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Bitcoin will soon be celebrating its sixteenth birthday. The mystery behind who invented Bitcoin is still, well, a mystery. Bitcoin was invented in January 2009 by Satoshi Nakamoto, a pseudonym for the individual or group responsible for designing bothbitcoin (BTC), blockchain technology, and thus, the Bitcoin blockchain. Upon its launch, Nakamoto released a nine-page white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System, detailing a system for electronic cash transactions that does not rely on trust. Instead, these transactions would use cryptographic proof to enable direct, pee-to-peer transactions between users, eliminating the need for intermediaries such as banks and other financial institutions. The paper laid the groundwork for what is today known as decentralized finance, or DeFi, upon which thousands of other blockchain networks and cryptocurrencies have been based.
In this article, we take a closer look at who invented Bitcoin, the inspiration behind why Bitcoin was created, its principles, and how the crypto industry has evolved over the last sixteen years.
Why was Bitcoin invented?
The question of when was Bitcoin invented naturally prompts us to explore the broader context and ask why Bitcoin was invented in the first place. Bitcoin is often thought to have been created as a knee-jerk reaction to the 2008 financial crisis. This was indeed the proverbial straw that broke the camel’s back. But the invention of Bitcoin —both the blockchain and cryptocurrency— were a response to the general limitations and weaknesses of the traditional financial system, particularly when it comes to digital transactions.
In contrast to these traditional systems, Bitcoin aimed to offer a decentralized system, one that is fully transparent and less dependent on banks. It aimed to empower individuals with greater control over their own money by offering a type of “electronic cash”, i.e. cryptocurrency, that would function independently of any government or central authority.
In the words of Nakamoto as stated by the original white paper, Bitcoin was invented to address the “inherent weaknesses of the trust-based model” in digital finance. The traditional system relies on financial institutions as intermediaries, which adds cost, increases transaction times, and reduces privacy. On the other hand, Bitcoin’s peer-to-peer network allows transactions to be sent “directly from one party to another without going through a financial institution”. Nakamoto also explained how they would eliminate the risk of “double-spending” any single bitcoin by introducing a decentralized nature, thus providing a secure digital currency that facilitates private, transparent, low-cost transactions.
How does Bitcoin retain its value?
Nakamoto’s white paper also set out how bitcoin —the currency— would retain its value. The market factors that would drive the value of Bitcoin and other cryptocurrencies could not have been known sixteen years ago. But Nakamoto did establish the foundations for retaining the cryptocurrency’s value by creating scarcity, security, and utility through a self-sustaining network. The Bitcoin white paper explains how Bitcoin’s value retention is supported by its “limited supply” of 21 million coins, which incentivizes scarcity, in a similar way to precious metals such as gold.
This figure of 21 million is ensured through a process known as halving, which literally halves the reward miners are given through block creation and transaction fees every 4 years, also helping to secure and maintain the system. Nakamoto writes: “The steady addition of a constant amount of new coins is analogous to gold miners expending resources to add gold to circulation”, suggesting that “once a predetermined number of coins have entered circulation, the incentive can transition entirely to transaction fees”.
Bitcoin’s evolution since 2009
The early days of Bitcoin were quiet. The news of Bitcoin’s journey continued with technological advancements like the Lightning Network, aiming to improve transaction scalability, and sustained interest as a hedge against inflation, with institutional backing from companies like MicroStrategy and Teslacirculated primarily among tech and programming enthusiasts, who, despite their numbers, were fascinated by the idea of decentralized finance. The first notable transaction occurred on 22 May 2010, Laszlo Hanyecz made the first real-world transaction by buying two pizzas in Jacksonville, Florida, for 10,000 BTC —at today’s value, these pizzas would have come to a grand total of around $689,330,000. Bitcoin first passed the $1 mark in 2011, prompting more widespread attention from the media.
By the late 2010s, Bitcoin had grown far beyond its initial grassroots community and evolved into a considerate financial asset in 2017 as its value surged to nearly $20,000. This uptick in growth led to some regulatory scrutiny and debates among Bitcoin users regarding scalability, which resulted in the creation of a new cryptocurrency known as Bitcoin Cash (BCH), able to handle larger transaction volumes. Bitcoin’s continued to incorporate technological advancements like the Lightning Network, which aimed to improve transaction scalability, and institutional backing from companies like MicroStrategy and Tesla. Bitcoin surged to a new all-time-high (ALT) of $73,750 in March 2024, following the approval of 11 spot Bitcoin ETFs, solidifying institutional interest and investment in the cryptocurrency.
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