Bitcoin

Lore & Background

Bitcoin works through the collaboration of computers, each of which acts as a node in the peer-to-peer bitcoin network. Each node maintains an independent copy of a public distributed ledger of transactions, called a blockchain, without central oversight. Transactions are validated through the use of cryptography, preventing one person from spending another person's bitcoin, as long as the owner of the bitcoin keeps certain sensitive data secret. Consensus between nodes about the content of the blockchain is achieved using a computationally intensive process based on proof of work, called mining, which is performed by purpose-built computers. Mining consumes large quantities of electricity, with surveyed miners reporting that 52% of their electricity use came from sustainable energy sources, and has been criticized for its environmental impact.

In Their Own Story

The node hummed in the silence of a server room, its fans spinning against the cool air. On the screen, lines of hexadecimal code cascaded down like hashes sealing history, each block verifying a transaction from a thousand miles away. There was no bank vault to break into, no manager to bribe; there was only the immutable ledger, etched in light and math, recording transactions that could never be rewritten.

Reader's Guide

Bitcoin was created by Satoshi Nakamoto, whose identity remains unknown. The domain name bitcoin.org was registered on 18 August 2008. On 31 October 2008, a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Nakamoto released bitcoin as open-source software. On 3 January 2009, the bitcoin network was created when Nakamoto mined the genesis block. Nine days later, Hal Finney received the first bitcoin transaction: ten bitcoins from Nakamoto. On 22 May 2010, the first known commercial transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John's pizzas for ₿10,000. Blockchain analysts estimate that Nakamoto had mined about one million bitcoins before he disappeared in 2010 and handed the network alert key and control of the code repository over to Gavin Andresen. Andresen later became lead developer at the Bitcoin Foundation, an organization founded in September 2012 to promote bitcoin. After early transactions, the first major users of bitcoin were black markets, such as the dark web Silk Road. In March 2013, the US Financial Crimes Enforcement Network established regulatory guidelines for decentralized virtual currencies. In December 2013, the People's Bank of China prohibited Chinese financial institutions from using bitcoin. In August 2017, the SegWit software upgrade was activated. SegWit opponents forked to create Bitcoin Cash. In December 2017, the first futures on bitcoin was introduced by the Chicago Mercantile Exchange. In February 2018, the price crashed after China imposed a complete ban on bitcoin trading. In 2020, some major companies and institutions started to acquire bitcoin. In February 2021, bitcoin's market capitalization reached $1 trillion for the first time. In November 2021, the Taproot soft-fork upgrade was activated. In September 2021, bitcoin became legal tender currency in El Salvador, alongside the US dollar. In October 2021, the first bitcoin futures exchange-traded fund (ETF), called BITO, from ProShares was approved by the SEC and listed on the CME. In early 2022, during the Canadian trucker protests, organizers turned to bitcoin to receive donations. In May and June 2022, the bitcoin price fell following the collapses of TerraUSD and the Celsius Network. In 2023, ordinals—non-fungible tokens (NFTs)—on bitcoin, went live. In January 2024, the fi

Did You Know?

• The genesis block embedded the text 'The Times 03/Jan/2009 Chancellor on brink of second bailout for banks'.
• The first known commercial transaction using bitcoin was for two Papa John's pizzas costing ₿10,000.
• Silk Road, a dark web black market, transacted ₿9.9 million worth about $214 million during its 30 months of existence.
• In 2017, research estimated there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most using bitcoin.
• As of June 2023, River Financial estimated that bitcoin had 81.7 million users, about 1% of the global population.