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May 9, 2022

#004: Bitcoin (Part 2): The Evolution

Today we are continuing on our journey from the previous episode towards understanding the evolution of Bitcoin.

In this second part of the episode about Bitcoin, we talk about the events that led to the emergence of Bitcoin, the roller coaster journey it has had so far, and the hurdles it has already crossed on its way towards being crowned as Digital Gold.

Adam Back: @adam3us
Martti Malmi: @marttimalmi
Hal Finney: @halfin
Gavin Andresen: @gavinandresen
Cameron: @cameron
Tyler Winklevoss: @tyler

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Episode 4: Bitcoin (Part 2): The Evolution

What’s going on guys! Welcome to this new episode of The MetaRoy Podcast. This is the show that makes learning about crypto simple and fun. 

I am your host Roy and every week on this show we talk in detail about one aspect of the crypto world. Today we are continuing on our journey from the previous episode towards understanding the story of Bitcoin so if you have missed Part 1, I urge you to check that out to get some more background into Bitcoin.

Also, if you’re new to this show, follow me on Apple Podcasts, Spotify, or whichever platform you’re listening to me on. In return I promise you to have your back in anything and everything the world of crypto has to offer.

Before we start though, just a quick disclaimer. I am not a financial advisor and none of the following content is financial advice. Please do your own due diligence before making any moves in the crypto space. 

Also the world of crypto moves at lightspeed. So what I'm about to tell you is my view of the world, and I know many of you are going to listen to this in the future. And much of what I've mentioned here might be different by the time you hear it, but that's okay.

Are you strapped in for a fun ride on the Bitcoin Roller Coaster? Let’s go!

The Advent of Bitcoin

Last time around, we were talking about the CypherPunks and how some early attempts such as Digicash, Hashcash, BMoney, BitGold etc. had tried and failed to create a reliable and secure digital currency.

So, yes, Bitcoin first appeared in 2008, three years after Bit Gold, which was 2005. But before Bitcoin appeared, something else happened. The 2008 crash. Basically, 2008, for anyone who either wasn't paying attention or wasn't born, perhaps 2008, basically, the whole financial system almost went down the toilet. 

It was chaos and we're still dealing with the fallout from it. But it's pretty easy to know where most of the blame for the financial crash lies. The blame for the financial crash can be largely put at the feet of the banks. 

The Crash of 2008

So it's really important to consider Bitcoin in the context of what happened in 2008 and also what the cypherpunks had been talking about long before that, the fact that we couldn't trust these large entities. The computer age had ushered in this whole new era, and there were massive risks associated with it. And these risks basically came to pass in 2008 because the institutions that were supposedly looking after our money have basically been gambling with it instead. And so you couldn't trust them anymore. And especially when they were bailed out and no one was punished, trust was just completely eroded. And governments kind of seemed to be colluding in this as well, because they were acting in the interests of the banks rather than in the interests of the people. And this only really confirmed the kind of libertarian views that the cypherpunks had. So that's a really important context to what happened next to the emergence of Bitcoin.

Bitcoin Emerges From The Shadows

Anyway one day in August 2008, Adam Back got an email from someone he'd never heard of before. This person's name was Satoshi Nakamoto. Satoshi basically asked Adam if he could have a look at a proposal for something called Bitcoin. So Adam had a brief look at it, and he took the time. When he replied to Satoshi, he reminded him about all the other experiments with digital cash that had been tried by him and others. And I think he mentioned Wei Dai and Nick Szabo. 

On the 31st of October 2008, ten days after the Fed had loaned out $540Bn in order to keep the US economy going, Satoshi reappeared and he published the Bitcoin white paper to the cypherpunks’s mailing list. This is basically the beginning of cryptocurrency. 

This white paper was titled Bitcoin, a peer to peer electronic cash system. And here's the opening line. A purely peer to peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. That's the elevator pitch. Not many people believed in him in the first place and the topic went lull for a bit.

Satoshi then fired up the Bitcoin software kind of around New Year 2009, presumably kind of undaunted by this sort of almost deafening silence. And he mined the first block, and that is now known as the Genesis block. Another really big moment in the history of cryptocurrency. And he received the first 50 bitcoins as a block reward. And if you don't know what a block reward is, we have discussed this in the episode about blockchain. 

So this Genesis block contained a message. The message read, The Times, 3 January 2009. “Chancellor on the brink of second bailout for banks”. 

And that, to me, is an unmistakable pointer to the fact that, yeah, we've been building up this cataclysm for years. This is a reaction to what these guys have done. Satoshi obviously mined the first block. He was the first node on the Bitcoin network. And he then announced on the cryptography mailing list that Bitcoin was live. 

There was a pretty lukewarm response. Now, this leads me to one of my favorite quotations of all time. And this is Satoshi writing on the cryptography mailing list. It might make sense just to get some in case it catches on. 

The only person to respond positively was Hal Finney. Remember, I told you he was important. He asked to see the actual code. He was interested enough. Okay, let's see what this is made of. So Satoshi sent it to him and they then began working on it together. So they would make tweaks and then they'd test it out and they'd send each other emails. And Hal became node number two on the network. And he also mined a few blocks. And then Satoshi tested the network by sending Hal ten bitcoins. Ten BTC. 

So he was the first person ever to receive a Bitcoin payment. Now, the first few versions of the Bitcoin software, they basically kept crashing, it was full of bugs. There was one problem after another and, yeah, Hal basically mine several blocks as well. After a week, he became worried that all the work his computer was doing to mine these blocks was damaging it because, as you know, it can be quite processor-heavy. Yeah. It requires the computer to do a lot of work guessing these numbers. And the fan was running on the computer to keep it cool. And the noise of the fan was irritating him. So he switched it off. So it's not exactly the best start to this new technology. Node number two tries it out for a bit and then like, yeah, this is actually quite annoying.

The first few days, the first few weeks of Bitcoin, were basically about Satoshi, and Hal Finney collaborating on tweaking this software and trying to get this system to work and ironing out bugs as they came along. And it's worth pointing out again at this point, and still to this day, nobody knew who this Satoshi guy was. 

Satoshi stuck around cryptography forums and an incipient Bitcoin message board, responding with excitement to anyone who expressed interest — but almost no one was there. It was, at this point, that the technology got its savior from an unlikely place: a college student called Martti Malmi from Finland.

When Martti Malmi found Bitcoin in the spring of 2009, he was in his second year at the Helsinki University of Technology. Martti’s reclusive, computer-centric life led him to the ideas behind Bitcoin, and ultimately to Bitcoin itself. 

He wrote to Satoshi expressing interest in helping with Bitcoin. He set up an online forum where the small but growing group of people attracted to the technology could communicate.

The Bitcoin forum went online in the fall of 2009 and soon attracted a few regulars. One of them, who called himself NewLibertyStandard, talked about the need for a website where people could buy and sell bitcoins for real money. Martti had been talking with Satoshi about something similar, but he was eager to help NewLibertyStandard. In the very first recorded transaction of bitcoin for United States dollars, Martti sent NewLibertyStandard 5,050 bitcoins to use for seeding the new exchange. In return, Martti got $5.02 by PayPal.

Martti was instrumental in helping publicize Bitcoin, creating, coming up with the logo, collaborating with Satoshi, making Bitcoin more accessible. He was also heavily involved with submitting material about Bitcoin for an article published on a site called Slashdot in July 2010. Slashdot is basically a kind of tech website. This really helped to supercharge interest in the project and it started attracting a load of new users. The work he did was vital to help Bitcoin get off the ground. Essentially, in his own words, Martti set in motion something greater than personal gain. So, yeah, people like Hal and Martti selflessly contributed to Bitcoin in its early days. 

So there are plenty more people who've contributed tons to Bitcoin, and I should say at this point, because we're constrained by time and because the Bitcoin story is so ongoing. These guys that we're going to talk about aren't the only people who contributed to Bitcoin, obviously, but they are among the most important. But there are others. And if I haven't mentioned their names, apologies. It's just in the name of keeping things concise. 

Another important contributor to Bitcoin was Laszlo Hanyecz also known as the Bitcoin Pizza guy. In 2010, Laszlo Hanyecz spent 10,000 Bitcoins at a local pizza restaurant called Papa John's to buy himself two pizzas. The transaction is known as the first official use of Bitcoin for a commercial transaction with an actual company. Back then his Bitcoins were worth only $40. But, since the cryptocurrency wasn't yet a thing in the commercial world, Hanyecz reached out to the Bitcointalk community and openly traded his Bitcoins to anyone who would buy him these pizzas. Considering Bitcoin's value today, these two pizzas can be regarded as the costliest pizzas of all time.

Initially bitcoin mining using the processor was a slow process. But it was Laslow who used the graphics card, to get a lot more processing power or a lot more mining done. That was one of the technological leaps. A good analogy is if everyone else was mining with shovels, suddenly Lazlow appears with an excavator. In addition he also contributed a lot towards making the Bitcoin protocol more secure and free from vulnerabilities.

Satoshi may be hailed as the mastermind behind bitcoin, but Gavin Andresen is the man who really made bitcoin into what it is today.In 2010, Gavin Andresen came up with a novel idea called ‘The Bitcoin Faucet.’ All a visitor to the website had to do was complete a captcha and get 5 BTC. The thinking behind this project was that the only way to turn bitcoin from a small idea and community into a worldwide phenomenon was to ensure the cryptocurrency reached a wide audience that could make use of it.

And it worked. Since its inception to its closure in 2012, more than 19,700 BTC were disbursed among the website’s visitors, and the currency was slowly gaining traction with the first-ever price spike in its history happening in 2013.

A Roller Coaster Journey

Now something as novel as Bitcoin did not come into public usage as easily as you may think. Bitcoin had to jump a lot of hurdles. There were multiple attacks to the protocol, fake businesses and scams done to extract money from Bitcoin users.

On 15 August 2010 a vulnerability in the Bitcoin protocol was exploited and 184,000,000 BTC were fraudulently created. Remember that the protocol limit is only 21 million BTC. It doesn't succeed and the transaction is removed from the blockchain. Now, this is one of the few breaches. Yeah, the few sorts of vulnerabilities. This was a big moment in that the code looked vulnerable, but they were able to fix it. 

The biggest Bitcoin heist was probably the Mount Gox debacle where 740,000 Bitcoin were stolen from its users. At its peak in 2013, the exchange handled a whopping 70% of all bitcoin transactions worldwide. Over the course of several years, the hackers were able to slowly drain coins out of Mt. Gox's hot wallet, and they just never picked up on it. In fact, the amount of Bitcoin they had lost was about 7% of all the Bitcoin in circulation.

Many people mistakenly saw the whole Mount Gox thing as a weakness of Bitcoin. Now, this is not the case. Bitcoin itself has never been hacked and there was no flaw in the Bitcoin protocol. What it did show the whole thing was the danger of trusting centralized entities, which, ironically, was the point of Bitcoin.So in a weird way, in a weird and horrible and traumatizing way, Mt. Gox kind of made Bitcoin's point.

Another dark moment in Bitcoin’s history was the Silk Road. It was an online black market where buyers and sellers of illegal or unethical items could transact anonymously. Utilizing privacy techniques such as the Tor network and cryptocurrency transactions, people were able to transact in drugs, hacked passwords, illegal data, and other contraband.

So it's fair to say Mount Gox and Silk Road both played a huge role in bringing Bitcoin into wider public consciousness, but both also contributed to the perception that it was a scam or incredibly risky or only used by criminals. And as I've said before, I think a lot of people still hold these views today. So it's an image that Bitcoin is still trying to shake to an extent with some people. 

Anyway, Silk Road was shut down in October 2013 and Mount Gox collapsed in early 2014. It kind of happened vaguely around the same time. Not a great time for Bitcoin, but a few other notable events had taken place prior to all this and a few worth mentioning. 

Other Notable Bitcoin Milestones

In June 2012, we had the founding of Coinbase. Now, I think it's probably fair to say that anyone who's ever heard of crypto probably has heard of Coinbase as well. It's now one of the biggest exchanges out there, probably arguably the best known. And it aimed to make it safer and easier to buy Bitcoin. And yeah, as we can see, it's been around for ten years now. It is impressive. And obviously it's gone on to become the first ever crypto exchange to go public in 2021.

Then on the 12 March 2013, the Bitcoin blockchain split in two for a few hours. This was the result of a network upgrade that went wrong. What happened was it split into and started mining kind of in parallel. And fortunately the developers working on Bitcoin were able to fix it fairly quickly. And I think what this shows is that then as now, really, Bitcoin was a work in progress. It's not by any means finished or complete. There are still additions, there are still improvements, little tweaks being made to the Bitcoin network even today. 

In April 2013, the Bitcoin price crossed $100 for the first time. And it was also around this time that the Winklevoss twins discovered Bitcoin and they got really into it and began buying up a lot of BTC, and they used the money from their Facebook payout to do it. 

And what they did, they recognized the importance of it and they went around. They bought up a fairly credible percentage at least, of the actual Bitcoin in existence. And the Winklevoss Twins have become pretty big players in crypto. There's an exchange they founded called Gemini, obviously twins. And they were some of the first of the mainstream finance types to recognize Bitcoin's potential. 

There's a great book which I should mention called Bitcoin Billionaires, which talks all about the Winklevoss twins and their discovery of Bitcoin. 

Around this time, Bitcoin was starting to be talked about by celebrities and politicians as well. And Bill Gates and Warren Buffett, they both discussed it on TV. These guys, these sort of Titans, if you like, of business and finance are talking about Bitcoin on TV. It's come a long way since just being kicked around by the cypherpunks on their mailing list. 

And another big moment is November 2013. Jennifer Shasky Calvary, who worked at the US Treasury Department and Finsen, the financial crimes enforcement Network. She talked very positively about Bitcoin during a hearing of the Senate Banking Committee. So, yeah, again, although there were plenty of detractors, other people were starting to take notice of it and realized that it was a real deal. 

But back then, back around 2013, 2014, that sort of time, China was a big market for Bitcoin. And actually most of the Bitcoin mining was beginning to happen in China, In November 2013, the Chinese government is reported to have allowed Chinese citizens to actually trade Bitcoin. 

So remember that while all these events are taking place and while all these big names are kind of discovering it, actual Bitcoin adoption is kind of chugging along in the background. More people are buying it and more people are using it. We've got businesses beginning to accept it. It's slowly but surely taking off. And obviously as adoption continues, the price continues to rise. 

Now, even with these amazing qualities that Bitcoin has, it does present something of a drawback because it is very and I mean very difficult to actually do anything upgrade, if you like the Bitcoin network. So if there's an improvement to be made, if there's a patch to be implemented or anything like this, actually doing it is tricky as hell because of this decentralization, because there is no one person in charge. 

There has to be a majority of miners and developers on the network agreeing to implement any changes. Now, this doesn't mean that it's impossible to change Bitcoin to make adjustments to the code. And we actually had one fairly recently, an upgrade called Tap Root, which took place. I think it was November 2020. It was fairly small as upgrades go, but it was a big moment because it made changes to the Bitcoin protocol. 

And this is, as I say, very difficult to do because of this. It kind of tied into this. It's actually also very difficult to build any applications on top of Bitcoin. It functions as this network of exchanging value, but actually doing anything else with it, actually building anything that can run on top of the Bitcoin network is also very difficult, again, for the same reasons this decentralization, this no one person or entity in the decision making process. 

And this was why Ethereum was actually created by Vitalik Buterin, the guy who wrote the Ethereum white paper, he was frustrated. He loved Bitcoin. He wrote about it, he was a big disciple of it. But he saw the limitations early on. And that's what he set out to do with Ethereum. In the next episode we will talk about Ethereum in general. But for now these difficulties, these challenges for upgrading Bitcoin ultimately led to one of the most notorious and difficult episodes in Bitcoin's history. 

So 2015 and 2016 were, as by Bitcoin standards, fairly uneventful. Adoption itself continued. More merchants carried on accepting it. And these included, like big name companies, Microsoft, Dell, Expedia, they all began accepting Bitcoin. So it wasn't like nothing was going on. And we also had this explosion in the number of Bitcoin ATMs. They were kind of springing up all over the place. Although it's worth noting, in October 2015, the EU ruled Bitcoin to actually be a currency in Europe, which meant that EU citizens didn't have to pay tax on trading it. This was quite a big moment. And then we had what is known as the block size wars. 

Bitcoin Block Size Wars

Let's have a bit of context first about the block size wars. So Bitcoin transactions very simply are grouped together in blocks. And these blocks are then added to the Bitcoin blockchain and the whole network chugs along.

Bitcoin is designed so that a new block is produced on average, every ten minutes. And the Bitcoin protocol dictates this as you can't just pile more computing power, more hash power onto the Bitcoin network and produce blocks faster. Because if this happens, the network adjusts the difficulty of the mining to keep that ten minute average, or around about ten minutes. So you can't kind of cheat it in any way. 

Now, each block also has a size limit. It can only contain so much data. And the size limit on the Bitcoin blockchain is 1 MB. So this is basically a whole load of numbers. So it's not like they're trying to put video files or audio stuff in there. So 1 MB can record a lot of transaction history, a lot of letters and numbers, but it's still fairly limited. It can only store a certain amount which is 1 MB of transaction data. 

So as a result of this 1 MB limit, the Bitcoin network can only process somewhere between three and seven transactions per second. Now, this is not very much, especially if you compare it to the likes of Visa network, which can process about 65 thousand transactions per second. And actually, most other cryptos today leave that in the dust as well. 

Anyhow, it means that Bitcoin transactions can take a long time to go through. You pay with Bitcoin for things and it's not instantaneous. If it's something for quite a large amount, it's nerve racking. For ten minutes, you're waiting there. Did I do it right? Did I put the right code in? Is the address right? Because obviously, Bitcoin transactions, crypto transactions can't be reversed once it's on the blockchain. When I send crypto today and especially Bitcoin, even though I know why it's taking this time, it's still kind of like I won't quite be able to relax until I get notification from the wallet that I'm sending it to that it's arrived safely. So obviously, this is not ideal for a payment network. 

And also this can make transaction fees on the Bitcoin network more expensive as well, because some network users will be willing to pay more to have their transactions processed quicker. So you get the price being kind of bid up. So transaction fees increase for everyone because the average price goes up. Now if you remember, miners who process these transactions on the Bitcoin network are incentivized to do the mining and expend all that computing power, firstly by block rewards, as you remember. So you get this allocation of BTC of Bitcoins when you mine a block, which obviously today is pretty valuable. But the other way that miners make their money is by charging a small fee to include a transaction in a block. And it's not usually very much. I mean, when the network is all working fine, it's fractions of a Penny. 

But when the network gets congested and this is even more so on other networks like Ethereum, these transaction fees can get obscenely high. Sometimes on Ethereum today, sometimes the actual gas fee, as they call it, as transaction fees are known, can be more than what you're sending. So let's say you're trying to send $100 of Ethereum and the gas fee is $120. That's ridiculous. 

And this is one of the big problems with Ethereum at the moment, which is working hard to fix. But I should say that this is something that most crypto networks experience. And this was a problem with Bitcoin. And in a way it still is, because as we're going to see, not much has changed. So the network is not fast, it's only dealing with a few transactions per second. So concerns around this block size, around this 1 MB block size limit, had been rumbling for a while. 

And actually back in 2015, Gavin Andreessen proposed increasing the block size to 20 megabytes. Now, this didn't go down well with the Bitcoin community.

Now you're probably asking yourself why? What's wrong with just increasing the block size? Speed it up, speed the network up. That's great. Now, the main problem with this is that if you increase the block size, then the Bitcoin blockchain itself would get much larger. You'd be dealing with much larger amounts of data. And as a result of this, it would become much harder for smaller nodes to store a copy of the Bitcoin blockchain. 

Now remember, you've got miners on the Bitcoin network who are processing transactions, minting these blocks and getting paid for their troubles. But you also have these nodes, which are often just a very, very basic little computer, and all they do is store copies of the blockchain and validate transactions. So they just check that these transactions have gone through, that the balances of the people sending and receiving are up to date, all this sort of stuff. They're doing fairly basic, low level computing, but they still need to store this data. 

Now, if you suddenly increase the block size and ask them to store a much larger amount of data, fewer and fewer nodes will actually have the capacity to do that. And what that means is that you reduce the decentralization of the network because smaller nodes start to drop off, and at the same time, more power gets handed to larger nodes and larger entities and in particular, miners. So it's bad for decentralization. And if decentralization decreases, then so does security. This was the big objection to larger blocks. 

And I remember when I first read about it and not knowing as much as I do now, thinking, well, yeah, naturally, make the blocks bigger and the whole network becomes quicker and more people can use it. But actually, this question of decentralization, this idea of making the network too big, is a real issue. 

And around this time, crucially, as I alluded to earlier, most Bitcoin mining was being done in China. China dominated the hash rate. And the worry was that Chinese miners would become too powerful if the blockchain got bigger and harder to store. These Chinese miners would occupy an even greater percentage of the network. Now, if this was the case, they could theoretically collude to manipulate the network. 

So this was a big problem and a big concern. And there was also a concern that bigger blocks would actually reduce transaction fees. Now, again, on the face of it, why is that about it? There's no incentive then for the miners. Miners need these transaction fees to incentivize them to maintain the network. So if transaction fees are going down, smaller miners will drop off because what happens when the last block is mined? Then the transaction fees has to go up to keep the network going.

There's some debate over this because we're quite a long way away, decades from the last block being mined. But a lot of people are thinking about this already. What happens when the block reward doesn't exist anymore. And I mean obviously transaction fees will be how miners make their money. But in order to make it worthwhile for lots of miners, which is what you want, then people are pointing out that transaction fees will have to go up in order to cover it. 

It's hard to know exactly what's going to happen at that time. I mean, you can't predict the future because the block reward is going to decrease ever more. At the moment, the block reward is 6.25 Bitcoin. And it decreases sort of roughly every four years. So it's about two years since the last Bitcoin halving and then it's going to decrease to 3.125 BTC. So, yes, this is going to be a problem. 

The block size debate, though, has kind of gone away because these scalability issues are being addressed in other ways. And perhaps the most notable of those is the Lightning network. In a nutshell, the Lightning network is looking to settle Bitcoin transactions off the main Bitcoin blockchain and then validate them on the main chain later on. So they're often known as layer 2 scaling solutions or side chain solutions. That's what's now being explored in order to solve this problem of the Bitcoin blockchain, essentially so slow and clunky. So the big blocks idea has been consigned to history, but not before. It managed to do a lot of damage in the Bitcoin community, such as multiple hard forks etc. which I would say we still live with today. 

By this point, there are so many events that have happened around Bitcoin, so many important moments, so many important people. And I think we've tracked up to now, the big ones, up until now. So let's look at some more of the milestones in Bitcoin's history. 

Mainstream Bitcoin Adoption

2017 was just a wild year for crypto. We saw what was known as the ICO boom, the initial coin offering boom. This was when loads of start up crypto projects realized that they had this amazing way of earning startup capital, of earning money. They basically held these coin sales. They issued a coin or a token, and then they sold it in the ICO, and some of them raked in absolutely obscene amounts of money. Some of them in seconds. The world basically just went crypto crazy and altcoins, really, for the first time ever, shared the limelight with Bitcoin. But also the Bitcoin price itself went bananas towards the end of 2017, it just took off. The price peaked just shy of $20,000 late in December 2017. And this was the time that Bitcoin futures on the Chicago Mercantile Exchange were launched. And this, as we later found out, signaled the very top of the market. 

This was an opportunity for institutional investors to get involved more. This was an opportunity for institutional traders to weigh in. And then things got a little painful, didn't they? 

Basically, early January 2018, what we now refer to as crypto winter set in, and prices absolutely tanked. And it was tough. So when this crypto winter set in in early January 2018, this is when kind of mainstream criticism of Bitcoin seemed to kind of bubble up to the surface again. People like Warren Buffett called it rat poison squared. And then it got worse, unfortunately, because then the following month, February 2018, the Chinese government announced a ban on crypto exchanges. 

So it's fair to say that 2018 was a tough year, both for Bitcoin and for crypto in general. And a lot of people felt that the whole thing was a bubble that had burst. And sadly, a lot of investors had lost a lot of money, especially through these ICOs, these initial coin offerings. And the Bitcoin price dropped to as low as $3,200. So 2018 is generally a year that we like to ask people in crypto we like to forget about. We don't like to think about it too much. 

And 2019 was also kind of slow, although Bitcoin was starting to climb up. And around May 2019, there was a kind of noticeable uptick. And then, of course, we had and again, 2019, again, wasn't too eventful, but things were at least going up. And then March 2020 came along and Bitcoin tanked, along with everything else we saw the stock market tank, the Bitcoin price tank, all cryptos tanked. And that was on the announcement from the World Health Organization. We were officially in a pandemic.

But things didn't stay brutal for long because May 2020 was a really important date because that was the Bitcoin halving. This is when the block reward for mining a Bitcoin block is cut in half. So it had been 12.5 BTC. It was cut down to 6.25 BTC by the algorithm. Now, a lot of people have identified the Bitcoin halving that happens roughly every four years as being the start of a Bull market cycle. And in this case, it was the prices for Bitcoin and other cryptos started creeping slowly back up. 

Crypto was basically becoming new again, and obviously a big thing for crypto back then, because we were all suddenly all found ourselves locked down in our houses with not an awful lot to do. Interest in crypto went through the roof. People were like, you know what? I'm going to look into crypto. I'm going to see what this is all about. I haven't had the time, I haven't had the inclination. And now that I've actually got some free time, for the first time in my adult life, I'm going to find out what this whole crypto thing is about. Educating themselves. 

While retail interest picked up during the pandemic, the big money was poured into Bitcoin and crypto in general, by late 2020 and early 2021.

In October 2020, PayPal announced that it was going into crypto and it was going to allow users to actually buy and sell various cryptos through its app. This was a huge step towards mainstream adoption. And you had, again, sort of big names, big investors, if you like, in finance. Big Wolves of Wall Street started to make encouraging noises about Bitcoin again. And then in January 2021, Tesla announced that it was going to accept BTC for its cars. And then you had Elon Musk tweeting his support for Bitcoin. This was sort of Elon's entry into the Bitcoin world, which I think many of us would rather he hadn't done, because he's been very vocal about Bitcoin and crypto and not always for the best. 

In March 2021, after this big buy-in from Tesla and these big announcements, the Bitcoin market cap hit $1 trillion for the first time. And you had investment banks, the likes of JPMorgan, who had been very rude about crypto up to that point. Suddenly they were offering Bitcoin exposures to their clients because their clients were all going, hey, why can't we get involved? This is amazing. Again, just an amazing turnaround. 

Then, May 2021, crypto crashed because Tesla announced that it was suspending its Bitcoin payments over concerns around the environmental impact of Bitcoin mining. And this treads on the toes of ESG environmental, social and governance investing guidelines, which are all the rage at the moment. So this was a big concern. So Tesla stopped accepting Bitcoin payments and the markets didn't react too well to this. And we saw what's known as a flash crash. It dipped very quickly and it was a nasty couple of months. 

But actually, you couldn't really keep it down because by July 2021, there was more good news. Germany decided to allow its financial institutions to hold up to 20% of their assets in Bitcoin. And again, this thing that had been sort of seen as an outlawed sector just a few years before, suddenly even German banks started piling in. 

Then we have the Bitcoin Miami conference in June of 2021, where the President of El Salvador, Najib Bouquelli, announces that his country will adopt Bitcoin BTC as legal tender. And this came into effect a few months later in September 2021. And again, probably of all the recent developments in Bitcoin, this has got to be the biggest, really. And again, I've said it before several times. But just in relation to everything that had gone before, even just a few years ago, in the depths of the crypto winter in 2018, if you'd said in about three years time there'll be a country accepting BTC as legal tender, you wouldn't have got a very receptive audience. You would have been laughed out of town by all. But the most hardcore Bitcoin is, I think it would just impossible to imagine. And I'm sure El Salvador is not going to be the last. There are going to be more countries adopting this as legal tender. 

A few more things, a few more noteworthy points around that time, in September of 2021, we also saw China banning crypto mining. So even though it banned exchanges a long time ago, it's still been possible to mine Bitcoin and other cryptos in China. But that was no more. And basically all this did was hand much of Bitcoin's hash rate to the United States. So I think it's fair to say that China really shot itself in the foot there, because all its concerns, they cited sort of things like environmental concerns, really. China wants to launch its own central bank digital currency, which has some similarities to cryptocurrency in the run on a blockchain, but is in fact, nothing like a cryptocurrency at all. But obviously China doesn't want an autonomous form of money challenging its central bank. 

October 2021, we had the SEC, the Securities and Exchange Commission over in the US approve the first American Bitcoin futures ETF, although actually such instruments did already exist in Canada and elsewhere, that the US is a bit behind the curve here. 

Closing Thoughts

With all this history around it, the Bitcoin story is just getting started, really. That's one of the things that's so exciting about it. It's only 13 years old, it's evolving all the time, it's growing all the time. There is so much more ahead of it. And at the moment, it's matured greatly. Bitcoin has survived indifference scandals, disasters, and survived attempts to ban it. It survived divisions within its community. It survived hard forks and price crashes and pandemics. It survived Elon Musk, and it's surviving global uncertainty at the moment at just 13 all at just 13, just imagine what it's going to be like. The sweet 16 part is going to be great. Oh, yeah. So Bitcoin yet it can't be killed, it can't be stopped. It's only going to get stronger as the years go by. And yeah, Bitcoin is now digital gold. 

That’s it for today folks. In the next episode we are going to journey deeper into the wider world of crypto because there is so much more to crypto than just Bitcoin. We will explore the story of Ethereum’s development in the next one. 

I hope you enjoyed this second part of the two part episode about the story of Bitcoin. I would love to hear your thoughts on this episode. Drop me a comment on my website, on twitter @TheMetaRoy or through instagram @TheMetaRoy. And do stay in touch for the next episodes are going to be even more interesting, so do follow this podcast on Apple Podcasts, Spotify or wherever you like listening to your podcasts on. Bye bye and have a great rest of the week ahead!