Bitcoin: How It Grew Up to Become Big Money


Depending on how you calculate its birth, bitcoin turned ten years old by now. The first lines of code were assigned to the bitcoin blockchain on January 3rd, 2009, a few months after the publication of the primary whitepaper. These lines of code acknowledged as the “genesis block” are credited to the person or persons recognised as Satoshi Nakamoto.

Users essentially provided each other bitcoins as rewards for good remarks in forums. The first “real” business took place on May 22nd, 2010. Laszlo Hanyecz ordered two pizzas for 10,000 bitcoin, or around $30.

For most of its life, bitcoin went from three central overlapping communities: the tiny association of real investors and true believers, the blockchain technology enthusiasts, and the speculators who are just there to get money, ma’am. Lately, another community has developed: old-fashioned stodgy finance representations.

Initially, bitcoin was money with a conception: rather than a central bank, it had programming and Nakamoto’s whitepaper, both of which suggested scepticism about ordinary financial institutions. But Nakamoto disappeared. As the digital currency held, the way that was supposed to work without trust developed trust matters. And as the bitcoin’s value has risen, it’s become another investment carrier for the financial system it was intended to replace. Ten years later, bitcoin is a member of the system it was designed to overthrow.

You can understand the influences of the banking disaster on bitcoin’s ideology: first of all, it’s a distinct distrust of financial institutions. Beyond breaches of trust that practised place during the financial crisis, a money market fund called the Reserve Primary Fund did something horrifying: it broke the bull. If you had spent $1, you’d get 97 cents back. It was because the money market capital had invested in Lehman Brothers, a financial firm that had just moved belly-up.

Money Isn’t “Real.”

According to USA Today, money market funds were considered as safe as an actual savings account; $3 trillion had been invested in them as of September 2008. But they aren’t as secure as savings accounts, which is why they had better rates of returns — as investors got out, to their wonderment and fear.

Pollution from the Lehman bankruptcy developed into the broader financial markets, making it clear how banks were tied together. There are various ways to respond to this: encourage financial regulations, squeeze the system, and start running, hopefully in a more stable form. Another response is to build a new system without these particular hazards. Quickly, a lot of people were in the state to take bitcoin seriously.

Bitcoin highlights how radically bizarre money is. In some sense, business isn’t “real” in the way that a tree is. It’s a human design, a value token that offers exchange more comfortable. But it’s perfect enough — people fight and die for it. Money is fundamental if enough people think about it. Many people were looking for options to the mainstream financial policy that had catastrophically declined in 2009. The core of banking, as most people know it, is money. Of all the previous efforts at internet-based currency, bitcoin was the one that broke out as the whole possible choice to society’s collective concerns around the financial policy.

Into The Underworld

Bitcoin is structured in a method that exposes its ideology. The concept of a peer-to-peer money network cuts back to old-fashioned Silicon Valley disruption. You don’t have to spend a fee on sending money to a third party like a bank or Western Union. But the original ideas is even more radical than that: if you think that the state is just a designated force for violence, then it’s reasonable to believe that fiat currency — the dollar — is an expected state monopoly. Bitcoin upends that monopoly, working in part as a currency-based way to circumvent the influence.

Even the term “mining” carries some of this idea: many investors see bitcoin as a stock, like gold. There’s also the finite nature of bitcoin: there can only be 21 million bitcoin in the world under the current protocol. More than 17 million have been mined. The rest will be delivered at a predictable mining rate, which has slowed as more stores have come into continuation. 

The Closure Of Silk Road: End Of Bitcoin’s Inception

The critical technology for avoiding banking institutions is the distributed ledger. Anyone can reach the public sections of the “blockchain,” a list of all transactions made over a period. No institution is required to guarantee accurate transactions. Keep your wallet anonymous. They don’t even want to remember who you are.

The last decade has clarified that shifting trust as a segment in one part of the financial system implies that trust issues pop up somewhere else. To make the investment in bitcoin valuable, you had to persuade others that the asset was expensive. Bitcoin societies sprang up on platforms.

The most significant association for early bitcoin was the dark web marketplace Silk Road. Established by Dread Pirate Roberts — who would later be exposed as Ross Ulbricht — the promise of Silk Road was also essentially libertarian. The trade was dominated by fake IDs, benzos, marijuana, and other prescription drugs facilitated by bitcoin. When the US government seized the Silk Road in 2013, that seizure involved 144,336 bitcoins associated with Ulbricht.

The closure of the Silk Road was the result of bitcoin’s inception. It was perhaps the time it became clear that eliminating financial institutions from money would not fundamentally mean a more reliable environment. It didn’t ensure protection from the state. When Mt. Gox registered for bankruptcy, that would set bitcoin’s trust difficulties.

Creating A Smarter Coin

But even as Mt. Gox went down and the Silk Road got busted, bitcoin proceeded to enter the mainstream. At the end of 2014, Microsoft began allowing bitcoin payments. Other cryptocurrencies — based on the blockchain — began to emerge throughout this period, the most important of which was Ethereum, launched in 2014, with an initial coin offering (ICO) that raised $18 million.

Ethereum was the beginning of another significant shift in the community: the change in focus from bitcoin per se to blockchain technology. Using the blockchain, Ethereum allows users to write applications and earn money from their work. The best-known application is the “smart contract”.

While Ethereum was the various means of these companies, plenty of other ICOs came into existence: NXT Neo, Spectrecoin, Stratis, and EOS among them, often tied to specific businesses and products. The expanded cosmos of blockchain technology — a term no one agrees on, unexpectedly — took shape as different governments woke up to new cryptocurrencies as taxable, possibly regulatable investment carriers. The US Securities and Exchange Commission in 2017 declared that financing transactions for digital currencies would be regarded as securities under some conditions. It proceeded to record a suit against a series of scammy coin designs for violating securities legislation.

Final Thoughts

No one has seen Satoshi Nakamoto, though many have tried to be him. Several frauds have been to the crown, but no one has ever rendered definitive evidence: trading Nakamoto’s bitcoin. The disaster in confidence in the banking system seems to have passed. But the essential winners from the new bitcoin era may very well be the people the policy was created to circumvent: institutional investors and banks.