain pristine for long. On August 6, 2010 a significant vulnerability came to the fore regarding its protocol. The issue was that the transactions didn’t undergo proper verification before being included in the blockchain or transaction log. The blockchain was famous for letting users bypass the economic transactions of Bitcoin.

Fraudsters exploited this vulnerability on August 15 of the same year. One transaction on this date generated more than 184 billion Bitcoins. These were then transferred to two addresses present on the Blockchain Network.

However, within hours the original developers could spot the transaction. Eventually, they fixed the bug and erased the transaction from the log. Consequently, they updated the network to include a better protocol. To date, this event counts as the only significant security flaw spotted and exploited in the history of Bitcoin.

Adoption of these currencies after Bitcoin’s Beginning

Using the same open source code of Bitcoin, other cryptocurrencies started emerging. From January 2011,  a non-profit group named the Electronic Frontier Foundation began accepting the digital currency. However, they stopped in June 2011, since the new currency framework lacked any reliable legal precedent. Again, on May 17, 2013, they reversed their decision and resumed the acceptance of the digital currency.

In the same month and year, other organizations like Wikileaks started accepting currency as donations. During September of 2011, Vitalik Buterin, later gaining prominence as the Ethereum co-founder, also co-founded the Bitcoin Magazine. Bitbill’s Douglas Feigelson filed an application for patenting the Creation and Use of the Digital Currency.

Jon Matonis, Gavin Andreson, Charlie Shrem, Patrick Murck & Peter Vessenes launched the Bitcoin foundation in September of 2012. The aim of the organization was the acceleration of the currency’s global growth through the protection, standardization and promotion of its open source protocol.

From Beginning to Present

As new and diverse applications for the currency appeared, so did the increase in its popularity and adoption. Throughout its history, the coin retained one of its best features, namely low volatility.

A host of global organizations currently use Bitcoin. These range from medical to financial institutions. On October 10, 2018, the currency celebrated its 10th year anniversary. It demonstrated its strength of having a consistent value above $6,000 for a long time.

 

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