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Bitcoin — Satoshi Nakamoto's Paper and Electronic Cash Without a Trusted Third Party
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Bitcoin is an electronic cash system for sending online payments directly from one party to another without going through a bank or other intermediary. It began on 31 October 2008 (US Eastern time), when someone using the name Satoshi Nakamoto posted a paper, "Bitcoin: A Peer-to-Peer Electronic Cash System", to a cryptography mailing list. Nakamoto's identity is still unknown.
The post opened: "I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party." Electronic cash that runs entirely between its users, with no trusted party in the middle, was the whole of the paper's claim.
This article offers no investment guidance and makes no price predictions. It sets out what the paper proposed, and the events and rules that followed, with the dates of the sources.
The problem the paper solved: double-spending
Digital data can be copied. The hardest problem for electronic cash is double-spending — spending the same money twice — and until then a central party such as a bank or card company had prevented it. The paper argued that as long as such a trusted party was needed, the main benefits of electronic cash were lost, and it proposed another way.
| Element | What the paper describes |
|---|---|
| Coin | Defined as a chain of digital signatures; each owner passes it on by signing a hash of the previous transaction and the next owner's public key |
| Timestamp | The hash of each block of transactions is published, and each block includes the hash of the one before, forming a chain |
| Proof-of-work | A nonce in the block is changed over and over until the block's hash begins with the required number of zero bits |
| Longest chain | The chain with the most computation behind it is treated as the true record; as long as honest nodes control most of the computing power, an attacker cannot catch up |
| Reward | The first transaction in each block creates a new coin owned by whoever made the block |
The signatures on each coin rely on public-key cryptography, an idea whose roots lie in the 1976 paper New Directions in Cryptography. On the reward for new coins, the paper compares it to gold miners expending resources to add gold to circulation, and says that in Bitcoin's case what is expended is CPU time and electricity. The seed of the later argument over energy use was already in the first paper.
3 January 2009: the first block
The timestamp of the first block in the chain — the genesis block, at height 0 — points to 18:15:05 UTC on 3 January 2009. Its first transaction carries a reward of 50 bitcoins and this embedded text:
"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
It is the date and a headline from that day's edition of the British newspaper The Times, reporting that the chancellor was on the brink of a second bank bailout. The first block of a system built to work without banks carries a headline about rescuing them.
May 2010: two pizzas for 10,000 bitcoins
The best-known early exchange of bitcoin for something real is a pizza order. On 18 May 2010 a user named laszlo posted on the Bitcoin forum that he would pay 10,000 bitcoins for a couple of large pizzas. Another user in the same thread replied that 10,000 bitcoins could be sold for $41 at the time. Four days later, on 22 May, laszlo wrote: "I just want to report that I successfully traded 10,000 bitcoins for pizza." The date later came to be celebrated as Bitcoin Pizza Day.
2014: Mt. Gox in Tokyo
Exchanges that trade bitcoin for yen or dollars hold their customers' assets. One of the largest losses of such assets came at Mt. Gox (MtGox Co., Ltd.), based in Shibuya, Tokyo.
| Date | Event (from the company's and trustees' announcements) |
|---|---|
| Early February 2014 | Illegal access abusing a bug in the bitcoin system leads to a rise in incomplete transfer transactions |
| 25 February 2014 | The site is closed at noon |
| 28 February 2014 | Application to the Tokyo District Court for civil rehabilitation, accepted the same day; about 750,000 customers' bitcoins and about 100,000 of the company's own reported missing |
| 20 March 2014 | About 200,000 bitcoins found in an old-format wallet used before June 2011 |
| 24 April 2014 | The Tokyo District Court orders the start of bankruptcy proceedings |
| 22 June 2018 | The court orders civil rehabilitation proceedings, suspending the bankruptcy |
In its 28 February announcement the company also reported a discrepancy of about ¥2.8 billion between the cash it held at financial institutions and its customers' deposits, and said the causes probably included hacking by third parties. A rehabilitation plan was later confirmed and repayments are under way; the trustee's site says the repayment deadline has been moved from 31 October 2026 to 31 October 2027.
Japan's rules: registration from April 2017
After the collapse Japan brought exchanges under the law. An act amending the Banking Act and other laws to respond to advances in information and communications technology passed the Diet on 25 May 2016, and the amended Payment Services Act took effect, with its cabinet orders and ordinances, on 1 April 2017. The Financial Services Agency explains that from that date, exchanging virtual currency for legal tender as a business in Japan required registration. An amendment in force from 1 May 2020 changed the legal term from "virtual currency" to "crypto-asset".
Crime and collapses
Bitcoin's transaction record is public, but its addresses are not tied to real names, and that property has been used by criminals. The 2017 ransomware WannaCry demanded its ransom in bitcoin.
Mt. Gox was not the last exchange to fail. On 13 December 2022 the US Securities and Exchange Commission charged Samuel Bankman-Fried, chief executive of the crypto exchange FTX, with concealing from investors that customers' funds had been diverted to his trading firm, Alameda Research; according to the SEC, FTX had raised more than $1.8 billion from investors. FTX had filed for bankruptcy the month before, in November 2022. Bankman-Fried was convicted of fraud and related charges on 2 November 2023 and sentenced to 25 years in prison in March 2024.
January 2024: spot ETPs in the United States
On 10 January 2024 the SEC approved the listing and trading of exchange-traded products that hold bitcoin itself. According to a statement by its chairman, Gary Gensler, the commission had rejected more than 20 such filings between 2018 and March 2023, but after a federal appeals court vacated its rejection of Grayscale's proposal, he judged approval to be the most sustainable path. The statement also called bitcoin primarily a speculative, volatile asset and said: "we did not approve or endorse bitcoin." What was approved was the listing of products, not bitcoin itself.
El Salvador: the legal-tender experiment
El Salvador brought its Bitcoin Law into force on 7 September 2021, making bitcoin legal tender and requiring businesses to accept it. On 18 December 2024 the International Monetary Fund announced a staff-level agreement with the country on a 40-month Extended Fund Facility arrangement of about $1.4 billion. The announcement said: "Legal reforms will make acceptance of Bitcoin by the private sector voluntary." Taxes would be paid only in US dollars, and the government's participation in the Chivo crypto wallet would be gradually unwound. Wikipedia describes the legal-tender status as revoked in 2025.
Electricity
Proof-of-work spends electricity on computation. The Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge has tracked how much. Its report of 28 April 2025 gave these figures:
| Item | Estimate (CCAF, 28 April 2025) |
|---|---|
| Annual electricity use | About 138 TWh (about 0.5% of global consumption) |
| Annual emissions | 39.8 MtCO2e |
| Share of sustainable energy | 52.4% (nuclear 9.8%, renewables 42.6%) |
| Largest single source | Natural gas, 38.2% (coal 8.9%) |
| Share of mining by country | United States 75.4%, Canada 7.1% |
The estimate rests on data reported in a survey of 49 mining firms, covering 48% of global mining activity. Electricity used and environmental impact are not the same thing; emissions depend on which sources supply the power.
What it left behind
The paper's idea of a public record protected by computation led some to ask whether it could be used for more than money. One answer was Ethereum, which set out to run programs on such a record. The wider story of moving value over the network is on the internet and web timeline.
Questions this page answers
- When was Bitcoin created, and by whom?
- It began on 31 October 2008, when someone using the name Satoshi Nakamoto posted the paper 'Bitcoin: A Peer-to-Peer Electronic Cash System' to a cryptography mailing list. The first block was created on 3 January 2009. Nakamoto's identity remains unknown.
- What is Bitcoin Pizza Day?
- On 22 May 2010 a forum user named Laszlo reported that he had traded 10,000 bitcoins for pizza. He had offered 10,000 bitcoins for a couple of large pizzas on 18 May.
- What happened at Mt. Gox?
- Mt. Gox, a bitcoin exchange in Shibuya, Tokyo, applied to the Tokyo District Court for civil rehabilitation on 28 February 2014, saying about 750,000 customers' bitcoins and about 100,000 of its own had disappeared. Bankruptcy proceedings began on 24 April 2014, and the case moved to civil rehabilitation on 22 June 2018.
- How much electricity does Bitcoin use?
- A report published on 28 April 2025 by the Cambridge Centre for Alternative Finance estimated about 138 TWh a year, roughly 0.5% of global electricity consumption. Based on a survey of 49 mining firms, it put the share of sustainable energy at 52.4%.
Sources
PrimaryBlock 0 (genesis block), raw block data — Blockchain.com
Timestamp 1231006505 (18:15:05 UTC, 3 January 2009), height 0, the coinbase text and the 50 BTC reward
PrimaryMTGOX 再生管財人 ホームページ（民事再生手続開始決定のお知らせ、弁済期限日の変更に関するお知らせ ほか）
The civil rehabilitation order of 22 June 2018, and the repayment deadline moved from 31 October 2026 to 31 October 2027
Primary暗号資産に関連する事業を行うみなさまへ — 金融庁
TertiaryBitcoin — Wikipedia
TertiaryBankruptcy of FTX — Wikipedia
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