Bitcoin (BTC) was the first digital currency and remains the most valuable and widely recognized digital asset today. Conceptually existing for over 40 years, Bitcoin made it a reality in 2009, and its journey since has been both volatile and revolutionary.
Key Moments in Bitcoin’s History
1983: American cryptographer David Chaum, the “godfather of cryptocurrency,” proposed eCash, the idea of anonymous electronic money. He launched Digicash in 1989, but failed to achieve widespread adoption.
2008: An unknown person or persons going by the name Satoshi Nakamoto published Bitcoin: A Peer-to-Peer Electronic Cash System.
2009: Bitcoin launched, introducing the world to decentralized digital currency. That same year, New Liberty Standard established the initial exchange rate, a pivotal milestone that transformed cryptocurrency from a theoretical concept to a tradable asset.
2010: The first real-world Bitcoin transaction occurred on May 22, 2010, now celebrated by Bitcoin enthusiasts as Bitcoin Pizza Day.
2011: Bitcoin crossed the $1 threshold, piquing the interest of speculators and investors. It also set the stage for the first major pricing bubble and subsequent crash. While both events dramatically changed Bitcoin’s narrative, it also set the stage for its resilient reputation.
2013: Bitcoin was named the best investment of the year by Forbes.
2014: Bloomberg shifted the narrative, proclaiming Bitcoin the year’s worst investment.
2020: PayPal announces their support for cryptocurrencies, opening Bitcoin to millions more users.
2021: The Securities and Exchange Commission (SEC) approved ProShares Bitcoin Strategy (ticker: BITO), the first U.S. Bitcoin futures exchange-traded fund (ETF).
2022: FTX, the leading cryptocurrency exchange by trading volume, declared bankruptcy.
2024: SEC approved 11 spot Bitcoin ETFs.
2024: SEC gave final approval for spot Ether (ETH) ETFs to start trading, further legitimizing the asset class.
Bitcoin’s Beginnings
Writing under a pseudonym, Bitcoin’s enigmatic creator, Satoshi Nakamoto, introduced the blockchain system in a 2008 white paper. A blockchain, the backbone of the cryptocurrency market, is a decentralized ledger of transactions replicated and distributed across a network of computer systems, ensuring security, transparency and seamless immutability. It is the revolutionary system that underpins the cryptocurrency market and allows any person with internet access to make financial transactions independent of banks, financial firms and the government. Nakamoto formally launched Bitcoin on Jan. 3, 2009, when he mined the first Bitcoin block, known as the Genesis Block or Block 0. Nakamoto’s true identity has never been verified.
Bitcoin Core Concepts
- Bitcoin units. Each Bitcoin is divisible to eight decimal places. A millibitcoin (mBTC) is 1/1,000th of a Bitcoin. The smallest unit is a satoshi (sat), which is 1/100,000,000th of a Bitcoin.
- Transaction. A computer directive styled as “payer X sends Y Bitcoin to receiver Z.”
- Block. A block is a group of Bitcoin transactions over a certain period. Transactions are verified by Bitcoin “miners.”
- Mining. A process where individuals or groups (“miners”) solve complex calculations to validate transactions and create new blocks. Miners are financially rewarded for their work with newly minted BTC.
- Block hash. Mining activitiesinclude a record-keeping service ensuring the blockchain remains consistent, complete and unalterable. The hashes validate available Bitcoin and provide a uniform mining reward.
- Blockchain. A continuous, transparent ledger where each block transaction is seamlessly linked to the previous one. This public chain enables both Bitcoin’s existence and usability.
- Blockchain address. A sequence of 25 to 34 alphanumeric characters used to receive Bitcoin while concealing personally identifiable information. While cryptocurrency exchanges may be required to collect personal data, each transaction can use a different Bitcoin address to enhance privacy.
- Keys. Credentials, similar to a safe-deposit box, that allow access to Bitcoin assets. If a party loses their key, the Bitcoin becomes inaccessible and effectively worthless. According to Chainalysis, a blockchain analytics firm, roughly 20% of Bitcoins have been lost due to misplaced private keys.
- Public keys. This is the technology used to encrypt and decrypt transactions. It is “one way,” allowing transactions to be unlocked but not reversed. This key enables the blockchain to be uninterrupted.
- Private keys. A unique passcode used by transacting parties to initiate a Bitcoin transaction. To spend Bitcoin, one must know their own private key and digitally sign the transaction. The party’s signature is verified by the public key without revealing the private key. Private keys are invaluable and must be protected. If a party loses their key, the Bitcoin becomes inaccessible and effectively worthless.
- Wallet. A digital collection of private keys necessary to managing and using Bitcoin.
- Full clients. A wallet that contains a complete copy of the entire blockchain, making it the safest form of storage besides offline or “cold storage.”
- Lightweight clients. A wallet that holds a partial version of the blockchain, allowing it to be used on mobile devices. Since it does not include the entire blockchain, users must trust full wallet intermediaries for verification.
Bitcoin Adoption
Bitcoin supporters point out that an increasing number of institutions, countries and platforms are accepting the digital currency. In the U.S., its primary value is as an investment.
While some countries (notably China, India and Saudi Arabia), have banned cryptocurrency mining and trading, many others are fully embracing it:
- Cryptocurrency has been used to fund both sides of the Russia-Ukraine conflict. Crypto is prized due to its decentralized nature, where quick transactions are useful to get humanitarian aid and military support funding into conflict zones.
- El Salvador, battling severe economic issues and a weak national economy, became the first country to adopt Bitcoin as legal tender in 2021.
- Iran has effectively used Bitcoin to bypass U.S. financial sanctions. Hamas is believed to have used $165 million in crypto transactions to fund the surprise attack on Israel on Oct. 7, 2023.
With new strides in regulatory acceptance, major institutions and investors are stepping into the BTC ring. The Millennium Management hedge fund led the charge with $2.6 billion in Bitcoin ETFs. The United Arab Emirates has enabled significant traction for other fund managers to participate, including Abu Dhabi’s sovereign wealth fund’s $436 million investment. Goldman Sachs was an important tipping point for many investors with their $1.58 billion. But, Jane Street Group has really raised the martini glasses with their $2.8 billion treasure chest, dramatically signaling institutional confidence.
