Bitcoin: The Future of the Virtual Currency, Cyberattacks and Security (2014)



Bitcoin was invented by Satoshi Nakamoto,[note 6] who published his invention on 31 October 2008 in a research paper called “Bitcoin: A Peer-to-Peer Electronic Cash system”.[12] It was implemented as open source code and released in January 2009. Bitcoin is often called the first cryptocurrency[19] although prior proposals existed.[note 8] Bitcoin is more correctly described as the first decentralized digital currency.[14][22]

One of the first supporters, adopters, contributor to bitcoin and receiver of the first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received 10 bitcoins from Nakamoto in the world’s first bitcoin transaction.[72][73]

Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold.[74]

In 2010, an exploit in an early bitcoin client was found that allowed large numbers of bitcoins to be created.[75] The artificially created bitcoins were removed when another chain overtook the bad chain.[76]

Based on bitcoin’s open source code, other cryptocurrencies started to emerge in 2011.[23]

In March 2013, a technical glitch caused a fork in the block chain, with one half of the network adding blocks to one version of the chain and the other half adding to another. 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 temporary halt to transactions, sparking a sharp sell-off. Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software.[77]

In 2013 some mainstream websites began accepting bitcoins. WordPress had started in November 2012,[78] followed by OKCupid in April 2013,[79] Atomic Mall in November 2013,[80] TigerDirect[81] and Overstock.com in January 2014,[82] Expedia in June 2014,[83] Newegg and Dell in July 2014,[84] and Microsoft in December 2014.[85][note 13] Certain non-profit or advocacy groups such as the Electronic Frontier Foundation accept bitcoin donations.[87] (The organization started accepting bitcoins in January 2011,[88] stopped accepting them in June 2011,[89] and began again in May 2013.[87])

In May 2013, the Department of Homeland Security seized assets belonging to the Mt. Gox exchange.[90] The U.S. Federal Bureau of Investigation (FBI) shut down the Silk Road website in October 2013.[91]

In October 2013, Chinese internet giant Baidu had allowed clients of website security services to pay with bitcoins.[92] 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.[93] On 19 November 2013, the value of a bitcoin on the Mt. Gox exchange soared to a peak of US$900 after a United States Senate committee hearing was told by the FBI that virtual currencies are a legitimate financial service.[94] On the same day, one bitcoin traded for over RMB¥6780 (US$1,100) in China.[95] On 5 December 2013, the People’s Bank of China prohibited Chinese financial institutions from using bitcoins.[96] After the announcement, the value of bitcoins dropped,[97] and Baidu no longer accepted bitcoins for certain services.[98] Buying real-world goods with any virtual currency has been illegal in China since at least 2009.[99]

The first bitcoin ATM was installed in October 2013 in Vancouver, British Columbia, Canada.

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