Short History of Bitcoin

In its early days, crypto was primarily a technical and political experiment aimed at bypassing a traditional centralized system like banks. Each crypto must meet a specific need. The reasons for buying or selling must be considered and be part of a strategy, be it financial, political, or even starting a collection. Individual responsibility being the credo of cryptos, we believe that knowing their history allows a better understanding of the present situation and therefore, to make informed decisions about the future.

Bitcoin’s Birth and Early Days

The early years of Bitcoin served primarily to prove that a decentralized peer-to-peer digital asset exchange system did work. The first crypto exchange platform, bitcoinmarket.com (now defunct), appeared in March 2010. It was followed a few months later by a company that converted its Magic: The Gathering trading card business into a crypto exchange: MtGox. In 2011, Frenchman Mark Karpelès bought MtGox and succeeded in propelling the crypto exchange to the rank of No. 1 worldwide in terms of Bitcoin volume traded.

Then, a movement took shape within the community: Bitcoin 2.0. In 2012, aiming for uses other than monetary exchange (shares, collectibles, or real estate), users sought to take advantage of the lack of fungibility of Bitcoin to authenticate transactions by ‘marking’ the parts sent. In a way, this was the birth of the NFTs!

Their first use case could be traced back to J.R. Willett with the Mastercoin ($MSR) project after he sent the Whitepaper (called ‘The Second Bitcoin Whitepaper‘) to Satoshi Nakamoto and didn’t receive an answer. The goal was to put in place an overlay to facilitate the use of smart contracts over the Bitcoin protocol. But with no upfront funding or time to look for it, he used the concept of colored coins to exchange Bitcoin sent to a specific crypto-address for the latter to be automatically exchanged for $MSR. Around 5,000 Bitcoin were raised for him to carry out his project, thus creating the first Initial Coin Offering (ICO) in the history of crypto!

Silk Road Shuts Down

In 2013, the world learned of another crypto use case during the FBI’s shutdown of Silk Road, a marketplace connecting sellers and buyers of drugs, weapons, counterfeits, and other illegal assets that operated online since 2011. The American crypto community defended Ross Ulbricht with all their strength in the name of the ‘free market’ but justice remained deaf to libertarian convictions and sent Ross to spend the rest of his days in prison. Interest in Bitcoin drove the corresponding USD value to over $1000 in December 2013 and several central banks began to speak out against its existence despite positive support in the US. 

Birth of Counterparty

From the start of January 2014, on the forum Bitcointalk, a decentralized exchange marketplace for artists, developers, or entrepreneurs using a bitcoin overlay was created that changed the daily life of creators around the world: Counterparty. Still in existence today, Counterparty has evolved over the years to provide the opportunity to create, trade, give, stake, and earn dividends from artistic works in an open and free manner for anyone. 

In February 2014, a new kind of project was announced: Huntercoin. A fork of Bitcoin, Huntercoin is the first game and cryptocurrency totally hosted on a blockchain! Its mechanics allow players to recover the cryptocurrency spent on the project simply by playing and completing quests, then exchanging quest items for Bitcoin later on via Poloniex. It is the first game to use the concept of ‘play to earn‘ which aims to reward players for their time spent playing rather than asking them to pay to win. Although the project is still accessible, from the start players were warned that the bots would take over one day or another.

The same month, MtGox noticed 744,408 $BTC was missing from its wallets (around US$ 350 million at that time) and filed for bankruptcy within days. The administrative management of the company was to blame: it was only when users sold and wanted to withdraw their funds that MtGox realized the daily reconciliation of the accounts had not been made for 2 years.

In July 2016, thanks to the tenacity of a MtGox user determined to recover his 12 BTC and a blockchain indexer (designed by Mark Karpeles), WME aka Alexander Vinnik was arrested in Greece by the American authorities for having stolen 630,000 BTC between 2011 and 2013 from the MtGox platform. The facts are now known to all: Bitcoin transactions are not anonymous, but pseudonymous.

Gradually, more and more centralized exchanges appeared. Despite a few hacks, they restored the image of Bitcoin and helped reassure newcomers in the ecosystem.

The 2017 Bitcoin Bull Run

In December 2017, BTC reached $20,000 and began a correction that stopped at $3,500 a couple of months later. While this fall caused banks around the world to react by comparing the value of Bitcoin to Tulipmania, the speculative folly of 17th-century tulips, it didn’t stop them from seriously considering the benefits they could gain from utilizing blockchain. During this period, personalities like the Winklevoss twins, Elon Musk, and Jack Dorsey recognized Bitcoin as a safe financial investment and contributed to improving public opinion.

In 2020, central banks were working on their closed, private blockchain CBDCs while continuing to decry Bitcoin as a technology that promotes terrorism and money laundering. This opinion is not shared by other financial institutions such as Square, MicroStrategy, or even BlackRock, who have bought a significant number of Bitcoins, sometimes at a discount by contacting miners directly. 

As of February 2021, so-called ‘illegal’ BTC transactions represented 0.32% of network usage. This figure is not surprising: the darknet marketplaces accepting Bitcoin have all been closed by the authorities. Considered today as ‘digital gold,’ the main reasons Bitcoin is traded boils down to (1) long-term investment, or (2) trading for another crypto in the hope of short-term gains.

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