Bitcoin’s rollercoaster ride

A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France in this picture released May 3, 2016. — Reuters pic
A Bitcoin (virtual currency) paper wallet with QR codes and a coin are seen in an illustration picture taken at La Maison du Bitcoin in Paris, France in this picture released May 3, 2016. — Reuters pic

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PARIS, Feb 8 — Virtual currency bitcoin — which hit a record near US$45,000 (RM182,947) today — morphed from an academic paper to one of the world’s most closely-watched crypto currencies. 

Here is a look at its tumultuous rise, fall and rise again.

Mysterious beginnings

As the world reels from the 2008 financial crash, a nine-page paper called “Bitcoin: A Peer-to-Peer Electronic Cash System” is published on October 31 by someone called Satoshi Nakamoto.

The mysterious Nakamoto — whose real identity still remains a mystery — proposes creating a system where payments can be sent “directly from one party to another without going through a financial institution”.

It is a master plan for an alternative to currency not controlled by any central bank and that could be accessed by anyone.

‘Genesis block’

The first 50 bitcoins were created on January 3, 2009.

These were bunched into a single unit called a block, the first of which was called the “genesis block”.

From then on, every new block was attached to the one that came before it, creating what is today commonly known as a block chain.

The first transaction between two accounts occurred nine days later, when Satoshi Nakamoto sent 10 bitcoins to computer scientist Hal Finney as a test.

0.00076 dollars

Bitcoin’s first value was deduced on October 5, 2009 from its cost of production — 0.076 US cents.

At the time, the best way to get bitcoins was to “mine” them by using computers to solve difficult puzzles that release bitcoins from a block.

The electricity costs were offset by bitcoin’s real-world value.

The puzzles get more difficult with the rise in the number of users, making their mining progressively more expensive.

The US$100 million pizza

On May 22, 2010, a virtual currency developer in Florida got a delivery man to accept 10,000 bitcoins for two pizzas.

It was the first known bitcoin payment, worth about US$41 at the time. Those bitcoins are now worth in excess of US$200 million.

May 22 is now known as “Bitcoin Pizza Day”.

Nakomoto vanishes

Nakamoto announced his withdrawal from the project on December 12, 2010, ceasing all bitcoin operations four months later.

The identity of Nakamoto and the actual number of bitcoins remains a mystery.

Nakamoto briefly reappeared in an internet chat room in 2014, denying a Newsweek magazine article that claimed to unmask his identity.

Bankruptcy

After malfunctioning for more than two weeks, the main bitcoin exchange — based in Tokyo and known as Mt Gox — filed for bankruptcy protection in February 2014.

Accounting for nearly 80 per cent of all bitcoin operations, the exchange said it had been hacked, losing around US$477 million in crypto currencies.

Its former chief, a Frenchman named Mark Karpeles, was hit with a two-and-a-half-year suspended sentence from a Tokyo court in March 2019 for tampering with electronic data. He was later acquitted on charges of embezzling millions from client accounts.

Breakthrough

The currency hit global headlines in 2017 after soaring in value from less than US$1,000 in January to US$19,511 on December 18.

The virtual bubble burst in the subsequent days, with bitcoin’s value then fluctuating wildly, dropping below US$5,000 by October the next year.

Traders had been hoping to get a big boost with the approval by the US Securities and Exchange Commission (SEC) of a bitcoin exchange-traded fund (ETF).

But the SEC has thus far baulked out of concerns about fraud, and has clamped down on initial coin offerings (ICO) which it considers to be scams.

Record

Bitcoin shot up in October after US online payments provider PayPal announced that it would allow account holders to use crypto currency.

It soared to new heights today after electric carmaker Tesla announced that it had purchased US$1.5 billion of bitcoin and would soon allow customers to pay for vehicles with it.

The US Federal Reserve and European Central Bank are holding consultations on the possible launch of their own virtual currencies, while China’s central bank started experimenting with digital payments in four cities in April. — AFP

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