As the world prepares to say goodbye to another year and Bitcoin nears its sixth birthday, we look back at one of the more memorable and eventful year of Bitcoin's history. A year in which Bitcoin began to mature and, just like a six year old…
2014 is the year when Bitcoin was thrown into the sea to sink or swim and was tested to its limits to only come back stronger than ever before. The shark of MT Gox and China’s central bank injured it greatly at first, but Silicon Valley and the Merchants came to its rescue and helped Bitcoin come back stronger than ever with all fundamental measures at all times high.
2014 opened ominously. As Bitcoin’s popularity continued to grow and reached unimaginable heights by the end of 2013, the empire struck back. Uneasy with Bitcoin’s potential to evade capital controls and undermine the tricky task of China’s Central Bank of cooling down the economy without a hard landing, the Chinese government issued a number of vague statements which many understood to be an announcement of a ban on the use of bitcoins for commerce.
China moved aggressively at the beginning of the year and succeeded in its aim by May. The gains, however, were short-lived as the populace adjusted. By the end of 2014, China once again accounts for most of bitcoin trading and attendance at bitcoin meetings continues to increase, showing strong, undeterred interest and a failed strategy by the Chinese government.
Russia is following the same strategy while Ukraine, Bangladesh, Bolivia and Ecuador, which puzzlingly declared its intention to create a govcoin, went further and declared that Bitcoin is illegal. They are likely in 2015 to share the same experience as China as the populace quickly adapts and finds loopholes.
As winter came to a close, the loudest bang in Bitcoin’s history was heard on February the 28th when MT Gox, the largest and oldest bitcoin exchange, declared bankruptcy following a claimed loss of approximately 850,000 bitcoins. Chaos and panic prevailed over the community for the winter months as bitcoin companies distanced themselves, TwoBitIdot declared war, blockchain detectives found 200,000 bitcoins and a string of warnings was issued by government agencies highlighting bitcoin’s risks.
It wasn’t the first time that MT Gox disrupted the bitcoin community, but it is, hopefully, the last. As the nascent technology was gaining steam in 2011 and was introduced to coders for the first time, a hack of MT Gox turned the balance of opinion against bitcoin, deeming it to be too risky, culminating with a now infamous Wired article which declared Bitcoin dead. The price continued to fall for almost two years reaching $2 from the height of $37, but Bitcoin came back, stronger than ever, and raced to new heights in April 2013 when, once more, its nemesis, Magic the Gathering, froze. It was claimed that some sort of DDos had happened, both by numerous trades, numerous new account registrations and a more traditional DDos of the servers. Rumors began circulating; panic was spreading. When trading resumed, the price plummeted, from $270 to $50. The community mobilized. It recognized MT Gox as a single point of failure, blamed it for incompetence, lack of professionalism, and started mocking it as Magic the Gathering. New exchanges sprung up to meet the customer’s demands with Bitstamp taking most of the market share and Coinbase promising a new era of bitcoin businesses, run not by amateurs, but professionals.
By the time the exchange went bust, it was the most vilified and hated bitcoin company. As fiat withdrawals became almost impossible, most had left, leaving Magic the Gathering to die as a shell of its former self. The community, therefore, breathed a sigh of relief knowing that this terrible exchange, which had caused single-handedly all previous price crashes, even, some would argue, the latest one in early 2014, was now finally gone.
As price continued to plummet, reaching a low of $275, those that were aware of bitcoin’s history kept their faith. Knowing that now the Magic The Gathering had gone, and with it the amateurism of the earlier days of bitcoin, adoption might not again so severely, suddenly, and cripplingly be disrupted as MT Gox did in 2011, 2013, and 2014.
Bitcoin became officially acknowledged in 2014. Some might say, perhaps too soon, leading to irrational decisions. The Inland Revenue Service, against all common sense, declared the taxation of bitcoin to be as a property, rather than as a currency. The Australian Tax Office followed suit, but has been met with outrage by the Australian Bitcoin community. There are suggestions that Bitcoin businesses are leaving both countries to more favorable jurisdictions.
Unlike USA or Australia, the British Bitcoin community was effective in persuading Her Majesty’s Revenue and Customs to treat bitcoin as a currency, backing down from its initial proposals. Bitstamp, the Bitcoin Foundation and CoinJar, amongst others, packed their bags for a new London home and were welcomed by the Chancellor of the Exchequers who declared his intention to make London the Bitcoin Capital of the World.
Bitcoin British businesses however face the challenge of persuading British banks to provide them with banking facilities. The FCA, the new British payment’s regulatory body, has set a task force to ensure that banks do not uncompetitively deny bank accounts to businesses that offer different payment methods and the Chancellor is expected to declare new proposals regarding Bitcoin in Spring, just before the general elections.
The competition for bitcoin businesses between Britain on one hand and the other three English-speaking jurisdictions may, therefore, lead to a change of heart by the IRS and ATO in 2015. The greater theme, however, is that most nations have taken their stance on Bitcoin in 2014 and have laid out the rules, taking away uncertainty and allowing businesses to better plan their strategies.
He was soon followed by NewEgg, which saw its merchandise quickly run out of stock after offering a discount for bitcoin purchases. Then the list kept growing with Jimmy Whales of Wikimedia coming to speak to the bitcoin community at bitcoin’s subreddit. Expedia announcing that it will accept the currency for flights and hotel bookings. Dell surprised everyone with its announcement that you can now buy its goods and services in bitcoins and was quickly rewarded with a $50,000 purchase by one of many bitcoin enthusiasts in charge of managing IT purchases. Paypal, the competitor cum friend, excited even sceptics with its announcement that it will accept bitcoins for its payment process Braintree. And Microsoft, the giant of the computer world, a feature in every family’s home, the third biggest company on earth, came out to say that they wanted some bitcoins too.
Yet not all bitcoin’s new friends were IT related as Times Inc, an ancient magazine conglomerate with a circulations of 130 million, more read by your mum and dad than the university student or computer coder, came out to say that they too wanted to play.
Tens of thousands of merchants now accept bitcoin payments with 20,000 of Bitpay’s merchants keeping some of the bitcoins and almost 5,000 merchants keeping it all in bitcoins. We will probably see this trend continue in 2015 as the costs of adopting bitcoin are minimal while the rewards can be substantial. We might even see in 2015 a further adoption of the virtual cycle whereby merchants not only keep all or some of their bitcoins, but use them to purchase from suppliers, thus reaping savings from conversion fees and fully enjoying all the benefits of bitcoin payments.
Countless of new coins were created in 2014, with Ethereum raising millions for a promised new smart contracts protocol, just as Adam Back, a pioneer of e-money, in collaboration with many other well known names in the bitcoin world, announced Blockstream, a new company with the aim of focusing on the creation of sidechains, an added protocol to Bitcoin which allows for the creation of new “altcoins,” without the need of a new blockchain, paving the way for what may be an explosion in experimentation, including the issuing of digital assets, which may act as shares, thus eliminating the countless fees required to buy and trade shares. In the process, opening the door to the masses to invest their hard earned savings not in dormant bank accounts, but in thriving and productive companies.
Satoshi made a come back this year with a one-word sentence: “I am not Dorian Nakamoto.” following some hilarity involving car chases, free lunches, thousands of bitcoins in donations and perhaps a needed lesson to all – leave Satoshi alone. However, no one knows if it was really Satoshi who broke his silence this year after more than three years. Satoshi’s email account had apparently been hacked, leading to some more media comedy. It may well be that it was one of the hackers.
As the bitcoin world says goodbye to Hal Finney, a pioneer of emoney and the first contributor to bitcoin besides Satoshi, it welcomes Nick Szabo, another pioneer of emoney, who after months of silence has taken to tweeter and now fully contributes to the ongoing discussions in the bitcoin community.
And finally, Tim Draper became one of the newest bitcoin celebrity after he surprised the bitcoin community with his purchase of 50,000 bitcoins sold by the Marshals. He joins Barry Silbert of Second Market, who grabbed the next 48,000 in the second auction, as well as more widely known figures, such as Marc Andreessen, Ashton Kutcher, 50 cent, Nash and others.
2014 has been one of the most exciting rides in the world and may be remembered as the year when bitcoin took the spotlight and left its home to make new friends. As the regulatory climate begins to take away much of the uncertainty, venture capital sees large opportunities and innovation continues apace as merchants rush to charm the influential, sophisticated and moneyed bitcoin crowd: the drums of excitement are once more being heard and starting to get louder.
2015 is likely to bring us that long promised Winklevoss ETF and, following the bitlicense implementation, wall street might indeed rush into bitcoin. As the business world took a pause to take notice of Microsoft’s Bitcoin move, executive boardrooms are abuzz with that question: to accept or not to accept bitcoin? Many will probably decide to and some might join the 5000 merchants that keep all the bitcoins they receive from BitPay, which, in turn, might well decide to take the next step and pay their expenses in bitcoins, thus opening the new stage of adoption.
Innovation is likely to move much faster as the hundreds of millions of VC capital is turned into products offering more convenience, security and ease of transaction. And if I am to make one prediction, it is that the joyful orangey Bitcoin logo will find its place in every website in 2015, becoming as common as the Facebook button, as micro-payments become convenient with zeroclick.
We say goodbye to amateurs this year, and hello to Silicon Valley. We might welcome Wall Street next year, or even mummy and daddy.
What do you think? Will 2015 be the year when Bitcoin is seen as the smartest child in school and teaches everyone how to do everything better, smarter, faster and much, much cheaper?
Let us know in the comments below!
Images from Shutterstock.
Last modified: January 8, 2020 3:19 PM UTC