Despite its relative youth, the crypto industry has had its fair share of historical events. Let’s take a look at these events together.
1. The born of Bitcoin
Everything has begun with a single White Paper. The document was released on 31st October 2008. Trust me when I say that the Bitcoin white paper may be one of the most important white papers in the modern history. But it’s crucial to understand what Bitcoin really means.
It’s surprising how easy and simple Bitcoin white paper is. One may think it would be an enormous document with hundreds of pages and technical explanations, but the truth is, it’s a really short document. It has only 8 pages, and it describes everything from network to ecosystem.
In the abstract of this document, Satoshi Nakamoto describes a short summary of everything. The whole idea of Bitcoin and the blockchain is about being able to send and receive online payments across borders without the need for an intermediary.
It’s not the whole solution, because you still need a trusted third party who prevent double spending. A solution to the double-spending problem is using a peer to peer network. Basically, we have this connection between transactions and spending CPU cycles (cryptocurrency miners).
The curriculum of the Bitcoin White paper is:
3. Timestamp Server
7. Reclaiming Disk Space
8. Simplified Payment Verification
9. Combining And Splitting Value
In the last 11th chapter Satoshi Nakamoto describes some simulations and calculations of what happens if an attacker comes. You can check the Bitcoin whitepaper here.
On 3rd January 2009, Satoshi created the Bitcoin blockchain genesis block (block 0) which contained the first 50 bitcoins. Satoshi left the following message in the code of the first block: “The Times 03/Jan/2009 Chancellor on brink of the second bailout for banks”. The message references an article from the London Times with a date of 3rd January 2009 that focused on banks receiving massive bailouts from the British government. Nakamoto’s purpose is clear, to make banks obsolete.
2. First Bitcoin Transaction
For a long time, you couldn’t buy any goods with crypto. On 22nd May 2010, Laszlo Hanyecz made the first real-world purchase using bitcoins. He bought 2 PAPA JOHN’S PIZZAs for 10 000 Bitcoins or $25 at the time. Now, these pizzas would be worth around $100 000 000. May 22nd is since celebrated as Bitcoin Pizza Day! People have soon realized that you could buy more than just pizza with bitcoin.
3. Silk Road
The first online store to accept Bitcoin as payment was launched in February 2011. Imagine a place where anyone on the black market could buy and sell products and services. That place was the Silk Road. The Silk Road had become a sprawling black-market bazaar. The main idea was to create an online criminal marketplace outside the reach of law enforcement or government regulation. Within a few short months, The Silk Road became the most sophisticated criminal online marketplace. In such a short time, people distributed hundreds of kilos of drugs, hundreds of thousands of buyers and all were laundering millions of dollars. What was for sale?
– illegal drugs of every variety
– criminal services (anonymous bank accounts, counterfeit bills, firearms and ammo, stolen credit cards)
– digital goods (pirated software and media, hacked accounts, hacking tools)
– forgeries (fake licenses, passports, credit cards)
How did the Silk Road hide its users? Well, the users were using the Tor browser, which encrypts browsing, and all payments were made in bitcoin. The Silk Road also used a “tumbler” to frustrate tracking of bitcoin transactions through the blockchain.
How much money was involved?
– sales revenue over 9,5 million Bitcoins
– commission over 600 000 Bitcoins
– approximately 957 000 registered user accounts
– over $ 1 200 000 000
– approximately 1367 transactions per day at an average of $976
How did such a sophisticated black market get shut down? The FBI has located some of the Silk Road servers. On 23rd July 2013, the FBI obtained access to an image of the Silk Road server. The Silk Road was growing in popularity until the FBI discovered the identity of “DREAD PIRATE ROBERTS”, the alleged creator of the Silk Road, and the location of Silk Road servers. Then the FBI arrested Silk Road owner. Subsequently, the system was shut down.
4. Mt Gox
In July 2010, when Jed Mc Caleb (founder of Stellar and Ripple) read about Bitcoin on a tech website and decided that the Bitcoin community needed an exchange for trading Bitcoin. On July 18th, MT GOX launched its exchange which allowed users to trade Bitcoin against FIAT currencies. In 2011, McCaleb sold the site to French developer Mark Karpeles who was living in Japan at the time.
It wasn’t long before MT GOX began to run into problems. On 19th June 2011, a security breach of the MT GOX Bitcoin exchange caused the price of a Bitcoin to fraudulently drop to one cent on the exchange.
On February 24th, 2014, Mt Gox suspended all trading and in hours later its website went offline. Mt Gox then filed for bankruptcy protection in Tokyo Japan and stated they had lost over 850 000 BTC of its customers due to hackers.
A few years later the company found 200 000 bitcoins in an old company digital wallet. These funds are now being sold off to pay back old Mt Gox users who lost money. Mark Karpeles was arrested for falsifying the exchange computer system information as well as embezzlement. He was then released on bail but is not allowed to leave Japan. Crypto enthusiasts hate the name Mt Gox to this day.
5. Smart contracts and Ethereum
In 2011, a 17-year-old boy would realize a common problem in the crypto world. The boy would realize that if there could be one internet for everyone, there could be one blockchain for everyone to build applications on as well. The boy’s name is Vitalik Buterin, and in 2015 Ethereum was born.
One of the key technology innovations of the Ethereum blockchain is the development of what is called Smart contracts. Smart contracts are computer codes that are stored inside of a blockchain encode contractual agreements. Smart Contract is self-executing with the terms of the agreement or operation directly written in two lines of code stored and executed on the blockchain computer.
A contract, in the traditional sense, is a binding agreement between two or more parties to do or not do something. Each party must trust the other parties to fill in their side of the obligation. There are written or spoken agreements which are then intended to be enforced by the law. Our society is completely dependent upon third-party organizations to maintain and enforce these contractual agreements.
Smart contracts feature this kind of agreements (to act or not act) too but remove the need for the trusted third party between members to be involved in the contracts. This is because a smart contract is defined by the computer code and executed or enforced by the code automatically. Smart contract technology can remove the reliance on centralized systems and can enable people to create their own contractual agreements that can be automatically enforced and executed by the computer code. On top of it, smart contracts are decentralized. Smart contracts are enabling autonomy between members.