Ten thousand bitcoins for two great pizzas.
The idea sounds ridiculous today, but this is considered the first real-world Bitcoin transaction in history.
Now known as “Bitcoin Pizza Day,” May 22, 2010 saw the first time bitcoin — which peaked at $69,000 per piece in November 2021 — was used to buy something tangible.
To get those two pizzas, the bitcoins were sent to a volunteer in England, who made a transatlantic phone call and paid for the delivery of $30 worth of pizza to Florida programmer Laszlo Hanyecz.
Thirty dollars might not sound like a lot now, but it was an important step in the history of cryptocurrency, which has since become arguably the most exciting technological innovation of the 21st century. Let’s trace this story below, explaining how Bitcoin and cryptocurrency first developed and where they might go.
Table of Contents:
The idea for cryptocurrency
The idea of cryptocurrency first emerged in 1983, when American cryptographer David Chaum published a conference paper outlining an early form of anonymous cryptographic electronic money. The concept was for a currency that could be sent in an untraceable way and in a way that did not require centralized entities (i.e. banks). In 1995, Chaum built on his first ideas and developed a proto-cryptocurrency called Digicash. It required the user’s software to withdraw funds from a bank and required specific encrypted keys before those funds could be sent to a recipient.
Bit Gold, often considered a direct precursor to Bitcoin, was designed in 1998 by Nick Szabo. It required a participant to devote computer power to solving cryptographic puzzles, and those who solved the puzzle received a reward. Combined with Chaum’s work, it results in something very close to Bitcoin.
But Szabo could not solve the infamous problem of double spending (digital data can be copied and pasted) without the use of a central authority. As such, it wasn’t until a decade later when a mysterious person or group, using the pseudonym Satoshi Nakamoto, set the story of Bitcoin and subsequent cryptocurrencies in motion, publishing a white paper called “Bitcoin – A Peer to Peer Electronic Cash System.”
Here’s a short video explaining encryption for beginners:
Now let’s look at the timeline.
The beginning (2008-2010)
On October 31, 2008, Satoshi Nakamoto published the Bitcoin white paper, describing the functionality of the Bitcoin blockchain network. Satoshi formally began working on the bitcoin project on August 18, 2008, when they purchased Bitcoin.org. While that’s not the topic of this article, it’s worth noting that Bitcoin (and all other cryptocurrencies) wouldn’t be possible without blockchain technology, which in its simplest form involves creating unalterable data structures.
The story of Bitcoin was ongoing. Satoshi Nakamoto mined the first block of the Bitcoin network on January 3, 2009. They incorporated a headline from The Times newspaper into this initial block, making a permanent reference to economic conditions — involving bank bailouts and a centralized financial system — against which Bitcoin was partly a reaction.
This first block – which led to the mining of 50 bitcoins – is now referred to as the Genesis block. Bitcoin had virtually no value at that time, as well as for the first months of its existence. Six months after bitcoin became tradable, in April 2010, the value of one BTC was just under 14 cents. In early November, the price “rose” to 36 cents before settling at around 29 cents.
The market begins to form (2010-2014)
Although it wasn’t worth much yet, Bitcoin was proving to have real value. In February 2011 it rose to $1.06 before returning to around 87 cents. In the spring, partly due to a Forbes story about the new “cryptocurrency,” the price took off. From the beginning of April to the end of May, the value of bitcoin rose from 86 cents to $8.89.
On June 1, after Gawker published a story about the currency’s appeal to the online drug dealing community, the price more than tripled in a week, to around $27. The market value of bitcoins in circulation approached nearly $130 million. However, by September 2011, the value had fallen to around $4.77.
In October of the same year, Litecoin appeared, one of the many forks (i.e. updated versions) of Bitcoin. Litecoin soon became the second largest cryptocurrency by market capitalization, with CoinMarketCap’s first archive (as of May 2013) showing PPCoin, Namecoin and 10 others in the distance. Such cryptocurrencies were quickly dubbed “altcoins,” with some forked from Bitcoin and others based on a new code.
In 2012, Bitcoin prices grew steadily, and in September of the same year, the Bitcoin Foundation was established to promote the development and adoption of Bitcoin. Then known as OpenCoin, Ripple was also launched that year, with the project attracting venture capital the following year.
In 2013, amid federal, criminal, regulatory, and software-related issues, the price of bitcoin steadily rose and plummeted. On November 19 its price reached $755, only to plummet to $378 the same day. By November 30, it had risen again to $1,163. This was, however, the beginning of another long-term slump that ended with Bitcoin falling to $152 by January 2015.
Scams dominate the headlines (2014-2016)
Although intentional, anonymity and lack of centralized control make digital currency very attractive to criminals. In January 2014, Mt.Gox – then the world’s largest bitcoin exchange – collapsed and declared bankruptcy, after losing 850,000 bitcoins. Although it is not known what exactly happened, it is likely that the missing BTC was stolen gradually over time, starting in 2011, and resold on various money exchanges (including Mt.Gox), until one day Mt.Gox checked their wallets and discovered that they were empty. CEO Mark Karpeles was charged with embezzlement in 2017, but acquitted in 2019, so the destination of the missing BTC remains a mystery.
Although the hack was not a singular event, it served as a warning, and security on exchanges is much improved. Although smaller exchanges continue to be hacked even today, larger platforms now provide more assurance on their reserves in case of violations. This includes the Secure Asset Fund for users on Binance, for example, which is an emergency insurance fund.
Cryptocurrency traders are advised to use a hardware or software wallet to securely store their cryptocurrency rather than storing it on an exchange. Wallets like these were not so accessible during this early period in cryptocurrency history.
Bitcoin rises to the worldwide phenomenon (2016-2018)
Bitcoin prices have risen steadily year on year, rising from $434 in January 2016 to $998 in January 2017. In July 2017, a software update to Bitcoin was approved, with the aim of supporting the development of Lightning Network (a level two scaling solution) and improving security.
A week after the update was activated in August, Bitcoin was trading at around $2,700. By December 17, 2017, Bitcoin reached an all-time high of just under $20,000.
During this same period, a new blockchain project called Ethereum was making noise in the cryptocurrency sphere, having quickly become the number two cryptocurrency by market capitalization since its launch in July 2015. It brought smart contracts to cryptocurrency, opening up a wide range of potential use cases and generating over 200,000 different projects (and counting). Unlike Bitcoin, Ethereum allows other platforms to launch and trade on their own chain, each with their own cryptocurrencies and use cases. This has been a model largely copied from other new blockchains, with Cardano, Tezos, and Neo (to name just three) launching during this time.
Bust and recovery
, and bust and recovery… (2018–present)
Bitcoin was unable to sustain its all-time high of $19,783. Similarly, Ethereum, which reached its own ATH in January 2018 of around $1,400, has not been able to maintain its new level for long. Financial regulations and security concerns (due to semi-regular exchange hacks) contributed to the market-wide decline, and by the end of 2018 bitcoin had fallen to around $3,700.
However, prices have not stayed low for too long. As of the end of 2020, bitcoin has enjoyed something of a renaissance, starting with MicroStrategy’s announcement in August that it had bought bitcoin worth $250 million. This kicked off a bull market joined by the rest of the market, with prices further increased by Tesla’s purchase of $1.5 billion in bitcoin in early 2021. It was in November of that year that bitcoin reached its current all-time high of $69,000.
The market has once again fallen from this high, dragged down by macroeconomic concerns stemming from high inflation, rising interest rates and the specter of war. That said, with global stock markets also falling in late 2021 and 2022, the parallel fall in cryptocurrencies shows that the industry is becoming increasingly intertwined with traditional financial markets.
And while the volatility of cryptocurrencies is both attractive and potentially devastating, the technology behind them all, blockchain, has the power to change many sectors of our society. Whether it’s providing accessible and affordable financial exchange options, protecting your funds so no one but you can access them, or providing accurate data for your insurance quote, blockchain technology has the potential to be used in almost every area of the economy.
As the market becomes more stable with more knowledge and with the introduction of new areas such as stablecoins and decentralized finance (DeFi), it is easy to get excited about cryptocurrency and its potential from an investment and technology perspective. This is regardless of whether it’s Bitcoin or another blockchain project that fuels your interest.
Finally, here’s a visual look at the cryptocurrency timeline:
Top 10 Cryptocurrencies to Know
Bitcoin (BTC) – the original cryptocurrency, conceived in 2008 and launched in January 2009. It works using a proof-of-work consensus mechanism, meaning that computing power is used to verify transactions and generate new blocks in its blockchain. It has a total maximum supply of 21 million bitcoins, making it potentially deflationary.
Ethereum (ETH) – a proof-of-work cryptocurrency launched in July 2015. Originally conceived as a “universal computer” that could function as infrastructure for a decentralized Internet, it is capable of executing smart contracts, which perform pre-specific actions when certain conditions are met. It is currently planning a shift to a proof-of-stake consensus mechanism, where transactions are verified by betting Ethereum on them.
Tether (USDT) – a stablecoin launched in July 2014 as RealCoin. It is pegged 1:1 to the US dollar and backed by reserves equivalent to the value of its entire supply. Running on the Ethereum blockchain (and other chains as well), it generally records the highest 24-hour trading volume of any cryptocurrency on the market. This is because traders tend to go out in Tether during declines, although some commentators have said that it is not fully supported, an accusation given that Tether has never undergone a full audit.
Binance coin (BNB) – Binance’s native cryptocurrency, the world’s largest cryptocurrency by trading volume. Launched in June 2017, BNB holding company grants users discounts on Binance trading fees.
Cardano (ADA) – a proof-of-stake cryptocurrency launched in 2015 and opened for trading in 2017. Operating as a generic utility blockchain like Ethereum, it has witnessed steady development in the following years, launching the ability to execute smart contracts in September 2021.
Ripple (XRP) – a cryptocurrency launched in 2012 as OpenCoin. It has generally positioned itself as a remittance network, providing cross-border transfers between counterparties and financial institutions. Ripple’s ledger uses neither proof of work nor a proof-of-stake consensus mechanism, instead using its own consensus algorithm which is capable of executing over 1,000 transactions per second, in contrast to about 7 per second for Bitcoin.
Dogecoin (DOGE) – a so-called meme coin launched in December 2013. With a Shiba Inu dog as its mascot, Dogecoin is a fork of Litecoin, which is a fork of Bitcoin. Despite the fact that it started as a joke, he commands a large number of loyal fans and supporters, who can often help him quickly rise in price.
Solana (SOL) – A relatively new blockchain platform launched in 2020 and that promised scalability far beyond Bitcoin or Ethereum. SOL is advertised for having a small carbon footprint, high speeds and extremely low rates. The above low rates and fast throughput made it a favorite for NFT, DEX, and apps. A common criticism of Solana is that it is heavily influenced by VC funding that is not as decentralized as its competitors. It has also suffered several notable interruptions.
Monero (XMR) – a privacy coin launched in 2014. It helps users achieve greater anonymity than Bitcoin and other cryptocurrencies offer, through a variety of new features. These include one-time invisible addresses, ring signatures that mix transactions so they cannot be traced, and transactions that hide transferred amounts. Given its effectiveness, Monero has been removed from numerous exchanges that do not want to break anti-money laundering regulations.
The Sandbox (
SAND) – along with Decentraland (MANA), the Sandbox is one of the largest gaming-related cryptocurrencies and metaverse on the market. Launched in August 2020, SAND is the governance and utility token of the Sandbox gaming platform, which allows holders to purchase in-game items, vote on upgrades, and for staking, which earns them rewards.
