BitCoin

As bitcoin is pseudonymous, its use by criminals has attracted the attention of regulators, leading to its ban by several countries as of 2021.

Bitcoin works through the collaboration of computers, each of which acts as a node in the peer-to-peer bitcoin network. Each node maintains an independent copy of a public distributed ledger of transactions, called a blockchain, without central oversight. Transactions are validated through the use of cryptography, preventing one person from spending another person's bitcoin, as long as the owner of the bitcoin keeps certain sensitive data secret.

Consensus between nodes about the content of the blockchain is achieved using a computationally intensive process based on proof of work, called mining, which is performed by purpose-built computers. Mining consumes large quantities of electricity and has been criticized for its environmental impact.

History

Background

Before bitcoin, several digital cash technologies were released, starting with David Chaum's ecash in the 1980s. The idea that solutions to computational puzzles could have some value was first proposed by cryptographers Cynthia Dwork and Moni Naor in 1992. The concept was independently rediscovered by Adam Back who developed Hashcash, a proof-of-work scheme for spam control in 1997. The first proposals for distributed digital scarcity-based cryptocurrencies came from cypherpunks Wei Dai (b-money) and Nick Szabo (bit gold) in 1998. In 2004, Hal Finney developed the first currency based on reusable proof of work. These various attempts were not successful: Chaum's concept required centralized control and no banks wanted to sign on, Hashcash had no protection against double-spending, while b-money and bit gold were not resistant to Sybil attacks. 

2008–2009: Creation

The domain name bitcoin.org was registered on 18 August 2008. On 31 October 2008, a link to a white paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Nakamoto's identity remains unknown. According to computer scientist Arvind Narayanan, all individual components of bitcoin originated in earlier academic literature. Nakamoto's innovation was their complex interplay resulting in the first decentralized, Sybil resistant, Byzantine fault tolerant digital cash system, that would eventually be referred to as the first blockchain. Nakamoto's paper was not peer reviewed and was initially ignored by academics, who argued that it could not work.

Nakamoto released bitcoin as open-source software. On 3 January 2009, the bitcoin network was created when Nakamoto mined the starting block of the chain, known as the genesis block. Embedded in this block was the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks", which is the date and headline of an issue of The Times newspaper. Nine days later, Hal Finney received the first bitcoin transaction: ten bitcoins from Nakamoto. Wei Dai and Nick Szabo were also early supporters. On May 22, 2010, the first known commercial transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John's pizzas for ₿10,000, in what would later be celebrated as "Bitcoin Pizza Day". Satoshi tasked Finnish developer and early Bitcoin contributor Martti Malmi [fi] with creating content for the bitcoin.org website.

Blockchain analysts estimate that Nakamoto had mined about one million bitcoins before disappearing in 2010 when he handed the network alert key and control of the code repository over to Gavin Andresen. Andresen later became lead developer at the Bitcoin Foundation, an organization founded in September 2012 to promote bitcoin.

After early "proof-of-concept" transactions, the first major users of bitcoin were black markets, such as the dark web Silk Road. During its 30 months of existence, beginning in February 2011, Silk Road exclusively accepted bitcoins as payment, transacting ₿9.9 million, worth about $214 million.

In March 2013, the US 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 services businesses, subject to registration and other legal obligations. In May 2013, US authorities seized the unregistered exchange Mt. Gox. In June 2013, the US Drug Enforcement Administration seized ₿11.02 from an individual attempting to use them to purchase illicit drugs. This marked the first time a government agency had seized bitcoins. The FBI seized about ₿30,000 in October 2013 from Silk Road, following the arrest of its founder Ross Ulbricht.

In December 2013, the People's Bank of China prohibited Chinese financial institutions from using bitcoin. After the announcement, the value of bitcoin dropped, and Baidu no longer accepted bitcoins for certain services. Buying real-world goods with any virtual currency had been illegal in China since at least 2009.

Research produced by the University of Cambridge estimated that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin. In August 2017, the SegWit software upgrade was activated. Segwit was intended to support the Lightning Network as well as improve scalability. SegWit opponents, who supported larger blocks as a scalability solution, forked to create Bitcoin Cash, one of many forks of bitcoin.

In December 2017, the first futures on bitcoin was introduced by the Chicago Mercantile Exchange (CME)^.

In February 2018, the price crashed after China imposed a complete ban on bitcoin trading. The percentage of bitcoin trading in the Chinese renminbi fell from over 90% in September 2017 to less than 1% in June 2018. During the same year, bitcoin prices were negatively affected by several hacks or thefts from cryptocurrency exchanges.

In 2020, some major companies and institutions started to acquire bitcoin: MicroStrategy invested $250 million in bitcoin as a treasury reserve asset, Square, Inc., $50 million, and MassMutual, $100 million. In November 2020, PayPal added support for bitcoin in the US.

In February 2021, bitcoin's market capitalization reached $1 trillion for the first time. In November 2021, the Taproot soft-fork upgrade was activated, adding support for Schnorr signatures, improved functionality of smart contracts and Lightning Network. Before, bitcoin only used a custom elliptic curve with the ECDSA algorithm to produce signatures. In September 2021, bitcoin became legal tender currency in El Salvador, alongside the US dollar. In October 2021, the first bitcoin futures exchange-traded fund (ETF), called BITO, from ProShares was approved by the SEC and listed on the CME.

In early 2022, during the Canadian trucker protests opposing COVID-19 vaccine mandates, organizers turned to bitcoin to receive donations after traditional financial platforms restricted access to funding. Proponents highlighted bitcoin's use as a tool for fundraising in situations where access to conventional financial systems may be restricted. In May and June 2022, the bitcoin price fell following the collapses of TerraUSD, a stablecoin,^[ and the Celsius Network, a cryptocurrency loan company.

In 2023, ordinals—non-fungible tokens (NFTs)—on bitcoin, went live. As of June 2023, River Financial estimated that bitcoin had 81.7 million users, about 1% of the global population.

In January 2024, the first 11 US spot bitcoin ETFs began trading, offering direct exposure to bitcoin for the first time on American stock exchanges. In December 2024, bitcoin price reached $100,000 for the first time, as US president-elect Donald Trump promised to make the US the "crypto capital of the planet" and to stockpile bitcoin. The same month, BlackRock, the world's largest asset manager, recommended investors to allocate up to 2% of their portfolio to bitcoin.

In January 2025, El Salvador amended its laws to no longer accept it as payment for taxes. In March 2025, President Trump signed an executive order to establish a strategic bitcoin reserve. Later that year, some U.S. states, such as Texas and New Hampshire also instituted strategic bitcoin reserves.