If you’re not living in a cave, you’ve probably heard of Bitcoin already. Advertisements from cryptocurrency companies are now plastered across almost all major sports leagues, and celebrities are getting involved in droves. This is not too surprising given the sheer size of the cryptocurrency industry right now, of which Bitcoin has the lion’s share.
The combined value of all Bitcoin in existence is more than $700 billion, according to CoinCodex. This figure rivals the valuations of some of the largest publicly-traded companies in the world like Berkshire Hathaway, Meta (formerly known as Facebook) and Tesla. But how did we get to this point? Let’s take a quick look at the story of Bitcoin and how this global phenomenon started.
The story of Bitcoin
Bitcoin is a tremendous story of something emerging from practically nothing. The concepts that ultimately led to Bitcoin can be traced back to the early 90s, when the “cypherpunk” movement emerged to advocate for the use of cryptography to defend the privacy and freedom of individuals and protect the internet from monitoring and censorship from governments and powerful corporations.
In 2008, an unknown person using the pseudonym Satoshi Nakamoto synthesized several cypherpunk ideas and peer-to-peer technologies into Bitcoin, a digital currency that users could securely send to each other without requiring intermediaries like financial institutions.
With Bitcoin, Satoshi Nakamoto introduced the concept of the blockchain, which is being used in an increasing number of fields today, ranging from digital currencies to supply chains and financial products. A blockchain is a public ledger that consists of a series of “blocks” that are linked to each other through cryptographic means. With every new block that’s added to the blockchain, we can be more certain that the data in all the previous blocks hasn’t been tampered with or arbitrarily changed.
The Bitcoin network allows users to send and receive a digital currency called BTC. The maximum amount of BTC that can exist is 21 million, but each BTC can be split into 100 million units called satoshis – conceptually, it’s the same idea as one dollar consisting of 100 cents.
One of the biggest innovations of Bitcoin’s ingenious design is that it addressed the “double-spending” problem that plagued earlier attempts of creating decentralized digital currencies. Bitcoin is a decentralized digital currency that has very strong assurances that no coins are being created out of thin air and that nobody is able to spend coins they don’t actually have, or spend the same coins multiple times.
The initial Bitcoin whitepaper was published in October of 2008, but the actual Bitcoin software was released a couple of months later, on January 3, 2009. The idea didn’t catch on right away – initially, Bitcoin was a niche interest for cryptography enthusiasts, who discussed the technology on an online forum called Bitcoin Talk. Satoshi Nakamoto himself also participated in these discussions, but continued to keep his true identity hidden.
Gradually, a growing number of people developed a fascination with Bitcoin. One of the reasons for this is that it was possible to earn BTC simply by running specialized software on a laptop or desktop computer. In this process, called “mining”, users receive BTC as a reward for providing computing power and strengthening the security of the Bitcoin network. Even though BTC was practically worthless in the early days, the idea of earning something by running a program was still interesting enough for some people to give it a try. Besides, there was also the possibility that BTC could become worth something in the future.
The $375 million dollar pizza
Probably the best way to illustrate the scale of how much Bitcoin has grown is the infamous Bitcoin Pizza anecdote, which describes the first recorded example of BTC being used as a currency for a real-world service. On May 22, 2010, early Bitcoin adopter Laszlo Hanyecz submitted a post to the Bitcoin Talk forum where he offered to pay 10,000 BTC to anyone who could get two pizzas delivered to his home. After 3 days, a user called “jercos” obliged and accepted Hanyecz’s offer. As a result, Hanyecz purchased what would later turn out to be the most expensive pizza of all time. At today’s prices, 10,000 BTC translates to a staggering $375 million.
It’s unclear how much BTC was worth at the time of the Bitcoin Pizza transaction, as the market for BTC was still extremely small. However, the consensus seems to be that the value of 1 BTC was less than $0.01 at the time.
Those that got involved in Bitcoin early have seen massive returns on their investment. In early 2013, for example, you could buy 1 BTC for as little as $15. Later in the same year, the price of BTC skyrocketed to as much as $1,150 per coin. The highest value that BTC has ever reached was around $69,000 in November of 2021. At that point, the total value of all Bitcoin in existence was $1.27 trillion.
Bitcoin’s success has spawned both uninspired copycats as well as interesting projects that are making an honest effort to build upon the foundation established by Bitcoin and leverage the technology for new use cases. Besides Bitcoin, some of the largest cryptocurrencies on the market today are Ethereum, Binance Coin, Cardano, Solana and XRP.