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Bitcoin: Where It Came From, Where is It Going?

The future is unknown, but the past is written in stone. This is the power of wisdom, to take the past and use it to see the future. With this in mind, before I give you my opinion on where Bitcoin is headed, let’s look at its journey to where we are today.

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    On August 15, 2008 an interesting patent is filed by Neal Kin, Vladimir Oksman, and Charles Bry, using cryptography and linked nodes to secure messages - very similar in theory to Bitcoin.

        
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    On August 18th, 2008 bitcoin.org is registered.

        
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    On Halloween, 2008 the original whitepaper is released by our faceless friend, Satoshi Nakamoto. This paper draws on Cypherpunk and Libertarian ideology to create a decentralized digital currency.

        
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    On November 9th, 2008 Bitcoin is registered on SourceForge, a website for open-source software development/distribution.

        
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    January 3rd, 2009 - the first block is mined by Nakamoto himself. 6 days later it is released to the public.

        
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    3 days later, the first transaction is sent to Hal Finney.

        
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    October, 2009 - an exchange rate is established at $1=1309.03 BTC, using the amount of electricity required to mine one to determine a value.

        
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    On February 6th, 2010 the first Bitcoin currency exchange appears.

        
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    On May 22nd of that year, the infamous 10,000 BTC pizza transaction takes place.

        
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    On July 12th, 2010 BTC value reaches $0.08. (My advice: Buy and HODL)

        
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    August 15th, 2010 - A vulnerability in the verification process of Bitcoin is discovered and exploited, and over 180 billion are created.

        
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    In October of 2010 a warning is issued by the intergovernmental Financial Action Task Force against the use of digital currency to launder money and finance terrorist groups.

        
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    November 6th, 2010 - BTC market cap exceeds $1,000,000.

        
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    February, 2011 - The infamous Silk Road Marketplace opens.

        
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    On February 9th, 2011 BTC reaches parity with USD. 1 BTC = $1.

        
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    By May of 2011 Bitcoin exchanges have opened throughout Europe and even in South America.

        
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    In April, 2011 TIME Magazine releases an article on Bitcoin.

        
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    June 8th, 2011 - BTC reaches an all-time high, at a price of $31.91 with a market cap of $208 million.

        
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    Four days later, the price drops to $10.

        
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    June 19th, 2011 - The Mt. Gox fiasco ensues, thousands and thousands of BTC are stolen.

        
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    March, 2012 - Linode, a hosting company, is breached and 46,000 BTC are stolen, the largest theft to date.

        
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    May 9th, 2012 - An FBI report from April 24, 2012 which brought attention to concerns that Bitcoin payment methods could facilitate illegal transactions for weapons and narcotics is leaked.

        
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    June, 2012 - Coinbase is founded in San Francisco, California.

        
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    September 3rd, 2012 - Bitfloor is hacked, and 24,000 BTC (worth $250,000 at the time) are stolen.

        
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    2013 - By now, many online services accept payment and donations in BTC - you can even order a Pizza on PizzaForBitcoin.com!

        
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    February 22nd, 2013 - BTC finally reaches $30 again, for the first time since 2011.

        
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    Six days later the previous all-time high of $31.91 is broken.

        
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    March 11th, 2013 - “A significant glitch that involves two different versions of the Bitcoin software forces a halt in transactions that results in a sharp sell-off and a 23 percent drop in value to US $37. Later that evening, the exchange rate recovered much of its value.”

        
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    March 18th, 2013 - The U.S. Government defines their stance on crime using virtual currencies.

        
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    March 21st, 2013 - BTC reaches high of $74.90 in spite of announced regulation. (Take that, Big Brother)

        
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    March 28th, 2013 - Market cap reaches….”one billion dollars” (Insert Dr. Evil here).

        
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    April 10th, 2013 - BTC reaches high of $216.

        
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    May 2nd, 2013 - The first Bitcoin ATM opens in San Francisco.

        
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    May 7th, 2013 - Coinbase receives $5 million in funding. (Notice how quickly things are happening now.)

        
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    May 14th, 2013 - The U.S. Government seizes $2.9 million in BTC from a subsidiary of Mt. Gox, claiming they failed to file as a “money transmitting business”.

        
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    August 6th, 2013 - A Texas judge legally declares Bitcoin a currency.

        
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    August 12th, 2013 - The state of New York subpoenas 22 companies to investigate the possibility of illicit activities.

        
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    October 2nd, 2013 - The FBI shuts down the Silk Road for the first time, seizing $3.6 million in BTC and arresting DPR, Ross Ulbricht.

        
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    As a result, BTC drops from $139 to $109.71 in less than three hours, then recovers to $128.

        
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    November 17th, 2013 - BTC reaches high of $503.10.

        
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    The next day a Senate hearing is held to discuss the issues and legitimacy of virtual currencies.

        
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    The day after that prices soar to $1242.

        
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    December 2nd, 2013 - The biggest heist yet occurs, with almost 100,000 BTC stolen from drug marketplace Sheep.

        
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    Two days later China bans BTC transactions, and the price falls below $1000.

        
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    Further Chinese Regulation on December 17th, 2013 cause a drop to below $500.

        
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    On January 24th, 2014 Charlie Shrem is arrested for money laundering associated with the Silk Road, and resigns from the BTC Foundation 4 days later.

        
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    Late February, 2014 - Mt. Gox files for bankruptcy. (Things are looking pretty bad all around for BTC at this point)

        
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    Then, in July Newegg.com and Dell begin accepting BTC.

        
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    November 6th, 2014 - The Silk Road is shut down once more.

        
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    In January 2015, Coinbase raises $75 million, shattering previous Bitcoin startup records.

        
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    As of August 2015 it was estimated that 160,000 merchants accept bitcoin payments.” (4)

        
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    “In July 2016, researchers published a paper showing that by November 2013 bitcoin commerce was no longer driven by "sin" activities but instead by legitimate enterprises” (4).

        
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    In August 2016 Bitfinex is hacked and $60 million in BTC is stolen.

        
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    As of March, 2017 there are over 10,000 Github projects related to BTC

        

This brings us roughly to where we are today, where at the time of this sentence being written BTC sits at over $7800. An incredible and tumultuous journey, undoubtedly. There is plenty of fraud, theft, and arrest along the way - matched with legitimized adoption by successful businesses. The question remains: Is Bitcoin simply a bubble waiting to burst? Is there long-term value in the concept of digital currencies? Now that we’ve taken a brief trip down memory lane, let’s take a look at some speculation against BTC and what fuels it.

There’s a lot to be said about the way skeptics think about digital currency. They think it’s volatile, and it is. From fractions of a penny to nearly $8000 in less than 10 years - it’s been a wild ride. Speaking of wild, those who are involved call this time period we currently exist in “the Wild West” of digital currency history. There was no how-to book on crypto, no rules. We’re writing that book as we speak, here at Covesting and elsewhere. As you, the reader, engages in the consumption of this article on crypto, the cause grows. You may mention it in passing. You’ll overhear your uncle reciting a headline he read about Bitcoin. “It’s a bubble,” he might say. “Call me in a year, we’ll see how much your internet money’s worth then,”. I sincerely hope you do call him in a year. These things have been said before, and the track BTC is on remains largely unaffected (thank you very much, Jamie Dimon). In order to get a feel what the normal financial/investment sphere might think of Bitcoin, let’s take a look at an article from Forbes written less than two months ago. Quickly though, before we do so, let me note that I advocate the use of BTC across the board. I’m from Texas, and I’m about as Libertarian as Ron Swanson (Look it up if you don’t watch Parks & Recreation, you’ll thank me for the laugh). Anything that takes control from the government and puts it into the hands of the common man I will support, almost indiscriminately. With that being said, remind yourself that these are my opinions - I welcome and encourage you to develop your own.

The article is entitled “4 Reasons Why Bitcoin May Still Blow Up”. The author, John Wasik, is a 60 year old self-described “investment advocate” from Illinois - and while that might sound like the description of someone who is likely to be an early adopter of successful, cutting-edge technology, let me give you a few reasons why I think otherwise. To begin, since I started the opinion portion of this piece with a caveat about my own subjectivity, let’s talk about his. If you’re to search for other articles he’s written, you might find such unbiased titles as, “Why Buffet Sees Bitcoin Bubble,”, “5 Questions Bitcoin Traders Can’t Answer,”, and “Why You Should Worry About a Bitcoin, Crypto Bubble,”. Ignoring the vague, sensationalistic qualities we’ve come to expect from centralized media, they share one thing in common - they don’t have a positive outlook on our favorite blockchain currency, to say the least. In his “4 Reasons” article, Mr. Wasik begins by stating that…


“There are too many unanswered questions about cryptocurrencies and they are not immune from the perils of speculation and fraud.”

Right off the bat, we can see this is not the inquisitive ponderings of an open mind. This isn’t even a valid point - All currencies are subject to speculation and especially fraud. If you, John Wasik, or Warren Buffet can point me in the direction of a currency that ISN’T subject to speculation and fraud, please do - I’m quite ready to invest in it. The difference in Bitcoin is that the currency itself cannot be counterfeited or double-spent by design. This is a significant improvement, not an example of perfection, and with the added benefit of anonymity, it empowers the adopter. This facet of anonymity has lent itself to usage in less than desirable spheres, of course, but it is nonetheless a liberty of the spender and common man (here comes my libertarianism), and furthermore it is a well researched fact that usage of BTC by legitimate enterprises far outweighs those of less-refined taste. (4) Saying that cryptocurrencies are subject to fraud is like saying that baseball bats are subject to being murder weapons. It’s not wrong, but it also isn’t really relevant. Jamie Dimon said flat out that Bitcoin is a fraud. No, not this time - he said it when Bitcoin was around $400. Now, a 1000% increase later, he has reiterated that sentiment. Oh, and by the way, he’s also heavily invested in the technology behind it (7), so I’ll leave it to you to decide whether he’s leveraging potential fraud for profit or simply knows that isn’t true and has used it to his advantage

Moving onward in his article, John Wasik decides to help me author my own by making the same points I would; “Big banks, we should note, have a vested interest in the old money system. Their business is highly regulated and they bet on currencies, stocks, bonds and commodities every day. Those are all regulated and traded for their massive portfolios.” I would go on to explain why I think this is proof that regulation doesn’t benefit anyone but the government and the corporations who can manipulate it, but Wasik takes things elsewhere, saying, “Can you game any of those markets? Of course. Lot [?] at the massive swindle of betting for and against mortgage securities during the credit bubble of 2006-2009. That's all the more reason you should be wary of any virtual currency. If you don't think it can be manipulated, you're not paying attention to history.”

So, if I may summarize for you the point Mr. Wasik is making: “Crypto is subject to fraud and speculation, there are too many unanswered questions and not enough regulation. Big banks don’t want crypto, but they are subject to fraud and speculation - even with regulation. Bitcoin needs regulation. This is why you should be wary - people could potentially use Bitcoin to do the same things people are already doing, and that worries me.”

I am paraphrasing, but if that made as little sense to you as it did you me, then perhaps we share a vested enthusiasm for crypto, because the important question to me is whether or not Bitcoin can be used in a different way: in a way that won’t allow it to be regulated/manipulated by corporations, government, and Wall Street. Perhaps it’s not a bubble (like the Subprime Mortgage Bubble that Wasik touched on, which partially inspired cryptocurrency since it was made possible by piss-poor regulation and systematic abuse by those ‘abiding’ by said regulation).

The next point made in Mr. Wasik’s article is that prices are going up - “sky’s the limit”, he says. This is bad, because in his words, “whenever anyone says a price could rise infinitely higher, I worry about a bubble.” (5). Since this isn’t really much of a point, I won’t spend too much time on it, except to say that adoption and usage will give BTC increasing value, and therefore an increase in price. Anything can be called a “bubble” if the price pumps and it fails. We sit at 2% adoption of Bitcoin currently, with new users every single day. That’s why the price is going up - not because of hyper-inflated demand (definition of an investment bubble), but because of real, tangible usage of a commodity that offers real value.

Now, I’ll be honest. John Wasik’s next point is actually a good one - the only good one, in my opinion. He asserts that there is a dilemma in the valuation of cryptocurrencies. “With stocks, you can look at past and future earnings, dividends and sales. With currencies, it's what they are worth relative to other currencies. With bonds, it's the ability of an issuer to pay back investors.” He essentially wants to know what gives Bitcoin’s price relevance. I can understand this line of thinking, honestly. For the sake of time, I’ll address this as it applies only to Bitcoin, rather than cryptocurrencies as a whole. What gives the U.S. dollar value? There is no longer any gold standard. It’s just a piece of paper that we all agree is worth something. As with fiat currency, BTC does hold value against other cryptos, of course. His assumption that "outside of some limited use as a means to buy goods and services, Bitcoin's $61 billion market cap is linked to the perception of value.” Well, Mr. Wasik, draw the parallel. Use to buy goods and services is pretty necessary for a currency to be worth something, and Bitcoin has that in spades. I am also a firm believer that reality is rooted in perception, and that perception really gives tangible value, but I think that value of Bitcoin is more rooted in what it represents. Without sounding like a broken record, the idea of currency without government, without a middle-man, without a bank with ulterior motive is incredibly liberating. Using the blockchain to increase autonomy, privacy, and to take back the power of money is something that is truly, undeniably valuable. After spending 60 years on this earth, I don’t really blame John Wasik for thinking there is only one way money can work - it’s all he has known. But being well versed in the way things already are does not shape our future, innovation does. People fear change, it’s human nature, but those who embrace change are the ones who catalyze it.

The article ends by asking whether or not Bitcoin is the next world currency. Even Wasik admits that this type of advancement is needed - on that we can agree. Is Bitcoin that currency? Who knows. There sure as hell is a long way to go, and I think we can all share that sentiment, skeptics and advocates alike. But even if Bitcoin isn’t the answer, and it isn’t the next step in world currency, I strongly believe that it is at least the first step in that direction. That is where I think Bitcoin is going, where the dollar never will. Will the end of this journey be a world that uses Bitcoin instead of the USD or GBP? I don’t think so. I do however, strongly believe that we’ll look back on this pioneering, revolutionary currency as the first domino that led to the fall of fiat money as a whole, and a catalyst for personal liberty and decentralization. Bitcoin is the future, blockchain is the future, and I don’t think there’s anyone that can stop it.

Sources

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    http://historyofbitcoin.org/

        
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    https://en.wikipedia.org/wiki/Ross_Ulbricht

        
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    https://www.forbes.com/sites/johnwasik/2017/09/22/4-reasons-why-bitcoin-may-still-blow-up/#185b15cc1c23

        
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    https://en.wikipedia.org/wiki/History_of_bitcoin

        
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    https://www.forbes.com/sites/johnwasik/2017/09/22/4-reasons-why-bitcoin-may-still-blow-up/#185b15cc1c23

        
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    http://johnwasik.net/

        
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    https://www.cnbc.com/2017/10/16/jpmorgans-dimon-betting-on-blockchain-even-as-he-calls-bitcoin-stupid.html

        
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    https://www.investopedia.com/features/crashes/crashes1.asp