It makes SILICON VALLEY look like C-SPAN — and yet it’s a documentary. Yes, it’s Cryptocurrency!, the show! You already know it’s been the hit of the last half-decade in extreme-nerd, get-rich-quick and/or libertarian-conspiracist circles. But the story so far may seem incredibly… well… cryptic. So if you’re just tuning in, here’s a timeline to catch you up before the new season begins:
|October 2008||A pseudonymous figure or group called Satoshi Nakamoto publishes a white paper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System.” This introduces a new data structure, the blockchain, which over the next eight years will create billions of dollars of value and cause intelligent people to seriously speculate that it could be used to replace the entire global financial system. The mystery of Satoshi Nakamoto’s identity is never solved. Compared to much of what follows, this all seems pretty reasonable and plausible.|
|May 2010||The first real-world Bitcoin purchase occurs: 10,000 btc, currently valued at ~$6.5 million, is used to purchase two large Papa John’s pepperoni pizzas in Jacksonville, Florida.|
|Early Spring 2011||The rest of the world (including me) discovers Bitcoin. Reactions range from “this is a giant scam” to “the most dangerous project we’ve ever seen” to “this is our greatest hope for liberty” to “OMG, they’re all totally crazy.” Each of these contradictory viewpoints is surprisingly convincing.|
|Spring 2011||Bitcoin is widely castigated for being primarily used to purchase drugs on darknet sites such as Silk Road. The traditional reaction to moral censure ensues: the price of Bitcoin immediately rises almost forty-fold in 10 weeks.|
|June 2011||Bitcoin promptly falls back from $32 to $10.|
|June 2011||Mt. Gox, a Bitcoin exchange originally set up to trade Magic: The Gathering cards, is hacked.|
|June 2011||People keep using Mt. Gox, because, you know, what the heck, why not? What could possibly go wrong?|
|Autumn 2011||The price of Bitcoin has fallen back down to $2.|
|March 12, 2013||Most Bitcoin aficionados will tell you, in a tone usually reserved for tales of deaths, wars, famines and pestilences, that this is the day a “hard fork” occurred on the Bitcoin blockchain. In actual fact, there has never been a Bitcoin hard fork.|
|April 2013||Bitcoin skyrockets back up to $100.|
|July 2013||The infamous Winklevii twins launch the Winklevoss Bitcoin Trust exchange-traded fund. They found out about Bitcoin at a party on Ibiza. I am not making this up.|
|November 2013||Bitcoin hits $250.|
|November 2013||Bitcoin hits $500.|
|November 2013||Bitcoin hits $1,000.|
|December 2013||Bitcoin crashes back below $600.|
The New York Times publishes “Why Bitcoin Matters” by Marc Andreessen, who argues (correctly) that “Bitcoin offers a sweeping vista of opportunity to reimagine how the financial system can and should work in the Internet era, and a catalyst to reshape that system in ways that are more powerful for individuals and businesses alike.”
Meanwhile, however, much of the early Bitcoin community is still using Mt. Gox, the Magic: the Gathering trading-card site turned Bitcoin exchange coded in PHP by developers of extremely dubious technical ability.
|February 2014||Mt. Gox shuts down and files for bankruptcy, reporting the loss of 850,000 bitcoin, or about 7 percent of all extant at the time. Some weeks later they rediscover ~200,000 of those bitcoin behind a couch cushion.|
|March 2014||A train set aficionado named Dorian Nakamoto is “outed” by Newsweek as the creator of Bitcoin. It is soon apparent that Newsweek is flagrantly, painfully, stupidly wrong.|
|January 2015||Bitcoin slips to $200 during a period of merciful boredom, during which serious people, genuinely interested in using its remarkable decentralized/permissionless technology to change the world for the better, pour an enormous amount of time, money and resources into initiatives to do just that.|
|Basically all of 2015||The Bitcoin world is riven by a bitter, personal and vicious debate over an arcane (but important) technical issue that hamstrings the network to no more than seven transactions per second, and will require a hard fork — and, arguably, greater network centralization — to completely fix. Its developer community fragments into two chief camps: Sharks and Jets, later renamed Core and Classic.
This division makes it impossible to ignore the fact that the supposedly permissionless and decentralized cryptocurrency is de facto controlled by a handful of mining pools and a tiny coterie of developers. Previously the community has dealt with this inconvenient truth by loudly singing “la la la la!” while studiously looking away.
|April 2015||Mt. Gox co-founder Jed McCaleb, who, to his credit, left Mt. Gox long before it disintegrated in a bubble of recrimination and humiliation, and who went on to create two new (non-blockchain) cryptocurrencies, Ripple and Stellar, is sued by Ripple for selling Ripple, allegedly because he couldn’t sell Stellar to support Stellar.|
|August 2015||Ethereum, a new cryptocurrency basically founded on the precept that Bitcoin has been timid and unambitious, or at least insufficiently brash, weird and disruptive, launches its first phase into the world. Its distinguishing factor: the scripting language that controls its monetary transfers is Turing-complete, which means, by definition, that it is impossible to tell whether its programs will run forever or eventually halt. Ethereum deals with this problem by charging “gas,” a unit of its own currency, for every computation.
To analogize, Bitcoin offers its developers a knife with which to stab themselves; Ethereum offers them the entire arsenal of the United States military with which to destroy everything that they have ever loved, but makes them pay by the second to use it. Like Bitcoin, Ethereum is both technically fascinating and generally awesome. And, again like Bitcoin, it promptly attracts a coterie of dollar-sign-eyed enthusiasts who are … shall we say … somewhat less awesome.
|December 2015||An Australian man known as Craig Wright is “outed” as Satoshi Nakamoto. It soon becomes painfully apparent that either Wright is a con man, or “Satoshi” is doing absolutely everything he can to convince the world he is a con man. Occam’s Razor makes it pretty clear which way to bet.|
|January 2016||Mike Hearn, a senior Bitcoin developer, announced that Bitcoin has failed, and loudly and publicly quits the community (with a Medium post, of course).|
|January 2016||Blocksize debate (correctly) resolved, Bitcoin embarks on a long bull run and continues to gain in value, without ever really resolving the dark fundamental self-contradiction at its heart.|
|April 2016||Slock.it, a German startup that creates “slocks” — smart locks that open when they receive money, just like the toll door in Philip K. Dick’s dystopian Ubik — announces a side project: the world’s first Distributed Autonomous Organization, built on Ethereum, a computer program that will raise ether and then invest it based on its funders’ votes, with no further human decisions or intervention required. Their announcement refers, in a soon-to-be-ironic self-congratulatory manner, to
|May 2016||People claim, with an apparently straight face, “The DAO Will Soon Become The Greatest Threat Banks Have Ever Faced.” Optimistic investors pour a whopping $150 million (at then-current exchange rates) into the DAO, because, you know, what the heck, why not? What could possibly go wrong?
A few skeptical people like, er, me (and pretty much everyone I know) write things like “What most concerns me about the Ethereum project is security. … Ethereum offers a vastly larger attack surface than Bitcoin … this applies not just to the network itself, but to individual Ethereum contracts.” DAO enthusiasts are angered by us.
|May 2016||Craig Wright, the aforementioned Australian sure-looks-like-a-con-man, outs himself as Satoshi Nakamoto, and even manages to convince Gavin Andresen, a major Bitcoin figure and developer. (Con men can be very convincing in person.) But after a flurry of media attention, it soon becomes painfully apparent, again, that either Wright is a con man, or “Satoshi” is doing absolutely everything he can to convince the world he is a con man. Occam’s Razor continues to make it pretty clear which way to bet.|
|May 2016||Some well-respected researchers identify fundamental flaws in the DAO’s voting protocol and call for a moratorium on DAO projects until these are resolved.|
|June 2016||A potential flaw in Ethereum smart-contract scripts is identified in the DAO and, everyone is assured, quickly fixed.|
|June 2016||The DAO is hacked; nearly a third of its money is siphoned away into a “split DAO.” Who could possibly have seen that one coming?|
|June 2016||The very same people who until recently were trumpeting “irrefutable computer code … not influenced by outside forces … not controlled by its creators” immediately call for the intervention of creators and outside forces to repair the damage caused by the computer code. To their credit, they seem fairly embarrassed about this.
A “soft fork” to ensure the attacker can’t make away with the drained funds is proposed, as is a much more drastic “hard fork” to return the funds to investors. Someone purporting to be the attacker appears in the DAO slack channel claiming they’ll bribe miners to oppose the soft fork. Needless to say, one way or another, the DAO will be DAOing no more.
|June 2016||The august London Review of Books publishes a 35,000-word piece about Craig Wright (remember him?) which serves primarily as a vivid example of why technically incompetent writers should not attempt technically dense subjects. Sarah Jeong hilariously eviscerates it with one of the most caustic tweetstorms I have ever encountered. Meanwhile, Wright’s long game is explained, when he files dozens of Bitcoin-related patents.|
|June 2016||Emin Gün Sirer, a Cornell professor and one of the researchers who identified flaws in the DAO’s voting proposal, and an early identifier (and explainer) of the exploit that led to the DAO hack — for which he was apparently falsely accused of being the attacker by Slock.it — points out that the proposed fix opens Ethereum to a troubling Denial-of-Service attack. The soft fork is called off … for now.|
|Press time||A rumor sweeps through the Bitcoin community that a supermajority of Chinese miners — which is to say, a majority of all miners — has suddenly decided to reject Bitcoin Core in favor of previously spurned Bitcoin Classic. This rumor is, to understate, thus far unsubstantiated.|
|July 2016||Will the DAO attacker yet abscond with their hacked ether? Will it be worth anything by then? Will Ethereum recover from this wound — and will they aggravate it themselves, by intervening too much — or will it cripple the credibility of their smart contracts forever? Will patent offices fall victim to Craig Wright’s claims that he is Satoshi Nakamoto? Will Ripple and Stellar ever find wide success? Will the reign of Bitcoin Core be overturned in favor of the higher-bandwidth — and more centralized — hard fork of Bitcoin Classic, or will sidechains and the Lightning Network usher in a second era of cryptocurrency? Your guess is as good as mine! Stay tuned to this exciting stream, and don’t touch that touchpad! Whoever’s writing this show, you have to give them this much: they’re never boring, and always unpredictable.|