The world's first fully decentralized cryptographic financial network, Bitcoin, launched five years ago today. The years since then have been a wild ride. The currency's value has risen from nothing to billions of dollars, and millions have been invested in Bitcoin-related startups. Here's a brief synopsis of Bitcoin's most important milestones.
Jan. 3, 2009: Satoshi Nakamoto launches the Bitcoin network by creating the "genesis block," the first entry in Bitcoin's global transaction register. It includes the following text: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks."
Jan. 11: Some people immediately recognize that if Bitcoin catches on, its early users will get rich. Hal Finney estimates that if Bitcoin became the world's reserve currency, each Bitcoin could be worth as much as $10 million. "The possibility of generating coins today with a few cents of compute time may be quite a good bet," he says. Nakamoto agrees: "It might make sense just to get some in case it catches on." Finney mines bitcoins for a few days, but then he turns the program off because it makes his computer run too hot.
Jan. 12: The first Bitcoin transaction occurs, as Nakamoto sends some Bitcoins to Finney.
Aug. 15: Bitcoin is slowly attracting users. Tyler Gillies sends a note to the bitcoin-list e-mail list. "i just downloaded bitcoin, epic piece of software. the digital cash age has arrived." It was the only post to the mailing list that month.
Dec. 30: Growing interest in Bitcoin leads to the first increase in the difficulty of bitcoin-mining. The network automatically adjusts the difficulty of producing bitcoins so that a new batch is produced every 10 minutes, on average. By Dec. 30, 2009, there were enough miners that the network had to increase the difficulty to prevent bitcoins from being generated too quickly.
May 18, 2010: Laszlo Hanyecz is widely regarded as the first person to spend bitcoins in a "real" financial transaction. He offered 10,000 BTC for anyone who would order him a pizza. Someone did. The transaction valued each bitcoin at around $0.0025. Today, those 10,000 BTC would be worth around $8 million.
Mid-2010: Gavin Andressen creates the Bitcoin Faucet, a Web site that gives out free bitcoins. Early versions of the faucet gave out 5 BTC per visitor — worth around a penny in 2010, but worth about $4,000 today.
July 11: The technology news site Slashdot covers Bitcoin, generating a surge of interest in the cryptocurrency.
Nov. 10: After the U.S. government shuts off the transparency group WikiLeaks' access to funds, a bitcoin user suggests that WikiLeaks could use bitcoins. But others warn that getting involved with the controversial organization could bring it unwanted attention. "Bring it on," one Bitcoin enthusiast writes. "Let's encourage WikiLeaks to use Bitcoins and I'm willing to face any risk or fallout from that act." "No, don't 'bring it on,' " Nakamoto responds on Dec. 5. "The project needs to grow gradually so the software can be strengthened along the way."
Dec. 12: Nakamoto posts his last message on the Bitcoin Forum. Within a few months, he stops contributing to Bitcoin altogether and Andressen takes over the project as lead developer. We still don't know who Nakamoto is.
Feb. 9: Bitcoin price rises, reaching parity with the dollar.
Apr. 16: Jerry Brito writes what may be the first article about Bitcoin for a mainstream media organization. As the currency's price rises, it generates more media attention, which in turn fuels more demand for the currency.
Jun. 8: Bitcoin's price rises above $30 for the first time. Then the price collapses.
Jun. 13: A Bitcoin user claims that hackers stole 25,000 bitcoins from him, worth around $500,000 at the time. Those bitcoins would be worth around $20 million today. The incident raises awareness of the security risks associated with holding bitcoins.
Nov. 19: Bitcoin price bottoms out at $2. By the end of the year, it will rise to $5.
Sept. 27, 2012: The Bitcoin Foundation is created. The organization becomes the semi-official home for the cryptocurrency and begins providing a salary to lead Bitcoin developer Gavin Andressen.
Jan. 7, 2013: BitPay, a startup that helps merchants accept bitcoins, raises $510,000. It is one of the first Bitcoin startups to raise significant investment capital. It will raise another $2 million in May.
April 10: Bitcoin price soars to $266 (it started the year at $13.50). Then the currency implodes, plunging to $50 within a week.
May 1: Kashmir Hill embarks on a one-week project to live entirely on bitcoins. She succeeds, for the most part, but is unable to persuade her landlord to accept the currency.
Nov. 18: The Senate Committee on Homeland Security and Governmental Affairs holds the first congressional hearing on Bitcoin. That's followed two days later by a hearing before the Senate Banking Committee. The hearings are love fests, with federal regulators stressing the importance of not impeding Bitcoin innovation.
Nov. 29: Bitcoin's price hits an all-time high of $1,242.
Dec. 12: The Bitcoin startup Coinbase raises $25 million, the largest sum to date.