The rise of Bitcoin: What led to the global crypto phenomenon?
At this point, almost everyone has heard about Bitcoin, but some of its history is still a mystery.
How did the coin get created?
Before getting started, It is important to note that bitcoin can often be used to reference cryptocurrencies in general, including the actual coin Bitcoin. The reason for this is because Bitcoin is considered the original cryptocurrency and was what initially drove the crypto wave we’re seeing now.
Back in August 1, 2008, bitcoin.org was registered online, but it wasn’t until October 31 of the same year that Satoshi Nakamoto released a paper called “Bitcoin: A Peer-to-Peer Electronic Cash System."
Nakamoto released the code for this system in January 2009 and said that the code was available for everyone to use however they wanted to use it, or otherwise known as open-source code.
Nakamoto mined the starting block (called the Genesis Block) on the Bitcoin blockchain. On this starting block, Nakamoto embedded on the block’s raw data, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."
This article by The New York Times referred to the bailout that the banks received after the 2008-2009 financial crisis, and many think it’s a hint as to how Bitcoin isdifferent from the big banks that needed government bailouts in 2008.
There have been plenty of early adopters such as Hal Finney, Wei Dai and Nick Szabo, but the most important person for bitcoin is still Nakamoto. And, to this day, nobody knows who Nakamoto is.
When Bitcoin start getting traction?
It wasn’t until 2011 that the coin started getting serious traction, and it was mainly due to online black markets, such as Silk Road.
Silk Road was the first online darknet market that allowed users to browse and shop anonymously without the risk of being tracked. But The Federal Bureau of Investigation (FBI) eventually shut the website down after the creator, Ross Ulbricht, was sentenced to life in prison.
In January 2011, the coin was valued at around US$0.30, but by the end of the year, it was worth US$5.27.
And so, while the coin continued to grow in value, the value began to shift slightly when splits began forming in the blockchain and when China banned financial institutions from using the coin in 2013.
Some of these splits, or forks, in the blockchain ended up creating new coins.
When did these new coins start?
In the blockchain, a fork is defined as what happens when a blockchain diverges into two paths forward. So, in other words, the chain splits. This then creates a second blockchain that shares the same history as the chain it split from, but is now headed down a new path with different code.
This is because miners and developers in a particular block usually agree to a set of rules that define what that block does. But if there is disagreement, it can divert the blockchain.
This is what eventually led to the creation of coins such as Bitcoin Cash and Litecoin, which are some prominent coins outside of Bitcoin.
These coins operate off different rules than Bitcoin, which is why they were created, but none of them have come close to the massive value that bitcoin has earned. This month, Bitcoin reached a US$60,000 valuation.
How do people feel about crypto?
It is important to note that when it comes to crypto, what authorities don’t like isn’t the blockchain technology itself, but the decentralized finance (DeFi) aspect of the relatively new digital asset.
Since the coin has gained traction, crypto has been a highly controversial subject for financial experts.
For example, Abhijit Naskar, a neuroscientist, wrote that “the reason people are nuts about cryptocurrency is that they hear the magic phrase regulation-free. But what they forget to take into account is that it also means the user alone bears liability. The purpose behind a centralized system is not exploitation but to provide trust and stability. Anything that is decentralized on the other hand is a breeding ground for fraud and volatility.”
In September of this year, Securities Exchange Commission (SEC) Chair Gary Gensler, said to the Senate Banking Committee that “currently, we just don’t have enough investor protection in crypto finance, issuance, trading, or lending." He added that “frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted.”
Eric Schmidt, the former chief executive officer of Google, believes that bitcoin is the future of the digital world.
“Bitcoin is a remarkable cryptographic achievement and the ability to create something that is not duplicable in the digital world has enormous value,” he said.
From China’s banning of crypto to the SEC’s restrictions against it, the future of crypto remains uncertain.
But the thing to watch out for is where crypto technology leads. Because while governments and their agencies have taken a hardline stance, its future doesn’t have to be decentralized.
With that, the technology itself, blockchain, has already resulted in country’s looking into starting their digital currencies, including the United States and China. So, what’s certain is that there isn’t a future without blockchain technology.
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