Watching Bitcoin‘s meteoric rise over the past year or so, I just can’t help but be constantly reminded of John Maynard Keynes’ famous observation that “[m]arkets can remain irrational longer than you can remain solvent”. For at this point there can be no question that we are watching the inflation of a perfectly classic bubble. We’ve touched before on, among other things, Bitcoin’s inviability as a currency, its inability to provide the anonymity its proponents have been promising and its detrimental effect on merchants’ payment acceptance prospects in general. And sure enough, virtually no one accepts Bitcoin for payment at his store.
Yet, at the time of writing, Bitcoin’s value stands at $659, according to one of the multitude of Bitcoin exchanges — down from a recent peak of $1,203, but way above the $14 value at the beginning of 2013. Investors are clearly not at all bothered by the foremost digital currency’s apparent failure as a medium of exchange and are still very much in love with its promise as a store of value. Well, I wish them all the best, even as I suspect that the vast majority will end up losing all of their investment. But today I wanted to share with you an excellent new infographic on the (not so long) history of Bitcoin. Here it is.
The Definitive History of Bitcoin
So the good people over at the Visual Capitalist have tracked Bitcoin’s rise to global prominence down to the digital currency’s humble beginnings in August 2008 when Bitcoin.org was registered, barely a month before the collapse of Lehman Brothers plunged the world into its worst economic crisis since the Great Depression. Then in October of the same year, we learn, Bitcoin’s design paper was published.
The timing, the authors remind us, turns out to have been extremely fortuitous. As confidence in government-issued (fiat) currency began to wane, it was the perfect moment for a new-age, “crypto” currency to appear on the global stage. The authors then proceed to give us some very basic details on how Bitcoin was designed to deal with things like “double spending” and security, before focusing on the person(s) who created the whole thing.
Satoshi Nakamoto, as Bitcoin’s mythical founder is known, is a brilliant and reclusive mathematician who is well-versed in cryptography, we are told, and this characteristic is meant to seem rather obvious. Nakamoto made a final programming contribution in mid-2010, we learn, and then “passed the reins to Gavin Andersen, Bitcoin’s current lead developer”. Refreshingly, Gavin Andersen turns out to be a real person, and a Princeton graduate at that. Previously, Andersen had created ClearCoin, an escrow-type of service, which he closed in June 2011, to “concentrate on working on core Bitcoin”, as he tells us on ClearCoin’s website.
But I digress. Let’s get back to the subject at hand. Here are a few of the most notable moments in Bitcoin’s timeline, as related by the Visual Capitalist guys:
- January 2009 — the Bitcoin network comes into existence with the release of the first open-source Bitcoin client and the issuance of the first bitcoins. The first block of 50 bitcoins is humbly known as the “Genesis Block”. The first transaction promptly takes place, from Nakamoto to Hal Finney — a game developer when not involved with Bitcoin.
- October 2009 — first exchange rate is published by New Liberty Standard: $1 for BTC 1,309.03.
- May 2010 — Laszlo Hanyecz — a programmer — makes the first “real” Bitcoin transaction, by paying BTC 10,000 for two pizzas (including delivery).
- July 2010 — Mt. Gox is started and will become the biggest and best-known Bitcoin exchange.
- August 2010 — a major vulnerability in the Bitcoin protocol is identified and exploited to generate more than 184 million bitcoins — a huge amount. That will remain the only major security flaw found and exploited in Bitcoin’s protocol, at least to date.
- February 2011 — Bitcoin achieves parity with the USD.
- June 2011 — Mt. Gox leaks user information, which is used to hack 600 accounts in a popular Bitcoin wallet and steal the bitcoins they contained. Sell orders are issued for hundreds of thousands of fake bitcoins, forcing a huge disruption on the Mt. Gox exchange and causing turmoil within the broader Bitcoin network, which the organization will spend about a year sorting out.
- 1 April, 2013 — crisis-torn Cyprus’ financial system collapses, a bailout is negotiated and a bank holiday declared and Bitcoin surges to $200 on all this good news.
- May 2013 — U.S. federal authorities seize accounts on Mt. Gox, after discovering that the exchange had not properly registered with the FinCEN financial authority.
And on it goes. See much more in the infographic below.
Image credit: Wikimedia Commons.