The Age of

Cryptocurrencies
Post Catenam Laterum After the Blockchain

Section 3.2A History, 2008-2015

In this section we will look at some publicly known information about the history
Bitcoin and the development of other cryptos over time as a result of Bitcoins
creation.
In the next sections we will talk more about some of the subjects introduced in this
section. We will discuss people and companies, how the media and public have
received Bitcoin and other cryptocurrencies. We will expand on some introduced
directions for the future including R&D, BIPs, potential uses, experimental uses, as
well as some failed uses.

Inception
In August of 2008 the domain name bitcoin.org was registered anonymously through
anonymousspeech.com, which is the email SN used to communicate with others.
Around this time SN contacted others such as Adam Back and Wei Dai and Hal Finney
and suggested they read a pre-release to the white paper. No copies of this
pre-release are known to exist, the most likely candidate for keeping a copy was Hal
Finney who is claimed to have helped SN refine the software before launch.
The abstract of this pre-release does not include the word bitcoin but instead this
proposed white paper says Electronic Cash Without a Trusted Third Party. We may
never know if this was just so no one looked up bitcoin.org before it was ready or if SN
did not in fact have a name as of that time.

Get Ready, Get Set.

On October 31st, 2008 SN published the white paper on Bitcoin to a mailing list for
cryptography through metzdowd.com. He later says he created the code before
writing the white paper.
On November 9th the project is registered on SourceForge.net, a website used for
open source software at the time. Sourceforge has since garnered a poor
reputation, the Bitcoin code is currently hosted on GitHub. GitHub allows software
developers to work together with ease, very helpful on open source projects.
Bitcoin the idea was sown at that point. SN worked to finalize the software so it
could be released to the public.

January 3rd, 2009

The Genesis Block is mined. Satoshi would wait another 6 days until Jan 9th to
release the first version of the client, 0.1, to others.
At the time the world was in the midst of a financial recession caused by banking
practices. Citizens in countries around the world had their savings or holdings
diminished, and there was a general mistrust of banks for their actions.
People used mostly fiat currencies around the world although some of these would
face harsh devaluation in comparison to the USD.
Almost 2 billion people used the internet, and internet purchases were growing
with the use of payment processors like paypal and VISA. Cash, checks, wire
transfers, and bank money were widely used.

Why was Bitcoin created?

Included in the coinbase data for the Genesis block is the message, The Times
03/Jan/2009 Chancellor on brink of second bailout for banks.
This message by Satoshi Nakamoto / SN, the pseudonym of Bitcoins mysterious
creator could be interpreted as a jab at financial institutions with the hope the
creation of cryptocurrencies / cryptos similar events would never happen. But
message could simply be a timestamp.
We will only find unanswered and unanswerable questions by trying to understand
what SN was thinking. If he created btc for financial reasons or just to see if it were
possible we will probably never know.

Distribution
As a newly planted and fledging system Bitcoin had to gain traction before the
goals in the white paper could be realized.
The first transaction happened on the 9th between SN and Hal Finney. Hal was
one of if not the first person to publicly praise the benefits and novel features of
Bitcoin as a long time cryptographer and cypherpunk.
People reportedly downloaded the Bitcoin client, ran it for a while, and for the most
part stopped using it shortly afterwards. This provided a trickle of hashpower that
helped increase the security of the network.
For the first year Bitcoin remained very largely unknown to the world.

Early Operation
The blockchain left clues for researchers to follow. By analyzing data including
nonce and extra nonce fields, timestamps, coin use, and hashpower we can see
SNs effect on the network.
These analysies shows that SN contributed most of the mining power for the first
year. Different interpretations of that data lead to postulations such as the number
and type of computers he was using to mine.
This evidence suggests SN mines at least 300,000 coins and more likely closer to
1 million. No one knows if the Secret Keys to any of these coins still exist, no coins
known to have been mined by SN have even been moved or spent.

Early Activity
In October of 2009 the first exchange rate was established based on electricity
costs to run miners at the time, $1 in electricity could be used to mine roughly
1,300 btc. That is 0.000769 cents per btc.
A #IRC (internet relay chat channel) for bitcoin was set up.
The first update, a release to version 0.2 and the first difficulty increase happened
December 30th 2009 from 1 to around 1.1829. Within the next year the difficulty
would rise to over 1,000.
Bitcoin grew slowly mostly through word of mouth and largely among
computerized professions such as programmers.

Early Use
Pizza day is the Bitcoin Holiday to honor the first public bitcoin transaction as a
currency. On May 22, 2010 a programmer in Florida named Laszlo Hanyecz
posted that he had paid a fellow Bitcoin-Talk forum user 10,000 bitcoins for 2
Papa Johns pizzas to be delivered to him. The pizza buyer lived in the UK paid for
them with his credit card.
In July of 2010 Slashdot mentioned bitcoin in an article and brought in a number of
new users.
In August a vulnerability in the Bitcoin code caused someone to transfer 184
Billion btc to their address, the chain had to be 'rolled back' manually and is the
only instance of a 'hacking' of the blockchain. The potential exploit had been
announced just days before and a fix or patch was not ready at the time of the
'attack'.

2010 events
The launch of Mt. Gox which was the first online exchange where people could
buy btc for fiat. The first mining pool, Slush, happened in the summer of 2010.
GPU mining, used a GPU card instead of a CPU to perform Bitcoins POW
SHA-256, GPU mining was more efficient than mining with a normal computer. SN
wanted to limit GPU mining as long as he could to make the system more
accessible for newcomers.
The first recorded escrow tx occurred. The market cap or total value of all 21
million btc times the exchange rate (price) rose above $1 million.
The first mobile tx using occurred using bitcoind.

The Only Known Hack to Ever Occur

August 6, 2010. A vulnerability in the bitcoin protocol that didnt properly verify
large numbers was publicly found.
On 15 August, the vulnerability was exploited. It was found that block 74638
contained a transaction that created 184,467,440,737.09551616 bitcoin.
A network alert was sent:
*** WARNING *** We are investigating a problem. DO NOT TRUST ANY
TRANSACTIONS THAT HAPPENED AFTER 15.08.2010 17:05 UTC (block 74638)
until the issue is resolved.

Roughly 5 hours after discovery a new client was published and the code was
hard forked and the transactions reverted.
This was the only major security flaw found and exploited in Bitcoin's history.

Wikileaks
Julian Assanges website that allows whistleblowers to bring attention to illegal
acts without fear of repercussions was suddenly in media focus.
In December 2010 payment processors began to deny service to WikiLeaks. It
was suggested they accept btc as a means of circumventing this, however SN
responded that, The project needs to grow gradually so the software can be
strengthened along the way.
Six days later he made the a post saying, It would have been nice to get this
attention in any other context. WikiLeaks has kicked the hornets nest, and the
swarm is headed towards us

Departed Creator
For a while SN was active on forums and responding to emails, but in 2010 he
gave keys to the source code at SourgeForge and the alert keys for the Bitcoin
protocol to Gavin Andresen. His activity waned, not responding to emails from his
contacts, until he totally disappeared by the end of 2010.
Satoshi shared many of his thoughts but left before many questions could be
asked. His emails, forum posts, and other known correspondence can be found
online at https://nakamotoinstitute.org.
His ideas and vision was shared by many in the community but as the community
has grown not everyone shares the same vision anymore, leading to divides.

In 2011
A quarter / 25% of all bitcoins to ever exist had already been mined.
In February Silk road opened, it was the first online marketplace that used only btc
as currency though it was largely used to buy and sell drugs online.
Mt. Gox was sold and later suffered a security breach when an admin account was
used to leak account info and sell enough btc to temporarily push the price on the
site down from over $17 to $0.01.
A price bubble where the average price of a bitcoin went from nearly $32/btc to
around $10.

By Summer 2011
In Spring of 2011 Gavin Andresen accepted an invitation to the CIA headquarters
to give a presentation on Bitcoin at an emerging technologies conference for the
US intelligence community. Gavin denies any malice but some members of the
community dont believe him.
The difficulty passed 10,000 then 100,000 (mHash/sec).
The exchange rate for 1 bitcoin reached then surpassed parity with both the USD
and euro by the end of the summer in 2011. Hal Finney would later discuss how
wonderful it was his money value tripled when it hit $3/btc.

Litecoin
Litecoin or the Litecoin Project, created by Charles Lee was announced ahead of
time with support from the community on October 13th, 2011.
It is a fork of the Bitcoin code and blockchain. Largely identical to the Bitcoin
protocol, Litecoin incorporates some changes some developers thought would be
a good idea.
The Litecoin network creates a new block of coins every 2.5 minutes, 4 times a
often as btc. Because of this the most Ltc that will ever exist is ~84 million.
Litecoin also uses a different POW based on an attempt to make an
ASIC-resistant crypto.

By End of 2011
The appearance of a 'mystery miner' when a much larger than normal hashrate
was seen for brief intervals.
The Casascius Coins which were real copper or silver coins inscribed with a SK
under a tamperproof seal with some amount of btc on them were first sold. These
coins would later be sold unfunded due to US regulations.
There were difficulty drops, and coin losses by businesses of over 160,000 coins;
nearly 50,000 btc was lost by one business alone.
The largest tx fee of 171 btc was paid, the Satoshi Dice gambling website was
flooding the blockchain with txs drawing the ire of some in the community, and the
exchange company Coinbase was launched.

Discussion on SNs Choices

Bitcoin uses the elliptical curve secp256k1, at the time of Bitcoins creation the
NIST recommended a different curve, P-256 which was widely used.
Aside from btc the use of secp256k1 was almost nonexistent. There were even
calls to change Bitcoin's curve since secp256k1 was so strange.
Years later many of the curve recommended by the NIST were found to have
been constructed in a very suspicious way and have an uncomfortably high
likelihood of containing a backdoor.
How did SN choose secp256k1 and why? We have no good answers.

Choices Made by Community

In 2012 transaction use was growing and at the time there were only txs with the
key pairs. Two proposals were made to make more standard but more complex
txs.
OP_EVAL and P2SH were proposed, the miners included a script in their
coinbase data to vote for their choice. P2SH was the winner and was
implemented
Around the same time the Bitcoin Foundation was founded, it aimed to help
promote and educate the public on Bitcoin. Funded by btc users it has since fallen
into disgrace, many members have left in protest and they have squandered away
all their funding.

Notable Events 2012 and Early 2013

In 2012 the first back to back difficulty decrease happened, the first halving day occurred on
November 28th, and the FBI put out a report that mentioned bitcoins potential use for illicit
activities.
February 2013 saw a new all time high on the exchange rate, surpassing the old high of 31.90. The
price began fluctuating more heavily to nearly $75 in March then 100, then 266, then back towards
$60.
In March of 2013 an upgrade of the Core client began to fork the blockchain as it was incompatible
with earlier versions. An alert was issued and the fix was decided to be downgrading all clients
back to v0.7 from the failed upgrade of v0.8.
By summer of 2013 some online casinos would arise around or take bitcoin, the first bitcoin ATMs
were unveiled, a huge block with 1322 txs was made, the Winklevoss Bitcoin Trust is filed with the
SEC, and an exchange got hacked of some hundred of btc.

The Silk Road Marketplace Come to an End

And Ross Ulbricht, the administrator, is arrested in a public library in California.
Accused of being the mastermind who used the pseudonym Dread Pirate
Roberts he faced money laundering, hacking, drug trafficking, and attempted
murder charges.
The FBI said over ten million btc in volume had moved through the site, and that
the overall profit silk road generated was in excess of 600,000 btc. Of which
26,000 were seized from the site and another 144,00 from Ulbricht.
Critics of the arrest argue the site made the activity of buying illicit substances
much safer for people since they were going to do it anyway.

Discovery Methods
An IRS agent working with the FBI found a internet posting from 2011 about a new
website to buy drugs. Months later the same user who made the posting made a
post looking for IT help, the email address to contact was rossulbricht@gmail.
The FBI got the server records of the VPN that was used for those postings and
saw that DPR had logged in from a cafe where Ross Ulbricht often logged in.
The FBI claimed they got the IP address of SRs server from data leaked from a
CAPTCHA, but security researchers think differently. Once they located the server
agents flew to Iceland and had the data copied.
The government had succeeded in getting an undercover agent inside of the silk
road by mid 2013, he met Ross by the Fall. On October 1st a sting was carried out
at a library in San Francisco.

Arrest of Ross Ulbricht

Agents followed him and waited until their contact showed he was online on the
site as they needed his administrator password input to get the files they wanted.
They wanted the undercover agent to be talking to him to ensure his account was
logged in, their agents battery began to run low at that time.
When Ulbricht stopped in the Sci-Fi section the agent asked him a question he
would have to log into the website to answer.
Once the agents thought Ulbricht was logged in they had two agents who
pretended to be a couple having a fight next to him. When he looked at the
distraction other agents tackled him and took his computer; before he could shut
his computer which would have encrypted the files.

DarkNet Markets or DNM

Silk Road used TOR to hide the location of the user from prying eyes, and bitcoin
as currency outside the control of a country. The administrators that werent US
agents were caught but until that the venture was widely successful.
In its absence other DNMs arose to fill the gap quickly.
The operators of some of these markets were arrested but many were exit scams
where the admins simply took all the users btc after letting the site get popular.
Someone known as Variety Jones who claimed to be the mentor to Ross Ulbricht
would years later tell a story about a FBI agent who coerced and tricked operators
of these markets for his own profit.

The Great Price Rise

Throughout 2013 the exchange rate increased ten fold, many people will make
conjecture as to what caused what but we may never be able to know for sure why
these things happened, we only know they did.
The bitcoin price, after dropping to around $60 quickly got back to $100/btc,
around the fall it began to rise even more and high a new all time high on
November 6th of $269.
This wasn't the end, the price continued to rocket upwards to $1200 in some
exchanges. Why did this happen? Was adoption here and btc taking off? Alas that
was not the case and many people lost a significant amount of money or bitcoin
with no real recourse.

Mt.Gox
Magic the Gathering online exchange. At least that's how it started. Magic: the
Gathering is a card game using special cards, Jed McCaleb thought players of the
game should have a way to trade cards easier and online much like stocks and
created the site in 2007, it fell into disuse until July 2010 when he repurposed it to
trade bitcoins between people. He sold the site to Mark Karpels
in late winter 2011 citing lack of time to develop it to its potential.
Mt.Gox lost almost all its bitcoins due to theft that none of the customers were
aware of, they continued to trade but as the price rose they began restricting fiat
withdrawals until they only accepted deposits. In early 2014 Mt. Gox collapsed
completely with losses of nearly 750,000 btc.

Writing on the Wall

June 19, 2011 Mt. Gox security was breached and someone acquired a large number of bitcoins and put
them on the market to sell at any price pushing the price down to 1 cent. Mt. Gox later showed they had
control of some coins they made a public movement of coins in Block number 132749 with a tx of
424,242.42424242 btc.
By 2013 Gox was conducting 70% of all btc trades.
Around May 2013 Mt. Gox had roughly $5 million seized from their bank accounts by the US Gov citing
failure to register as a money transmitting business.
Mt. Gox suspended withdrawals in US dollars on June 20, and resumed them on July 4 announced their
trades were fully resumed.
On August 5, 2013, Mt. Gox announced that they incurred "significant losses" due to crediting deposits
which had not fully cleared and that new deposits would no longer be credited until the funds transfer was
fully completed.

Gox Down
There were reports of increased restrictions with some customers in Spring.
Forum discussion of withdrawal problems increased in autumn. One study found
that over 60% of users could deposit but couldnt withdraw fiat. Some users were
able to get btc out instead.
On 24 February 2014, Mt. Gox suspended all trading, and hours later its website
went offline returning a blank page.
An alleged leaked internal crisis management document claimed that the company
was insolvent, after losing 744,408 bitcoins in a theft which went undetected for
years, about 3.5% of all btc ever. Nearly $500 million at peak 2013 prices.

What Happened?
A leaked a known to be tampered with logs are the best source of knowledge we have. They
show bots with admin access, named by the researchers as Marcus & Willy were
performing trades at a fairly constant rate. Both has unusually high ID numbers and Willys
country code was ???.
Blockchain analyses show that funds were slowly leaked out of Goxs hot wallet and that
Gox could have been out of coins by September 2013.
Mark Karpels the owner and administrator of Mt. Gox found ~200,000 btc after Gox was
shutdown back.
There are many theories for how exactly this all happened, especially after it has come to
light that at least two federal agents worked together to intimidate companies, steal bitcoins,
and sell stolen btc them for profit.

Aftermath
A lawsuit was filed against Karpels by the users who lost money in an attempt to
recoup it which is still ongoing today
In August of 2015 Karpels was arrested in Japan. The authorities there have
stated that Gox was not solvent nearly 6 months before they went offline and they
are charging him with fraud of an electronic record and allegations of a loss of
customer funds equaling nearly 9 million USD. After 3 week without charges he
was briefly dismissed before another warrant was served on him related to the
misappropriation of $2.6 million in customer funds.
Another consequence is that there are many more exchanges nowadays then
there were in 2013. We also hope people learn to not store their btc online.

2014 Increased Pace and Amount of Activity

A mining pool gained a large amount of the hashing power, nearly 50% which
worried many about the possibility of a 51% attack, though only 30% can enable
malicious action. Miners soon split their hashing power and moved to new pools.
The first ~30,000 btc seized from the Silk Road were auctioned by the US
Marshalls Office and won by Tim Drapper a VC capitalist.
In the fall of 2014 someone put a sell order for nearly 30,000 btc on the exchange
bitstamp, worth around $9 million at the time. The unknown orderer was dubbed
the bearwhale by the community. This event has little effect on the price but
some suspected it intended to have a larger negative one.

Satoshis Email Hacked

In Fall of 2014 the email address satoshin@gmx.com was used, Those that
received the emails didnt believe Satoshi was sending the messages.
Shortly later a message with SNs account on the P2PFoundation website. It read,
"Dear Satoshi. Your dox, passwords and IP addresses are being sold on the
darknet. Apparently you didn't configure Tor properly and your IP leaked when you
used your email account sometime in 2010. You are not safe. You need to get out
of where you are as soon as possible before these people harm you. Thank you
for inventing bitcoin."

Dogecoin
The great price rise of 2013 brought cryptos to the minds of many for the first time,
Bitcoin was the first crypto but by this time it wasnt the only and a new more user
friendly coin based on a super shibe meme of the time gained popularity. It was
easy to mine and the community had a welcoming and easygoing vibe.
The 'Doge' internet meme featured a Shiba Inu dog that had phrases overlaid in
comic-sans such as, much wow or such coin.
The internet community behind Dogecoin sent the Jamaican Bobsled team to the
winter Olympics in Russia.
Dogecoin continues to operate but has dwindled greatly in use.

Neo & Bee

What was described as an aggressively marketed opening, billboards and the like
were created to advertise for Neo & Bee, a 'virtual entity' using about 4,440 btc of
the 9,400 it started with.
Nearly 6 months later the CEO claimed they had 5,000 btc but the next day said
they really only had about 140. He then claimed he would sell his cars to cover the
employees salary, but instead disappeared.
The employees quit and claim their ex-boss kept all customer funds and left huge
debts. You can read their stories online.

Sidechains by Blockstream
A new company called Blockstream was founded by Adam Back of hashcash fame and
employing a number of people who have worked on Bitcoin.
In October 2014 they released a whitepaper for Sidechains. The paper detailed the idea to
link other cryptocurrencies to bitcoin. The paper only announced the idea and that the
methods of performing this action would have to be thought up later. Before fully pegged
sidechains would be ready federated ones would be where a TTP exchanged the coins or
oversaw the movement.
New features could be tried in other cryptos before being implemented in Bitcoin, added
value and potential value growth. Many potential ideas could work because of sidechains.
The company would later be accused of being behind the inaction in regards to raising the
maximum block size. So they could force people to use their sidechains. Unsavory
contributors and members would be shown as evidence.

A Source of Computer Security is Lost

In 2014, what was widely regarded as the easiest and safest way for average
citizen to encrypt their data, a program called TrueCrypt that was used by many
announced it would be discontinued.
The TC posting recommended a software many considered to be insecure, which
was proof enough of malicious intent behind the action for many.
The software enabled a more secure way to store SKs on a computer without fear
of hackers.
Still operable and functioning software can be found online, as well other paid
businesses have arisen to fulfill the purpose.

More 2014 News

CEO of website reddit.com hired someone to work on a cryptocurrency to share
profits with users. The CEO later left the company and the engineer hired for the
task was dismissed.
The St. Petersburg Bitcoin Bowl was a NFL game sponsored in December 2014
sponsored by btc payment provider BitPay. It reached 3.3 million people on TV
and included three commercials by the sponsor BitPay. BitPay originally signed a
deal for sponsorship for three years, but this was canceled in early 2015. Not long
after they had to layoff nine employees. Some in the community thought the stable
bitcoin price was at fault while others said poor money management in the
company itself was to blame.