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History of Bitcoin, November 2008 - 2014

Pre-History.

Prior to the release of bitcoin there were a number of digital cash technologies starting with the issuer based ecash protocols of David Chaum and Stefan Brands. Adam Back developed hashcash, a proof-of-work scheme for spam control. The first proposals for distributed digital scarcity based cryptocurrencies were Wei Dai's b-money and Nick Szabo's bit gold. Hal Finney developed RPOW. Bit gold, b-money and RPOW all used hashcash as their proof-of-work algorithm. Independently and at around the same time Wei Dai proposed b-money and Nick Szabo proposed bit gold. Subsequently Hal Finney implemented and deployed RPOW a reusable form of hashcash based on IBM secure TPM hardware and remote attestation (centralized but with no issuer inflation risk). In the bit gold proposal which proposed a collectible market based mechanism for inflation control, Nick Szabo also investigated some additional enabling aspects including a Byzantine fault-tolerant asset registry to store and transfer the chained proof-of-work solutions. There has been much speculation as to the identity of Satoshi Nakamoto with suspects including Wei Dai, Hal Finney and accompanying denials. The possibility that Satoshi Nakamoto was a computer collective in the European financial sector has also been bruited.

 

Creation

In November 2008, a paper was posted on the internet under the name Satoshi Nakamoto titled bitcoin: A Peer-to-Peer Electronic Cash System. This paper detailed methods of using a peer-to-peer network to generate what was described as "a system for electronic transactions without relying on trust.

 

In January 2009, the bitcoin network came into existence with the release of the first open source bitcoin client and the issuance of the first bitcoins with Satoshi Nakamoto mining the first block of bitcoins ever (known as the "genesis block"), which had a reward of 50 bitcoins. The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John’s.

 

On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted.

Transactions weren't properly verified before they were included in the transaction log or "block chain" which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins.

 

On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol. This was the only major security flaw found and exploited in bitcoin's history.Growth Wikileaks and other organizations began to accept bitcoins for donations. The Electronic Frontier Foundation began, and then temporarily suspended, bitcoin acceptance, citing concerns about a lack of legal precedent about new currency systems, saying that they "generally don't endorse any type of product or service." The EFF's decision was changed in 17 May 2013.

 

On 22 March 2011 WeUseCoins published the first viral video which has had over 6.4 million views. On 23 December 2011, Douglas Feigelson of BitBills filed a patent application for "Creating And Using Digital Currency" with the United States Patent and Trademark Office, an action which was contested based on prior art in June 2013.

 

In January 2012, bitcoin was featured as the main subject within a fictionalized trial on the CBS legal drama The Good Wife in the third season episode "Bitcoin for Dummies". The host of CNBC's Mad Money, Jim Cramer, played himself in a courtroom scene where he testifies that he doesn't consider bitcoin a true currency, saying "There's no central bank to regulate it; it's digital and functions completely peer to peer.

 

In October 2012, BitPay reported having over 1,000 merchants accepting bitcoin under its payment processing service.

In February 2013 the bitcoin-based payment processor Coinbase reported selling US$1 million worth of bitcoins in a single month at over $22 per bitcoin. The Internet Archive announced that it was ready to accept donations as bitcoins and that it intends to give employees the option to receive portions of their salaries in bitcoin currency.

 

In March the bitcoin transaction log or "block chain" temporarily forked into two independent logs with differing rules on how transactions could be accepted. The Mt. Gox exchange briefly halted bitcoin deposits and the exchange rate briefly dipped by 23% to $37 as the event occurred before recovering to previous level of approximately $48 in the following hours. In the US, the Financial Crimes Enforcement Network (FinCEN) established regulatory guidelines for "decentralized virtual currencies" such as bitcoin, classifying American "bitcoin miners" who sell their generated bitcoins as Money Service Businesses (or MSBs), that may be subject to registration and other legal obligations. In April, payment processors BitInstant and Mt. Gox experienced processing delays due to insufficient capacity resulting in the bitcoin exchange rate dropping from $266 to $76 before returning to $160 within six hours. bitcoin gained greater recognition when services such as OkCupid and Foodler began accepting it for payment.

 

On 15 May 2013, the US authorities seized accounts associated with Mt. Gox after discovering that it had not registered as a money transmitter with FinCEN in the US.

 

On 23 June 2013, it was reported that the US Drug Enforcement Administration listed 11.02 bitcoins as a seized asset in a United States Department of Justice seizure notice pursuant to 21 U.S.C. § 881. It is the first time a government agency has claimed to have seized bitcoin.

 

In July 2013 a project began in Kenya linking bitcoin with M-Pesa, a popular mobile payments system, in an experiment designed to spur innovative payments in Africa. During the same month the Foreign Exchange Administration and Policy Department in Thailand stated that bitcoin lacks any legal framework and would therefore be illegal, which effectively banned trading on bitcoin exchanges in the country. According to Vitalik Buterin, a writer for Bitcoin Magazine, "bitcoin's fate in Thailand may give the electronic currency more credibility in some circles", but he was concerned it didn't bode well for bitcoin in China.

 

On 6 August 2013, Federal Judge Amos Mazzant of the Eastern District of Texas of the Fifth Circuit ruled that bitcoins are "a currency or a form of money" (specifically securities as defined by Federal Securities Laws), and as such were subject to the court's jurisdiction and Germany's Finance Ministry subsumed bitcoins under the term "unit of account"—a financial instrument—though not as e-money or a functional currency, a classification nonetheless having legal and tax implications.

 

In October 2013, the FBI seized roughly 26,000 BTC from website Silk Road during the arrest of alleged owner Ross William Ulbricht. Two companies, Robocoin and Bitcoiniacs launched the world's first bitcoin ATM on 29 October 2013 in Vancouver, BC, Canada, allowing clients to sell or purchase bitcoin currency at a downtown coffee shop.

 

In November 2013, the University of Nicosia announced that it would be accepting bitcoin as payment for tuition fees, with the university's chief financial officer calling it the "gold of tomorrow"

 

In December Overstock.com announced plans to accept bitcoin in the second half of 2014.

 

In January 2014, Zynga announced it was testing bitcoin for purchasing in-game assets in seven of its games. That same month, The D Las Vegas Casino Hotel and Golden Gate Hotel & Casino properties in downtown Las Vegas announced they would also begin accepting bitcoin, according to an article by USA Today. The article also stated the currency would be accepted in five locations, including the front desk and certain restaurants.

 

In September 2014 TeraExchange, LLC, received approval from the U.S.Commodity Futures Trading Commission "CFTC" to begin listing an over-the-counter swap product based on the price of a bitcoin. The CFTC swap product approval marks the first time a U.S. regulatory agency approved a bitcoin financial product.

Wallet Security

Secure your wallet at all times.. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can provide very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money.

 

Be careful of online services You should be wary of any service designed to store your money online. Many exchanges and online wallets suffered from security breaches in the past and such services generally still do not provide enough insurance and security to be used to store money like a bank. Accordingly, you might want to use other types of Bitcoin wallets. Otherwise, you should choose such services very carefully. Additionally, using two-factor authentication is recommended. Small amounts for everyday uses A Bitcoin wallet is like a wallet with cash. If you wouldn't keep a thousand dollars in your pocket, you might want to have the same consideration for your Bitcoin wallet.

 

In general, it is a good practice to keep only small amounts of bitcoins on your computer, mobile, or server for everyday uses and to keep the remaining part of your funds in a safer environment. Backup your wallet Stored in a safe place, a backup of your wallet can protect you against computer failures and many human mistakes. It can also allow you to recover your wallet after your mobile or computer was stolen if you keep your wallet encrypted. Backup your entire wallet Some wallets use many hidden private keys internally. If you only have a backup of the private keys for your visible Bitcoin addresses, you might not be able to recover a great part of your funds with your backup. Encrypt online backups Any backup that is stored online is highly vulnerable to theft. Even a computer that is connected to the Internet is vulnerable to malicious software. As such, encrypting any backup that is exposed to the network is a good security practice. Use many secure locations Single points of failure are bad for security. If your backup is not dependent of a single location, it is less likely that any bad event will prevent you to recover your wallet. You might also want to consider using different medias like USB keys, papers and CDs.

 

Make regular backups You need to backup your wallet on a regular basis to make sure that all recent Bitcoin change addresses and all new Bitcoin addresses you created are included in your backup. However, all applications will be soon using wallets that only need to be backed up once. Encrypt your wallet Encrypting your wallet or your smartphone allows you to set a password for anyone trying to withdraw any funds. This helps protect against thieves, though it cannot protect against keylogging hardware or software. Never forget your password You should make sure you never forget the password or your funds will be permanently lost. Unlike your bank, there are very limited password recovery options with Bitcoin. In fact, you should be able to remember your password even after many years without using it. In doubt, you might want to keep a paper copy of your password in a safe place like a vault. Use a strong password Any password that contains only letters or recognizable words can be considered very weak and easy to break.

 

A strong password must contain letters, numbers, punctuation marks and must be at least 16 characters long. The most secure passwords are those generated by programs designed specifically for that purpose. Strong passwords are usually harder to remember, so you should take care in memorizing it. Offline wallet for savings An offline wallet, also known as cold storage, provides the highest level of security for savings. It involves storing a wallet in a secured place that is not connected to the network. When done properly, it can offer a very good protection against computer vulnerabilities. Using an offline wallet in conjunction with backups and encryption is also a good practice. Here is an overview of some approaches. Offline transaction signing Hardware wallets Keep your software up to date Using the latest version of your Bitcoin software allows you to receive important stability and security fixes.

 

Updates can prevent problems of various severity, include new useful features and help keep your wallet safe. Installing updates for all other software on your computer or mobile is also important to keep your wallet environment safer. Multi-signature to protect against theft Bitcoin includes a multi-signature feature that allows a transaction to require multiple independent approvals to be spent. This can be used by an organization to give its members access to its treasury while only allowing a withdrawal if 3 of 5 members sign the transaction. Some web wallets also provide multi-signature wallets, allowing the user to keep control over their money while preventing a thief from stealing funds by compromising a single device or server. Think about your testament Your bitcoins can be lost forever if you don't have a backup plan for your peers and family. If the location of your wallets or your passwords are not known by anyone when you are gone, there is no hope that your funds will ever be recovered. Taking a bit of time on these matters can make a huge difference.

 

 

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