The story Bitcoin has to tell

Mysterious founder

On November 1, 2008, a man who called himself Satoshi Nakamoto posted a research report on a secret cryptography discussion group. The report described his new concept of electronic currency - Bitcoin was born! The old birds in the discussion group had never heard of him, and there was very little information about him. Even if there was any, it was obscure and even contradictory. Therefore, some people believed that "Satoshi Nakamoto" was a pseudonym.

Bitcoin uses a public distributed ledger to get rid of the constraints of third-party institutions, which Satoshi Nakamoto called the "regional chain". Users are willing to contribute CPU computing power and run a special software to become a "miner", which will form a network to jointly maintain the "regional chain". In the process, they will also generate new currency. Transactions also spread on this network, and computers running this software compete to crack irreversible cryptographic puzzles, which include several transaction data. The first "miner" who solves the puzzle will receive a 50 bitcoin reward, and the relevant transaction area will be added to the chain. As the number of "miners" increases, the difficulty of each puzzle also increases, which keeps the bitcoin production rate of each transaction area at about one bitcoin every 10 minutes. In addition, every time 210,000 areas are reached, the reward will be halved, from 50 bitcoins to 25, and then from 25 to 12.5, and so on. In this way, by 2140, Bitcoin will reach the predetermined upper limit of 21 million.

Early Bitcoin users: Small groups of open source software engineering. New England coder Gavin Andresen bought 10,000 bitcoins for $50 and created a website called "Bit Faucet" to give people bitcoins for no reason, just for fun. Florida programmer Lars Haunetz, who was the first person to use bitcoin in the real world, ordered two pizzas from Papa John's for 10,000 bitcoins. (He sent the bitcoins to a volunteer in England, who then received a credit card order from across the Atlantic.) A Massachusetts farmer named David Foster began accepting bitcoins for alpaca socks.

Red to purple

This spring, the price of Bitcoin experienced a "big explosion" growth, and the "Cryptocurrency" report by Forbes was one of the stimulants. From the beginning of April to the end of May, it rose from 86 cents to $8.89. Then, on June 1, it tripled in a week, reaching 1 Bitcoin to 27 US dollars. The market value of the entire Bitcoin Kingdom is about $130 million. A Tennessee man who calls himself Knight MB holds 371,000 Bitcoins, worth more than $10 million, making him the richest person in the Bitcoin Kingdom. The 10,000 Bitcoins that Haonetz spent on pizza are now worth $272,329. "I don't think it's a big deal. Those pizzas are really delicious." Haonetz said.

Bitcoin has received the kind of attention usually reserved for Silicon Valley IPOs and Apple product launches. On his online talk show, journalist and entrepreneur Jason Calacanis called it "a fundamental shift" and "the most interesting thing we've seen in the history of the tech business in the last 20 years." Well-known venture capitalist Fred Wilson believes the next big thing on the Internet is "social upheaval," and he cited four examples, including Bitcoin. Coder Andresen accepted an invitation from the CIA to come to its Langley, Virginia, headquarters to explain Bitcoin. Rick Rockvind, founder of the Swedish Pirate Bay, said he would convert all his savings into Bitcoin.

Bitcoin's future looks promising. Mark Saps, who bought parts from eBay and assembled a thermonuclear reactor in his Brooklyn loft, got his hands on an old ATM and converted it into a device for exchanging cash for Bitcoin. On the secret Internet (accessible only through the Tor anonymity software), the gray market Silk Road allows Bitcoin transactions; here, everything from painkillers to machine guns can be bought. A young Bitcoin user, a modern Plato, documents a cross-country self-driving trip in the form of a photo blog, using only Bitcoin during his trip. Coin enthusiasts in the Bitcoin Party began to yearn for recoverable Bitcoins and wondered how much the rare "Genesis Zone" Bitcoins were worth.

As prices soared, mining became more popular, competitors increased, and benefits began to decline. An "arms race" for computer configuration began, and miners rushed to find more advanced graphics cards for their computers. The first batch of miners used their existing computers, while a new wave of miners bought cheap computers with high-speed GPUs, cooled by noisy fans, and kept them running 24 hours a day to mine.

Recently, the global "Bernankes" have been continuously delivering good news, which has given the Bitcoin price the impetus to "run upward". In just half a month, the value of Bitcoin has soared from around $200 to over $900, but then fell to $378 in just one day...

Step down from the peak

In the midst of this euphoric atmosphere, the seeds of disaster began to grow. Bitcoin began with open source P2P software and the public interest spirit of liberal political philosophy, and also borrowed ideas from the Austrian School of Economics. But with real money at stake, the dramatic rise in the value of Bitcoin has brought a different reaction, with people viewing Bitcoin as a speculative commodity. Satoshi Nakamoto's previous concerns about the serious consequences of excessive media attention are finally becoming a reality. U.S. Senator Charles Schumer held a press conference and called on the Drug Enforcement Administration and the Department of Justice to shut down Silk Road, calling it "the most blatant online drug trafficking we have ever seen" and describing Bitcoin as "a form of online money laundering."

Even the purest technology has to survive in a dirty world. Bitcoin’s code and philosophy may be indestructible, but the bitcoins themselves — the unique digital units of currency — have to be stored somewhere. The default is to store bitcoins in a “wallet” on a user’s computer, which was sufficient when bitcoins were not valuable, easy to mine, and limited to technical people. But once they started to become valuable, a PC was no longer enough. Some users protect their bitcoins by creating multiple backups, encryption, USB flash drives, “safe” computers that are not connected to the Internet, cloud storage, and safe deposit boxes. But even some experienced bitcoiners have trouble protecting them. Stephen Thomas had three bitcoin backups, but accidentally deleted two of them. Unfortunately, he forgot the password to the third backup, which cost him 7,000 bitcoins, worth about $140,000 at the time.

As a result, a primitive, unregulated financial services industry has developed for this new currency. Unreliable online "storage services" promise to protect customers' digital assets and support the exchange of Bitcoin for US dollars or other currencies. Bitcoin itself is already very decentralized, but users are still blindly handing more Bitcoin to third parties for custody. Most of these third parties are online storefronts, and everyone does not know each other.

As the value of Bitcoin continued to rise, disturbing events began to plague Bitcoin users. In mid-June, a man calling himself Allinvain claimed that 25,000 Bitcoins had been stolen from his computer (to this day, no one has been able to verify whether this was true). About a week later, a hacker successfully broke into Mt. Gox, a Tokyo-based trading site that controls 90% of the world's Bitcoin transactions.

After the incident, market forces worked together to stop the hacker's plot. Mt. Gox stopped trading for a week and revoked the illegal transactions, but the loss was inevitable and the value of Bitcoin never returned to above $17. More importantly, the incident shook the confidence of the Bitcoin community and triggered a series of negative reports. In everyone's eyes, Bitcoin went from a future currency to a dystopian joke overnight.

More disasters followed. Poland's Bitomat, the world's third-largest exchange, unexpectedly found itself rewriting its entire bitcoin storage program. Security researchers found that viruses targeting bitcoin users were spreading: some were used to steal all the bitcoins a user had; others were used to grab bots and use them for free mining. By the summer, MyBitcoin, a long-established bitcoin storage service site, stopped responding to emails. After a month of silence, New York bitcoin evangelist Wagner finally admitted that the people who operated MyBitcoin had apparently swept away everyone's money and ran away. Wagner himself revealed that he had stored all 25,000 bitcoins on MyBitcoin, and also mobilized relatives and friends to use MyBitcoin. He also helped identify several suspects. The owner of MyBitcoin reappeared, claiming that his website had been hacked. "People have a misconception that virtual currency means you can trust random people you meet online," said Jeff Gajic, a core developer of Bitcoin.