đ
Bitcoin History: Everything from Bitcoin Pizza Day to Bitcoin Wallet Security - YouTube
Channel: Exodus
[0]
Hey crypto nation! This is Kris from Exodus
and in this video weâll talk about the coin
[5]
that started it all. The king of crypto. The
coin that for many people is synonymous to
[11]
cryptocurrencies: Bitcoin. Bitcoin. Bitcoin
[14]
So, without much ado, letâs dive into our
brief history of Bitcoin.
[25]
It all started soon after the financial crisis
of 2008 when on October 31st the now famous
[31]
whitepaper âBitcoin: A Peer-to-Peer Electronic
Cash Systemâ was shared on a cryptography
[36]
forum by Satoshi Nakamoto, as an answer to
the shortcomings of the traditional, fractional
[42]
financial system that had led to the crisis
[46]
The problem with electronic payments in the
past is the risk of the same money being spent
[51]
twice, this is called double spending. The
issue was the inability to verify whether
[57]
a digital currency has been spent more than
once. The only solution that existed up to
[62]
that point, was to have a âtrustedâ third-party
entity that verified all transactions, like
[68]
a central bank. But the experience of 2008
had shown that these âtrustedâ entities
[74]
donât always work in the best interest of
the people whose money they handled.
[79]
â¨Satoshi solved the double-spending problem
using cryptography, proof-of-work and a decentralized,
[86]
peer-to-peer network of nodes that validate
transactions and transferred the ownership
[92]
of wealth to each personâs hands.
[95]
What a brilliant idea!
[96]
What Satoshi proposed was that transactions
would be added to blocks of data, each with
[101]
a timestamp of the time of creation, and each
new block would be added after the previous
[107]
one and would be cryptographically related
to it, so that if one block is changed all
[112]
subsequent blocks must be changed too. And
thus the block-chain was created.
[117]
But in order to create a new block, there
needs to be a cost to it, otherwise anyone
[121]
could add any number of arbitrary blocks to
the chain. That cost is none other than the
[127]
electricity needed by computers to solve a
mathematical problem. The first one to do
[132]
gets to add a new block to the chain. This
new block generates new bitcoins, which the
[137]
miner that solved the problem gains as a reward
for their efforts, along with all the transaction
[144]
fees. That is proof-of-work, also known as
âminingâ, referencing the effort needed
[150]
to mine precious metals.
[152]
This Proof of Work also secures the network
because in order for an attacker to take control
[156]
of the network and change previous transactions
they would need to control the majority of
[162]
the computing power of the network, the infamous
51% attack
[167]
As we know, the cost of running a miner today
that actually mines bitcoins is extremely
[172]
high, making the accumulation of such power
by one entity practically impossible. But
[179]
even if two or three mining pools joined forces
and acquired the necessary 51%, it would still
[185]
not make financial sense to attack the network,
as they would completely undermine their own
[191]
wealth by destroying the credibility of Bitcoin.
[195]
All that, and more, were described in the
original whitepaper that started the amazing
[200]
journey of cryptocurrencies. Few days later,
Nakamoto registers the project on SourceForge,
[205]
the open-source code platform, and on January
the 3rd 2009 the first ever bitcoin block,
[212]
named the genesis block, is mined, awarding
Satoshi the first 50 bitcoins of the 21 million
[220]
that will ever be created.
[221]
In that block, Nakamoto puts the message:
âThe Times 03/Jan/2009 Chancellor on brink
[229]
of second bailout for banks.â, a headline
of London Times that day, which has been interpreted
[234]
as both a timestamp and a critique on the
traditional financial system. On January 9,
[241]
version 0.1 of Bitcoin is published. It is
so complete, that for many it's an indication,
[247]
along with the ingenious ideas in the whitepaper,
that Satoshi Nakamoto cannot be just one person,
[254]
but itâs the pseudonym of a group of people.
The identity of Bitcoinâs founder remains
[260]
a mystery until today, and although many names
have been proposed, there has been no concrete
[265]
proof for any of them, while most of the candidates
have denied being Satoshi Nakamoto.Â
[271]
Regardless of who Satoshi Nakamoto really
is, on January 12, 2009 he makes the first
[277]
ever bitcoin transaction, sending 10 BTC to
developer Hal Finney, who was actually one
[283]
of the candidates to be Satoshi. Fast forward
a few months and the first ever BTC/USD rate
[289]
is established on October 5, 2009, based on
the cost of electricity to produce one bitcoin.
[295]
The rate was $1 = 1309.03 BTC, or inversely,
1 BTC was worth just $0.00076, a fraction
[307]
of a cent! â¨â¨A few months later, on February
6, 2010, the first ever Bitcoin exchange is
[312]
established. Itâs funny to look back to
these early discussions and the bitcoin price
[317]
predictions these very early adopters were
making, where $12 dollars per BTC seemed like
[323]
something taken out of a fantasy novel. Who
could have imagined back then where Bitcoin
[328]
would be today.
[329]
A couple of months later, in what would turn
out to be a historic event, the first purchase
[334]
of goods with Bitcoin takes place.Â
[336]
Developer and early adopter, Laszl, offers
10,000 BTC for two large pizzas, in bitcointalk.org.
[345]
Someone took him up on that offer and ordered
for him the two pizzas. With a cost of around
[350]
$25 dollars, these pizzas set the first âreal-lifeâ
value for BTC at $0.0025 dollars. With todayâs
[358]
valuation those pizzas are worth over $100
million dollars! Definitely the most expensive
[364]
pizzas ever bought. Regardless, the 22nd of
May 2010 was a significant milestone in Bitcoinâs
[371]
history and has since been celebrated in the
ecosystem as âBitcoin Pizza Dayâ.
[378]
But even 1.5 months later, Laszlo had already
overpaid for his pizzas. Version 0.3 of Bitcoin,
[384]
that was released on July 7, is mentioned
in tech-site slashdot.org and that drives
[390]
many users to explore the new technology.
As a result, in just five days, Bitcoin price
[395]
rises tenfold, from $0.008 on July 12 to $0.08
on July 17.
[403]
On December 10, 2010, an article on PCWorld
about the Wikileaks scandal and its inability
[409]
to get access to financial services, mentions
Bitcoin as a funding alternative. The next
[415]
day Satoshi Nakamoto posts his final words
on bitcointalk.org: âIt would have been
[421]
nice to get this attention in any other context.Â
WikiLeaks has kicked the hornet's nest, and
[428]
the swarm is headed towards usâ. For a man
who apparently values anonymity and privacy,
[434]
having Bitcoin linked with Wikileaks at that
time, seems to have raised a red flag that
[439]
prompted him to leave the project. As he said
in his final email correspondence a few months
[445]
later, â[he] moved on to other thingsâ.Â
[450]
On February 9, 2011, Bitcoin reaches parity
with the dollar on Mt. Gox, and a couple of
[456]
months later, on April 23rd, it surpasses
the Euro and the British Pound. And less than
[462]
1.5 months later, the first parabolic movement
of Bitcoinâs price takes place. On June
[468]
2nd, it reaches $10, then by June 8, it climbs
to its highest price yet of $31.91, only to
[477]
plummet again to $10 four days later, on June
12. This movement would become known as âThe
[483]
Great Bubble of 2011â, and as we know today,
it wouldnât be the last parabolic movement
[489]
Bitcoin ever did.Â
[490]
Although the core idea and functionality of
Bitcoin has remained the same since its inception,
[495]
it has also received many improvements. In
April 2012, one such major improvement goes
[501]
live. Itâs Pay-to-Script-Hash (P2SH), which
gives birth to addresses starting with 3.
[509]
These addresses allow the recipient to set
any number of arbitrary conditions that need
[513]
to be met in order to spend the funds, like
requiring the signature of more than one person,
[518]
the famous multisig wallets.
[521]
Around the same time, another improvement
that made the life of users a lot easier was
[525]
adopted: Now this is a mouthful. Hierarchical
Deterministic Wallets or otherwise simply
[530]
known as HD wallets (like Exodus) where a
single Master Key, not just for Bitcoin but
[536]
for all assets controls all the rest of the
public and private keys in the wallet. To
[541]
make matters even simpler, another improvement
translates this Master Key to a number of
[546]
words, with which a user could restore all
of their Private Keys and addresses in case
[552]
of a mishap. This is the famous Mnemonic Phrase,
aka 12-word secret phrase or wallet seed.
[559]
On block 210,000 the reward for mining a block
was reduced from 50 BTC to 25. As with the
[568]
limited supply, the halving of the mining
rewards was included in Bitcoin protocol since
[573]
the beginning to limit inflation and ensure
the scarcity of bitcoins. The halving happens
[579]
every 210,000 blocks, or approximately every
four years, and since this first one weâve
[586]
had two more: the second one on July 9, 2016
and the third, on May 11. The halvings will
[594]
continue until the reward drops to zero, when
all 21 million bitcoins will have been issued,
[601]
and itâs expected to happen around the year
2140. After that point the miners will be
[608]
rewarded only with the transaction fees.
[612]
Halvings so far have been followed by a price
increase, so a few months later, in April
[616]
2013 Bitcoin price surpassed $100 for the
first time, while the market cap had broken
[623]
the $1 billion dollars threshold just a few
days earlier. Bitcoin even reached $266, before
[630]
crashing again to around $100, after another
exchange hack.
[635]
Around that time governments start to take
notice of Bitcoin and try to figure out how
[639]
to categorize and regulate, or even control,
this new digital currency. In October of the
[645]
same year, the FBI manages to shut down the
infamous dark web site Silk Road and seize
[651]
its assets. Because of that incident Bitcoin
starts to get portrayed as the coin of criminals
[657]
and money laundering.Â
[659]
During these months, Bitcoin saw a huge surge
in price, going from a little over $100 in
[664]
October to breaking the $1000 barrier in November
and December. But a ban from China and the
[671]
bankruptcy of Mt. Gox, both in a span of a
couple of months, drove the price down again,
[677]
and Bitcoin wouldnât reach that psychological
barrier again until January 2017.
[682]
Mt. Gox, a Bitcoin exchange that dominated
the market until February 2014, when it filed
[691]
for bankruptcy, after it became clear that
850,000 bitcoins had been lost over three
[697]
years and several other misappropriations
had taken place. At the time, it was feared
[703]
by many Bitcoin enthusiasts that the incident
could bring the death of Bitcoin.
[708]
Bitcoin has been pronounced dead several times
over the years, but this was perhaps the only
[713]
time that the fears came from inside the ecosystem.
Thankfully, Bitcoin persevered, as it has
[720]
always done, and Mt. Gox has since become
a textbook example of the importance of not
[725]
storing your funds on an exchange.Â
[727]
As crypto evangelist Andreas Antonopoulos
has put it: âNot your keys, not your bitcoinâ,
[733]
this mottoâs purpose is to instill the idea
that Bitcoin was invented to allow transactions
[739]
directly between users, without the need of
an intermediary.
[744]
In order, however, for someone to do that
and be the true owner of their bitcoins, they
[748]
need to hold the Private Keys used to sign
the transactions. When users send money to
[754]
an exchange they also transfer the true ownership
of those funds to these exchanges, since the
[760]
exchange holds the private keys to the deposit
addresses, not the user.
[766]
This makes it clear why itâs important that
Private Keys remain secret and safe, private,
[771]
as the name implies. The Private Keys sign
the transactions, and that signature is the
[777]
only thing miners need to consider a transaction
valid. So, whoever controls the Private Key
[782]
to an address controls the funds in it. And
if that someone is anyone else other than
[788]
the true owner of the funds, then theyâre
as good as gone.â¨
[792]
But letâs get back to our timeline.
[794]
2017 was definitely a very interesting year
for Bitcoin and the ecosystem in general.
[800]
Multi-million Initial Coin Offerings (ICOs),
forked coins, and of course, the bull run
[806]
that brought a lot of buzz around âthe new
digital currencyâ. â¨â¨During the first
[811]
few months of 2017, Bitcoin is moving around
the $1000 dollar mark. But after May, its
[817]
price starts climbing and climbing. From around
$1300 on May 1st, it will reach almost $7500
[826]
by November 9. But the true bull run hadnât
yet come.â¨â¨Meanwhile, amongst the constantly
[831]
changing price and political field, Bitcoin
improvements kept coming. One of the most
[836]
important improvements was Segregated Witness,
or SegWit, as itâs called in short. SegWit
[842]
separated the signature and script part of
the transaction from the part with the actual
[846]
transaction details, effectively increasing
the block size from 1 MB to up to 4 MB, and
[853]
as a result reducing transaction fees and
improving scalability, which is seen as one
[858]
of Bitcoinâs major drawbacks. Increasing
the block size was a matter of much debate
[863]
in the Bitcoin community, and as a result,
although the SegWit proposal existed since
[868]
2015, it wasnât until August 2017 that it
was implemented. And still not without controversy.
[876]
On August 1st, 2017, Bitcoin Cash (BCH) forked
or split from BTC, with its community representing
[883]
the belief that Bitcoin should be a means
of transaction, while Bitcoin Core, as the
[888]
original Bitcoin came to be known, is viewed
more as a store of value.â¨â¨Bitcoin Cashâs
[894]
creation initiates the âera of the forksâ,
a period of around a year, where forks of
[898]
Bitcoin, and other famous cryptocurrencies,
start popping up left and right. Most of these
[904]
coins had nothing new to offer and their sole
purpose was to create coins out of thin air,
[908]
so they soon fell into oblivion. But others
stuck around, like Bitcoin Gold or Bitcoin
[914]
Diamond, which both support SegWit, unlike
BCH.
[918]
Currently Bitcoin canât come even close
to competing with legacy payment systems.
[922]
With a capacity of just 7 transactions per
second and confirmation times of 10 minutes
[927]
on average, itâs far behind Visaâs maximum
capacity of 65,000 transactions per second
[933]
and its nearly instant payments. Furthermore,
because only so many transactions can fit
[939]
in a block, when the network is congested,
fees skyrocket, in a bidding war between users
[945]
to get their transaction in the next block.â¨â¨So,
whatâs the upgrade that will solve all these
[950]
problems? The answer: Lightning Network.â¨â¨Weâll
cover the lightning network in another video.
[957]
on December 17, 2017, it reached the highest
price to date: $19,783. â¨â¨Bitcoin was
[966]
mentioned almost daily on mainstream media,
driving a lot of new people to the ecosystem,
[972]
to find out what this âphenomenonâ is
and take part in the gains so many are already
[977]
enjoying. FOMO, the âFear Of Missing Outâ
is on full throttle, driving many people to
[983]
buy bitcoins at its highest prices.Â
[985]
But as it had happened before, and will surely
happen again, Bitcoin was on a parabolic movement,
[991]
and as its price rose, so it fell.
[994]
Bitcoin, and all cryptocurrencies, are definitely
highly volatile and have seen many extreme
[999]
highs and extreme lows. But what many traders
like to point out is that after each crash
[1004]
it settles at a higher low than the previous
one.
[1010]
What are your thoughts? Will Bitcoin be able to
[1012]
hold above 10k? Is a new bull run on the horizon?
[1015]
We can see bitcoinâs past and the technological
and financial revolution it brought is well
[1020]
documented. But where do you think is Bitcoin
today and what will its future hold? Let us
[1025]
know in the comments below. If you enjoyed
this video hit that like button and subscribe
[1031]
or more crypto videos from Exodus.
[1034]
Until next time⌠Hodl on! Or buy pizzas
with bitcoin.
Most Recent Videos:
You can go back to the homepage right here: Homepage