History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, commenced accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had embarked accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged holder Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] began accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper showcasing that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies commencing with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legitimate] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, commenced accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions fully peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged holder Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] began accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper showcasing that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks commencing late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Quick Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve examine, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the proprietor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies kicking off with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immovable and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged holder Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] commenced accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Rapid Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Rapid Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve explore, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies commencing with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immovable and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions fully peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged holder Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] commenced accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks commencing late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Rapid Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Prompt Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, serve with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve examine, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies beginning with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legitimate] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions entirely peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Rapid Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Rapid Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies beginning with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legitimate] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was motionless and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] commenced accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks embarking late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Prompt Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve explore, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired investigate published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies kicking off with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions fully peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies beginning with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was motionless and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions fully peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] commenced accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso spotted trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks commencing late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart showcased a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, serve with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies commencing with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] commenced accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Quick Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve examine, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired investigate published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies beginning with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobile and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions entirely peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] began accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex witnessed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve examine, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies commencing with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, commenced accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had embarked accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex witnessed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks embarking late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Quick Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Rapid Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart showcased a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immovable and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso spotted trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks commencing late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Rapid Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart showcased a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, serve with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve explore, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions downright peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged holder Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Rapid Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve probe, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks commencing late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Quick Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the proprietor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobile and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, commenced accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions entirely peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had embarked accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] began accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper showcasing that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso spotted trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex witnessed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks commencing late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Rapid Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Prompt Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve probe, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies kicking off with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions entirely peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper showcasing that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Quick Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve probe, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was motionless and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, commenced accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions downright peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had embarked accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged holder Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper showcasing that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Rapid Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve probe, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the proprietor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies kicking off with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legitimate] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] began accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Prompt Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies beginning with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions downright peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had embarked accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper demonstrating that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks commencing late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Prompt Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart showcased a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve probe, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies commencing with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immovable and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, commenced accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions fully peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper showcasing that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso spotted trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Rapid Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve explore, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired investigate published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the proprietor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies commencing with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legitimate] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions downright peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged holder Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks embarking late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Quick Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Prompt Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart showcased a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, serve with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve examine, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen demonstrated that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legitimate] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was motionless and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions downright peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] commenced accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired examine published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies beginning with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immovable and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions downright peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] began accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam began accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks embarking late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Rapid Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, serve with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies commencing with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions totally peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] began accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks embarking late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the holder, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies kicking off with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was motionless and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an activity which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions fully peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had embarked accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to begin accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam embarked accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso witnessed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Quick Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Rapid Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart displayed a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, conform with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve probe, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired explore published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to toughly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the proprietor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly embarked an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Three million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies beginning with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic limitations and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies embarked to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season scene “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions entirely peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had embarked accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a makeshift halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized harshly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] commenced accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] began accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to harshly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex eyed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Prompt Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Swift Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch sides” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not show up to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enlargening number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement activity”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative act against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen displayed that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, proclaimed that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the proprietor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform wielded by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, announced bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy announced bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies embarking with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Three] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense transferred over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was stationary and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, began accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions entirely peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged proprietor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] embarked accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter interchange product based on the price of a bitcoin. The CFTC interchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enhancing security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to commence accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper displaying that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin proceeds to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enlargened Four.6 times over the past year. [112] BitPay CEO Stephen Pair announced the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso eyed trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex witnessed an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Three,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks beginning late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a chunk by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, serve with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve examine, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (harshly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the possessor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly commenced an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, however the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantly.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Three.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has very likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies kicking off with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Legal] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immovable and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies commenced to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions downright peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had began accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate ripping off from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions, [55]

On twenty three June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to twenty one U.S.C. § 881. [56] It is the very first time a government agency has claimed to have seized bitcoin. [57] [58]

In July two thousand thirteen a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. [59] During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. [60] [61] According to Vitalik Buterin, a writer for Bitcoin Magazine, “bitcoin’s fate in Thailand may give the electronic currency more credibility in some circles”, but he was worried it didn’t bode well for bitcoin in China. [62]

On six August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are “a currency or a form of money” (specifically securities as defined by Federal Securities Laws), and as such were subject to the court’s jurisdiction, [63] [64] and Germany’s Finance Ministry subsumed bitcoins under the term “unit of account”—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications. [65]

In October 2013, the FBI seized toughly 26,000 BTC from website Silk Road during the arrest of alleged possessor Ross William Ulbricht. [66] [67] [68] Two companies, Robocoin and Bitcoiniacs launched the world’s very first bitcoin ATM on twenty nine October two thousand thirteen in Vancouver, BC, Canada, permitting clients to sell or purchase bitcoin currency at a downtown coffee shop. [Sixty-nine] [70] [71] Chinese internet giant Baidu had permitted clients of website security services to pay with bitcoins. [72]

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university’s chief financial officer calling it the “gold of tomorrow”. [73] During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. [74]

In December 2013, Overstock.com [75] announced plans to accept bitcoin in the 2nd half of 2014. On five December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. [76] After the announcement, the value of bitcoins dropped, [77] and Baidu no longer accepted bitcoins for certain services. [78] Buying real-world goods with any virtual currency has been illegal in China since at least 2009. [79]

2014 Edit

In January 2014, Zynga [80] announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants. [81] The network rate exceeded ten petahash/sec. [82] TigerDirect [83] and Overstock.com [84] embarked accepting bitcoin.

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox, [85] suspended withdrawals citing technical issues. [86] By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen. [87] Months before the filing, the popularity of Mt. Gox had waned as users experienced difficulties withdrawing funds. [88]

In June two thousand fourteen the network exceeded one hundred petahash/sec. [89] On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of St. Petersburg Cup under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90]

In July two thousand fourteen Newegg and Dell [91] commenced accepting bitcoin.

In September two thousand fourteen TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission “CFTC” to begin listing an over-the-counter exchange product based on the price of a bitcoin. The CFTC exchange product approval marks the very first time a U.S. regulatory agency approved a bitcoin financial product. [92]

In December two thousand fourteen Microsoft began to accept bitcoin to buy Xbox games and Windows apps. [93]

2015 Edit

In January two thousand fifteen Coinbase raised seventy five million USD as part of a Series C funding round, smashing the previous record for a bitcoin company. [94] Less than one year after the collapse of Mt. Gox, United Kingdom-based exchange Bitstamp announced that their exchange would be taken offline while they investigate a hack which resulted in about Nineteen,000 bitcoins (equivalent to toughly US$Five million at that time) being stolen from their hot wallet. [95] The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on nine January after enlargening security measures and assuring customers that their account balances would not be impacted. [96]

In March two thousand fifteen 21 Inc announced it had raised one hundred sixteen million USD in venture funding, the largest amount for any digital currency-related companies. [97]

As of August two thousand fifteen it was estimated that 160,000 merchants accept bitcoin payments. [98] Barclays announced that they would become the very first UK high street bank to embark accepting bitcoin, with a plan to facilitate users to make charitable donations using the cryptocurrency outside their systems. [99] They partnered in April two thousand sixteen with mobile payment startup Circle Internet Financial. [100]

In October 2015, a proposal was submitted to the Unicode Consortium to add a codepoint for the bitcoin symbol. [101]

2016 Edit

In January 2016, the network rate exceeded one exahash/sec. [102]

In March 2016, the Cabinet of Japan recognized virtual currencies like bitcoin as having a function similar to real money. [103] Bidorbuy, the largest South African online marketplace, launched bitcoin payments for both buyers and sellers. [104]

In April 2016, Steam commenced accepting bitcoin as payment for movie games and other online media. [105]

In July 2016, researchers published a paper showcasing that by November two thousand thirteen bitcoin commerce was no longer driven by “sin” activities but instead by legitimate enterprises. [106] Uber switched to bitcoin in Argentina after the government blocked credit card companies from dealing with Uber. [107]

In August 2016, a major bitcoin exchange, Bitfinex, was hacked and almost 120,000 BTC (around $60m) was stolen. [108]

In September 2016, the number of bitcoin ATMs had doubled over the last eighteen months and reached seven hundred seventy one ATMs worldwide. [109]

In November 2016, the Swiss Railway operator SBB (CFF) upgraded all their automated ticket machines so that bitcoin could be bought from them using the scanner on the ticket machine to scan the bitcoin address on a phone app. [110]

Bitcoin generates more academic interest year after year; the number of Google Scholar articles published mentioning bitcoin grew from eighty three in 2009, to four hundred twenty four in 2012, and three thousand five hundred eighty in 2016. [111] Also, the academic Ledger (journal) published its very first issue. It is edited by Peter Rizun.

2017 Edit

The number of businesses accepting bitcoin resumes to increase. In January 2017, NHK reported the number of online stores accepting bitcoin in Japan had enhanced Four.6 times over the past year. [112] BitPay CEO Stephen Pair proclaimed the company’s transaction rate grew 3× from January two thousand sixteen to February 2017, and explained usage of bitcoin is growing in B2B supply chain payments. [113]

Bitcoin gains more legitimacy among lawmakers and legacy financial companies. For example, Japan passed a law to accept bitcoin as a legal payment method, [114] and Russia has announced that it will legalize the use of cryptocurrencies such as bitcoin. [115] And Norway’s largest online bank, Skandiabanken, integrate bitcoin accounts. [116]

In the very first half of 2017, one bitcoin surpassed the spot price of an ounce of gold for the very first time, [117] and subsequently broke its all-time high, reaching US$1,402.03 on one May 2017, [118] and over US$1,800 on eleven May 2017. [119] On twenty May 2017, the price of one bitcoin passed US$Two,000 for the very first time.

In March 2017, the number of GitHub projects related to bitcoin passed Ten,000. [120]

Exchange trading volumes proceed to increase. For the 6-month period ending March 2017, Mexican exchange Bitso spotted trading volume increase 1500%. [121] Inbetween January and May two thousand seventeen Poloniex spotted an increase of more than 600% active traders online and regularly processed 640% more transactions. [122]

In June 2017, the bitcoin symbol was encoded in Unicode version Ten.0 at position U+20BF (₿) in the Currency Symbols block. [123]

On one August two thousand seventeen bitcoin split into two derivative digital currencies, the classic bitcoin (BTC) and the Bitcoin Cash (BCH). [124]

On five August 2017, the price of one BTC passed US$Trio,000 for the very first time.

On twelve August 2017, the price of one BTC passed US$Four,000 for the very first time.

Two days later, the price of one BTC hit a record high of US$Four,400 for the very first time.

Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency’s legal standing and rising media and Internet interest. [125] [126] [127] [128]

Until 2013, almost all market with bitcoins were in US $. [129] [130] [131]

As the market valuation of the total stock of bitcoins approached US$1 billion, some commentators called bitcoin prices a bubble. [132] [133] [134] In early April 2013, the price per bitcoin dropped from $266 to around $50 and then rose to around $100. Over two weeks kicking off late June two thousand thirteen the price dropped steadily to $70. The price began to recover, peaking once again on one October at $140. On two October, The Silk Road was seized by the FBI. This seizure caused a flash crash to $110. The price quickly rebounded, returning to $200 several weeks later. [135] The latest run went from $200 on three November to $900 on eighteen November. [136] Bitcoin passed US$1,000 on twenty eight November two thousand thirteen at Mt. Gox.

Prices fell to around $400 in April 2014, before rallying in the middle of the year. They then declined to not much more than $200 in early 2015. [137]

In the 2nd quarter of 2017, prices more than tripled from $1200 to over $4000.

“Satoshi Nakamoto” is presumed to be a pseudonym for the person or people who designed the original bitcoin protocol in two thousand eight and launched the network in 2009. Nakamoto was responsible for creating the majority of the official bitcoin software and was active in making modifications and posting technical information on the BitcoinTalk Forum. [152] Investigations into the real identity of Satoshi Nakamoto were attempted by The Fresh Yorker and Swift Company. The Fresh Yorker’s investigation brought up at least two possible candidates: Michael Clear and Vili Lehdonvirta. Quick Company’s investigation brought up circumstantial evidence linking an encryption patent application filed by Neal King, Vladimir Oksman and Charles Bry on fifteen August 2008, and the bitcoin.org domain name which was registered seventy two hours later. The patent application (#20100042841) contained networking and encryption technologies similar to bitcoin’s, and textual analysis exposed that the phrase “. computationally impractical to switch roles” appeared in both the patent application and bitcoin’s whitepaper. [11] All three inventors explicitly denied being Satoshi Nakamoto. [153] [154] In May 2013, Ted Nelson speculated that Japanese mathematician Shinichi Mochizuki is Satoshi Nakamoto. [155] Later in two thousand thirteen the Israeli researchers Dorit Ron and Adi Shamir pointed to Silk Road-linked Ross William Ulbricht as the possible person behind the cover. The two researchers based their suspicion on an analysis of the network of bitcoin transactions. [156] These allegations were contested. [157] Ron and Shamir later retracted their claim. [158]

Nakamoto’s involvement with bitcoin does not emerge to extend past mid-2010. [159] In April 2011, Nakamoto communicated with a bitcoin contributor, telling that he had “moved on to other things”. [160]

Stefan Thomas, a Swiss coder and active community member, graphed the time stamps for each of Nakamoto’s 500-plus bitcoin forum posts; the resulting chart demonstrated a steep decline to almost no posts inbetween the hours of five a.m. and eleven a.m. Greenwich Mean Time. Because this pattern held true even on Saturdays and Sundays, it suggested that Nakamoto was asleep at this time, and the hours of five a.m. to eleven a.m. GMT are midnight to six a.m. Eastern Standard Time (North American Eastern Standard Time). Other clues suggested that Nakamoto was British: A newspaper headline he had encoded in the genesis block came from the UK-published newspaper The Times, and both his forum posts and his comments in the bitcoin source code used British English spellings, such as “optimise” and “colour”. [161]

An Internet search by an anonymous blogger of texts similar in writing to the bitcoin whitepaper suggests Nick Szabo’s “bit gold” articles as having a similar author. [7] Nick denied being Satoshi, and stated his official opinion on Satoshi and bitcoin in a May two thousand eleven article. [162]

In a March two thousand fourteen article in Newsweek, journalist Leah McGrath Goodman doxed Dorian S. Nakamoto of Temple City, California, telling that Satoshi Nakamoto is the man’s birth name. Her methods and conclusion drew widespread criticism. [163] [164]

In June 2016, the London Review of Books published a lump by Andrew O’Hagan about Nakamoto. [165]

On twelve March 2013, a bitcoin miner running version 0.8.0 of the bitcoin software created a large block that was considered invalid in version 0.7 (due to an undiscovered inconsistency inbetween the two versions). This created a split or “fork” in the blockchain since computers with the latest version of the software accepted the invalid block and continued to build on the diverging chain, whereas older versions of the software rejected it and continued extending the blockchain without the offending block. This split resulted in two separate transaction logs being formed without clear consensus, which permitted for the same funds to be spent differently on each chain. In response, the Mt. Gox exchange temporarily halted bitcoin deposits. [166] The exchange rate fell 23% to $37 on the Mt. Gox exchange but rose most of the way back to its prior level of $48. [44] [45]

Miners resolved the split by downgrading to version 0.7, putting them back on track with the canonical blockchain. User funds largely remained unaffected and were available when network consensus was restored. [167] The network reached consensus and continued to operate as normal a few hours after the split. [168]

On eighteen March 2013, the Financial Crimes Enforcement Network (or FinCEN), a bureau of the United States Department of the Treasury, issued a report regarding centralized and decentralized “virtual currencies” and their legal status within “money services business” (MSB) and Bank Secrecy Act regulations. [49] [54] It classified digital currencies and other digital payment systems such as bitcoin as “virtual currencies” because they are not legal tender under any sovereign jurisdiction. FinCEN cleared American users of bitcoin of legal obligations [54] by telling, “A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations.” However, it held that American entities who generate “virtual currency” such as bitcoins are money transmitters or MSBs if they sell their generated currency for national currency: “. a person that creates units of convertible virtual currency and sells those units to another person for real currency or its equivalent is engaged in transmission to another location and is a money transmitter.” This specifically extends to “miners” of the bitcoin currency who may have to register as MSBs and abide by the legal requirements of being a money transmitter if they sell their generated bitcoins for national currency and are within the United States. [47] Since FinCEN issued this guidance, dozens of virtual currency exchangers and administrators have registered with FinCEN, and FinCEN is receiving an enhancing number of suspicious activity reports (SARs) from these entities. [169]

Additionally, FinCEN claimed regulation over American entities that manage bitcoins in a payment processor setting or as an exchanger: “In addition, a person is an exchanger and a money transmitter if the person accepts such de-centralized convertible virtual currency from one person and transmits it to another person as part of the acceptance and transfer of currency, funds, or other value that substitutes for currency.” [48] [49]

In summary, FinCEN’s decision would require bitcoin exchanges where bitcoins are traded for traditional currencies to disclose large transactions and suspicious activity, obey with money laundering regulations, and collect information about their customers as traditional financial institutions are required to do. [54] [170] [171]

Patrick Murck of the Bitcoin Foundation criticized FinCEN’s report as an “overreach” and claimed that FinCEN “cannot rely on this guidance in any enforcement act”. [172] [ non-primary source needed ]

Jennifer Shasky Calvery, the director of FinCEN said, “Virtual currencies are subject to the same rules as other currencies. . Basic money-services business rules apply here.” [54]

In its October two thousand twelve investigate, Virtual currency schemes, the European Central Bank concluded that the growth of virtual currencies will proceed, and, given the currencies’ inherent price instability, lack of close regulation, and risk of illegal uses by anonymous users, the Bank warned that periodic examination of developments would be necessary to reassess risks. [173]

In 2013, the U.S. Treasury extended its anti-money laundering regulations to processors of bitcoin transactions. [174] [175]

In June 2013, Bitcoin Foundation board member Jon Matonis wrote in Forbes that he received a warning letter from the California Department of Financial Institutions accusing the foundation of unlicensed money transmission. Matonis denied that the foundation is engaged in money transmission and said he viewed the case as “an chance to educate state regulators.” [176]

In late July 2013, the industry group Committee for the Establishment of the Digital Asset Transfer Authority began to form to set best practices and standards, to work with regulators and policymakers to adapt existing currency requirements to digital currency technology and business models and develop risk management standards. [177]

In 2014, the U.S. Securities and Exchange Commission filed an administrative activity against Erik T. Voorhees, for violating Securities Act Section five for publicly suggesting unregistered interests in two bitcoin websites in exchange for bitcoins. [178]

Bitcoins can be stored in a bitcoin cryptocurrency wallet. Theft of bitcoin has been documented on numerous occasions. At other times, bitcoin exchanges have shut down, taking their clients’ bitcoins with them. A Wired probe published April two thousand thirteen showcased that forty five percent of bitcoin exchanges end up closing. [179]

On nineteen June 2011, a security breach of the Mt. Gox bitcoin exchange caused the nominal price of a bitcoin to fraudulently drop to one cent on the Mt. Gox exchange, after a hacker used credentials from a Mt. Gox auditor’s compromised computer illegally to transfer a large number of bitcoins to himself. They used the exchange’s software to sell them all nominally, creating a massive “ask” order at any price. Within minutes, the price reverted to its correct user-traded value. [180] [181] [182] [183] [184] [185] Accounts with the equivalent of more than US$8,750,000 were affected. [182]

In July 2011, the operator of Bitomat, the third-largest bitcoin exchange, announced that he had lost access to his wallet.dat file with about 17,000 bitcoins (toughly equivalent to US$220,000 at that time). He announced that he would sell the service for the missing amount, aiming to use funds from the sale to refund his customers. [186]

In August 2011, MyBitcoin, a now defunct bitcoin transaction processor, announced that it was hacked, which caused it to be shut down, paying 49% on customer deposits, leaving more than 78,000 bitcoins (equivalent to harshly US$800,000 at that time) unaccounted for. [187] [188]

In early August 2012, a lawsuit was filed in San Francisco court against Bitcoinica — a bitcoin trading venue — claiming about US$460,000 from the company. Bitcoinica was hacked twice in 2012, which led to allegations that the venue neglected the safety of customers’ money and cheated them out of withdrawal requests. [189] [190]

In late August 2012, an operation titled Bitcoin Savings and Trust was shut down by the proprietor, leaving around US$Five.6 million in bitcoin-based debts; this led to allegations that the operation was a Ponzi scheme. [191] [192] [193] [194] In September 2012, the U.S. Securities and Exchange Commission had reportedly began an investigation on the case. [195]

In September 2012, Bitfloor, a bitcoin exchange, also reported being hacked, with 24,000 bitcoins (worth about US$250,000) stolen. As a result, Bitfloor suspended operations. [196] [197] The same month, Bitfloor resumed operations; its founder said that he reported the theft to FBI, and that he plans to repay the victims, tho’ the time framework for repayment is unclear. [198]

On three April 2013, Instawallet, a web-based wallet provider, was hacked, [199] resulting in the theft of over 35,000 bitcoins [200] which were valued at US$129.90 per bitcoin at the time, or almost $Four.6 million in total. As a result, Instawallet suspended operations. [199]

On eleven August 2013, the Bitcoin Foundation announced that a bug in a pseudorandom number generator within the Android operating system had been exploited to steal from wallets generated by Android apps; fixes were provided thirteen August 2013. [201]

In October 2013, Inputs.io, an Australian-based bitcoin wallet provider was hacked with a loss of four thousand one hundred bitcoins, worth over A$1 million at time of theft. The service was run by the operator TradeFortress. Coinchat, the associated bitcoin talk room, has been taken over by a fresh admin. [202]

On twenty six October 2013, a Hong-Kong based bitcoin trading platform possessed by Global Bond Limited (GBL) vanished with thirty million yuan (US$Five million) from five hundred investors. [203]

Mt. Gox, the Japan-based exchange that in two thousand thirteen treated 70% of all worldwide bitcoin traffic, proclaimed bankruptcy in February 2014, with bitcoins worth about $390 million missing, for unclear reasons. The CEO was eventually arrested and charged with embezzlement. [204]

On three March 2014, Flexcoin announced it was closing its doors because of a hack attack that took place the day before. [205] [206] [207] In a statement that now occupies their homepage, they announced on three March two thousand fourteen that “As Flexcoin does not have the resources, assets, or otherwise to come back from this loss [the hack], we are closing our doors instantaneously.” [208] Users can no longer log into the site.

Chinese cryptocurrency exchange Bter lost $Two.1 million in BTC in February 2015. [209]

The Slovenian exchange Bitstamp lost bitcoin worth $Five.1 million to a hack in January 2015. [210]

The US-based exchange Cryptsy proclaimed bankruptcy in January 2016, ostensibly because of a two thousand fourteen hacking incident; the court-appointed receiver later alleged that Cryptsy’s CEO had stolen $Trio.Trio million. [211]

In May 2016, Gatecoin closed temporarily after a breach had caused a loss of about $Two million in cryptocurrency. It subsequently relaunched its exchange in August two thousand sixteen and is leisurely reimbursing its customers. [212] [213]

In August 2016, hackers stole some $72 million in customer bitcoin from the Hong-Kong-based exchange Bitfinex. [214]

In 2012, the Cryptocurrency Legal Advocacy Group (CLAG) stressed the importance for taxpayers to determine whether taxes are due on a bitcoin-related transaction based on whether one has experienced a “realization event”: when a taxpayer has provided a service in exchange for bitcoins, a realization event has most likely occurred and any build up or loss would likely be calculated using fair market values for the service provided.” [215]

In August 2013, the German Finance Ministry characterized bitcoin as a unit of account, [65] [216] usable in multilateral clearing circles and subject to capital gains tax if held less than one year. [216]

On five December 2013, the People’s Bank of China announced in a press release regarding bitcoin regulation that whilst individuals in China are permitted to loosely trade and exchange bitcoins as a commodity, it is prohibited for Chinese financial banks to operate using bitcoins or for bitcoins to be used as legal tender currency, and that entities dealing with bitcoins must track and report suspicious activity to prevent money laundering. [217] The value of bitcoin dropped on various exchanges inbetween eleven and twenty percent following the regulation announcement, before rebounding upward again. [218]

On eighteen June 2014, it was announced that bitcoin payment service provider BitPay would become the fresh sponsor of the St. Petersburg Cup game under a two-year deal, renamed the Bitcoin St. Petersburg Cup. Bitcoin will be accepted for ticket and concession sales as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin. [90] On two April 2015, after one year of sponsorship, BitPay declined to renew sponsorship of the game. [219]

History of bitcoin

History of bitcoin

Bitcoin is a cryptocurrency, a digital asset designed to work as a medium of exchange that uses cryptography to control its creation and management, rather than relying on central authorities. [1] The presumed pseudonymous Satoshi Nakamoto integrated many existing ideas from the cypherpunk community when creating bitcoin.

Contents

Prior to the release of bitcoin there were a number of digital cash technologies kicking off with the issuer based ecash protocols of David Chaum [Two] and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The very first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai’s b-money [Trio] and Nick Szabo’s bit gold. [Four] [Five] Hal Finney developed reusable proof of work (RPOW) using hashcash as its proof of work algorithm. [6]

In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some extra enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. [Five]

There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. [7] [8] The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited. [9]

In November 2008, a paper was posted to a cryptography mailing list [Ten] under the name Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as “a system for electronic transactions without relying on trust”. [11] [12] [13] [14] In January 2009, the bitcoin network came into existence with the release of the very first open source bitcoin client and the issuance of the very first bitcoins, [12] [15] [16] [17] with Satoshi Nakamoto mining the very first block of bitcoins ever (known as the genesis block), which had a prize of fifty bitcoins.

One of the very first supporters, adopters, contributor to bitcoin and receiver of the very first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received ten bitcoins from Nakamoto in the world’s very first bitcoin transaction. [Eighteen] [Nineteen] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold. [20]

In the early days, Nakamoto is estimated to have mined one million bitcoins. [21] Before disappearing from any involvement in bitcoin, Nakamoto in a sense passed over the reins to developer Gavin Andresen, who then became the bitcoin lead developer at the Bitcoin Foundation, the ‘anarchic’ bitcoin community’s closest thing to an official public face. [22]

The value of the very first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of Ten,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s. [12]

On six August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions weren’t decently verified before they were included in the transaction log or blockchain, which let users bypass bitcoin’s economic confinements and create an indefinite number of bitcoins. [23] [24] On fifteen August, the vulnerability was exploited; over one hundred eighty four billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was immobilized and the network forked to an updated version of the bitcoin protocol. [25] [26] This was the only major security flaw found and exploited in bitcoin’s history. [23] [24]

2011 Edit

Based on bitcoin’s open source code, other cryptocurrencies began to emerge. [27]

The Electronic Frontier Foundation, a non-profit group, embarked accepting bitcoins in January 2011, [28] stopped accepting them in June 2011, [29] and began again in May 2013. [30]

In June two thousand eleven Wikileaks [31] and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about fresh currency systems. [32] The EFF’s decision was reversed on seventeen May two thousand thirteen when they resumed accepting bitcoin. [33]

On twenty two March two thousand eleven WeUseCoins published the very first viral movie [34] which has had over 6.Four million views. In September two thousand eleven Vitalik Buterin co-founded Bitcoin Magazine. On twenty three December 2011, Douglas Feigelson of BitBills filed a patent application for “Creating And Using Digital Currency” with the United States Patent and Trademark Office, an act which was contested based on prior art in June 2013. [35] [36]

2012 Edit

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wifey in the third-season gig “Bitcoin for Dummies”. The host of CNBC’s Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn’t consider bitcoin a true currency, telling “There’s no central bank to regulate it; it’s digital and functions entirely peer to peer”. [37]

In September 2012, the Bitcoin Foundation was launched to “accelerate the global growth of bitcoin through standardization, protection, and promotion of the open source protocol”. The founders were Gavin Andresen, Jon Matonis, Patrick Murck, Charlie Shrem, and Peter Vessenes. [38]

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service. [39] In November 2012, WordPress had commenced accepting bitcoins. [40]

2013 Edit

In February two thousand thirteen the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. [41] The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency. [42]

In March the bitcoin transaction log called the blockchain temporarily split into two independent chains with differing rules on how transactions were accepted. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a improvised halt to transactions, sparking a acute sell-off. [43] Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software. [43] The Mt. Gox exchange shortly halted bitcoin deposits and the exchange rate shortly dipped by 23% to $37 as the event occurred [44] [45] before recovering to previous level of approximately $48 in the following hours. [46] In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for “decentralized virtual currencies” such as bitcoin, classifying American “bitcoin miners” who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. [47] [48] [49]

In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity [50] resulting in the bitcoin exchange rate pulling down from $266 to $76 before returning to $160 within six hours. [51] Bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment. [52]

On fifteen May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US. [53] [54]

On seventeen May 2013, it was reported that BitInstant processed approximately thirty percent of the money going into and out of bitcoin, and in April alone facilitated 30,000 transactions,