In recent years, the crypto-currency known as Bitcoin has been taking the financial world by storm. Bitcoin’s revolutionary, independent design makes it a decidedly different animal than traditional currencies, opening up an entirely new world of possibilities in world financial markets. Bitcoin’s rise from its humble origins as a side interest for computer geeks to become a major factor in the world economy is remarkable and worth exploring.
Origins of Bitcoin
While there were some e-cash technologies that existed prior to Bitcoin, they had nowhere near the scope or reliability. Bitcoin emerged in late 2008 when someone penned by the name of “Satoshi Nakamoto” released a paper online titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” In this paper, “Nakamoto” laid out the principles and technology behind the Bitcoin concept, a form of currency that was backed by neither a central government nor a finite, valuable resource such as gold. The Bitcoin network came into being two months later in 2009 with the release of an open source Bitcoin client and the issuing of the first Bitcoins.
While initially limited to a small group of hobbyists, Bitcoin gained some media attention when several major organizations, such as Wikileaks, began accepting Bitcoin donations. Bitcoin broke out into the mainstream in early 2011 when several news websites reported on the existence of “grey market” websites such as Silk Road where users could purchase drugs and other illegal merchandise with Bitcoins. Despite these salacious reports, the majority of Bitcoin enthusiasts are law-abiding individuals, and the currency is no more a haven for illegal usage than the U.S. dollar is.
Bitcoin continued to gain notability in 2011 and 2012 as its price continued to rise to levels beyond the U.S. dollar. From an initial low of $.08 in 2010, Bitcoin rose to a high of $31 in mid-2011 before a sharp price drop. After steady growth up to $13 at the end of 2012, Bitcoins skyrocketed in value in 2013, reaching a height of $266 in April, breaking past $1,000 in November, and eventually stabilizing to around $650-800 at various points in 2014. Bitcoin has also gained ground as an alternate form of payment, as a growing number of vendors accept it in lieu of U.S. dollars or other forms of currency.
The Future of Bitcoin
Despite some issues with the currency, such as the shutdown of the Mt. Gox exchange, we believe Bitcoin has a bright future. With the increasing instability of traditional fiat currencies and the frequency of economic collapses (such as the collapse in Cyprus, which inspired citizens to turn to Bitcoin), alternate types of currency are becoming increasingly popular. While no one can predict the future, it’s easy to say that Bitcoin will be a big part of it.
Andreas Antonopoulos and Jeffrey Tucker talk about the present state of Bitcoin and its future.