BitCoins: The History
BitCoins. I’m so confused by them so I had a short series of articles written to help me understand them. I hope they help you too!. Here is the first:
A History of Bitcoin
Bitcoin is a form of currency that has no central authorities for creation and management, but instead relies on cryptography and a decentralized market to control trade and inflation.
Prior to Bitcoin there were several precursor technologies that relied on electronic money. This led to several independently developed proposals, such as Wei Dai’s b-money and Nick Szabo’s bit-gold.
Soon mechanisms were developed to control inflation, as well as enable the ability to decentralize control over the market.
In 2008 a paper, Bitcoin: A Peer-to-Peer Electronic Cash System, was posted on the internet. It detailed the basic method for using a peer-to-peer network to create an electronic marketplace that didn’t rely on a trust or other business entity.
Bitcoin came into existence in early 2009. The first bitcoins were issued and traded for standard currency, but their value online was initially negotiated between individuals. One notable transaction involved 10,000 bitcoins for a pizza.
Only one major security flaw has been found in Bitcoin’s short history. In late 2010, a major vulnerability was spotted within the network, allowing users to bypass Bitcoin’s economic restrictions and create an infinite number of bitcoins. Within hours these transactions were found and erased. The bug was quickly fixed, and there have been no further issues.
Since its inception Bitcoin has enjoyed a slow but steady rise in both use and recognition. Wikileaks was among the first organizations to accept bitcoins as currency. Other organizations have followed suite, leading to an increase in the market. In October 2012 BitPay, a third-party money transfer service similar to PayPal, reported that over a thousand merchants were accepting Bitcoins as money.
Bitcoin has gained even greater recognition since more mainstream merchants such as Okcupid and Foodler have begun accepting them as payment. The Internet Archive, a non-profit digital archive, announced that it would accept donations in the form of bitcoins, and as even allowed employees the option to receive a portion of their wages in bitcoins.
Recently Bitcoin has come even closer to being officially recognized as a legitimate form of currency. In August 2013 a United States federal judge, Amos Mazzant, ruled that bitcoins were “a currency or a form of money,” and thus under the court’s jurisdiction. Germany’s Finance Ministry has also recognized bitcoins as a “unit of account,” giving bitcoins legal and tax implications, though they are still not accepted as functional currency.
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