I’m reviewing the 2010s in Bitcoin. This is the story about 2014 in Bitcoin. Read about 2013 here.
The year 2014 in Bitcoin is defined by a few big events: MtGox filed for bankruptcy in Japan; Hal Finney, one of the first Bitcoin developers and recipient of the first ever bitcoin transaction from Satoshi Nakamoto, passed away after a five-year battle with ALS; and Newsweek doxxed Dorian Nakamoto, claiming the California resident to be Satoshi Nakamoto, founder of Bitcoin. Here’s the review of 2014.
MtGox Files For Bankruptcy
MtGox filed in February for bankruptcy protection in Japan. It had lost nearly half a billion dollars worth of bitcoins, citing a hack of a faulty computer system. The exchange halted trading of the cryptocurrency, though customers had had issues withdrawing their bitcoins dating back to 2013.
CEO Mark Karpeles blamed his firm’s collapse on a “weakness in our system.” He offered apologies. “First of all, I’m very sorry,” he said. “The bitcoin industry is healthy and it is growing. It will continue, and reducing the impact is the most important point.”
MtGox said the exchange had lost 7 percent of the global bitcoin supply: 750,000 of its users’ bitcoins and 100,000 of its own. The total loss amounted to $480 million at the time. In early March, the exchange said it found 200,000 “forgotten” bitcoins one week after it filed for the bankruptcy protection.
The exchange claimed to see unusual activity on its Bitcoin wallets, and suggested an issue lie with Bitcoin’s code. “A bug in the bitcoin software makes it possible for someone to use the Bitcoin network to alter transaction details to make it seem like a sending of bitcoins to a bitcoin wallet did not occur when in fact it did occur,” wrote the exchange. “Since the transaction appears as if it has not proceeded correctly, the bitcoins may be resent. MtGox is working with the Bitcoin core development team and others to mitigate this issue.”
Newsweek Claims To Find Satoshi Nakamoto in California
Newsweek journalist Leah McGrath Goodman claimed in 2014 to have found Satoshi Nakamoto. Dorian Nakamoto, a 64-year-old Japanese-American, acknowledged his role in the Bitcoin project, according to McGrath.
“I am no longer involved in that and I cannot discuss it,” Dorian reportedly said, though he later denied this. “It’s been turned over to other people. They are in charge of it now. I no longer have any connection.” McGrath Goodman wrote:
Far from leading to a Tokyo-based whiz kid using the name “Satoshi Nakamoto” as a cipher or pseudonym (a story repeated by everyone from Bitcoin’s rabid fans to The New Yorker), the trail followed by Newsweek led to a 64-year-old Japanese-American man whose name really is Satoshi Nakamoto. He is someone with a penchant for collecting model trains and a career shrouded in secrecy, having done classified work for major corporations and the U.S. military.
Standing before me, eyes downcast, appeared to be the father of Bitcoin.
Not even his family knew.
Many in the Bitcoin community did not believe the allegations. Andreas Antonopoulos, a bitcoin educator and speaker, rallied to Dorian’s defense, raising funds for him after his life had been uprooted by the viral report. By April 22, 47 bitcoins had been raised for Dorian, who said he planned to keep his “bitcoin account” open and become a user.
Bitcoin OG Hal Finney Passes Away
Hal Finney succumbed to ALS August 28th, 2014 after a 5-year battle with the disease. He lived for ten years in the same town as Dorian Satoshi Nakamoto, interestingly. By March 2013, ALS had handicapped Hal, as he explained in a thread on BitcoinTalk.
“When Satoshi announced the first release of the software, I grabbed it right away,” Finney wrote. “I think I was the first person besides Satoshi to run bitcoin. I mined block 70-something, and I was the recipient of the first bitcoin transaction, when Satoshi sent ten coins to me as a test. I carried on an email conversation with Satoshi over the next few days, mostly me reporting bugs and him fixing them.”
Finney mined bitcoins with CPUs before GPU miners were required. The noise of mining bothered Hal, and made his computer run hot, and so he stopped. Doctors diagnosed Hal in 2009.
“I was in the best shape of my life at the start of that year, I’d lost a lot of weight and taken up distance running,” he wrote on BitcoinTalk. “I’d run several half marathons, and I was starting to train for a full marathon. I worked my way up to 20+ mile runs, and I thought I was all set. That’s when everything went wrong.”
He added: “My body began to fail. I slurred my speech, lost strength in my hands, and my legs were slow to recover. In August, 2009, I was given the diagnosis of ALS, also called Lou Gehrig’s disease, after the famous baseball player who got it.”
Hal remains a central figure in the history of Bitcoin. Hal continued to program, despite his paralysis, until he passed away. He was working on software called bcflick, which used Trusted Computing to strengthen Bitcoin wallets.
The CFPB Issues A Warning To Consumers
The Consumer Financial Protection Bureau issued in August a consumer advisory warning the public about the risks of Bitcoin and other virtual currencies, citing unclear costs, volatile exchange rates, the threat of hacking and scams, and the inability for refunds. Consumers who encountered a problem could submit a complaint with the Bureau.
“Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions,” said CFPB Director Richard Cordray. “Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market.”
Overstock, TigerDirect, Dell, Etc. Begin Accepting Bitcoin
Overstock became the first major U.S. retailer to accept Bitcoin. Byrne tweeted that, after 21 hours on Overstock.com, 780 bitcoin orders had accounted for $124,000 in sales.
“We believe that Bitcoin is nearing a tipping point for broad consumer adoption,” Coinbase wrote in a blog post. “We couldn’t be more thrilled to be working with the team at Overstock.com to help make that a reality.”
Having also partnered with Coinbase, Dell.com began piloting Bitcoin acceptance. It had already been possible to purchase Dell.com gift cards through Gyft, where you could buy and send gift cards online.
“We’ve fostered a close partnership with the Dell team and that’s been instrumental in getting the Coinbase integration up and running in such a short timeframe. We look forward to continuing to support the team as they explore other ways to offer even more functionality when it comes to bitcoin payments,” said Fred Ehrsam, Co-Founder of Coinbase.
By 2017, however, Dell.com stopped accepting Bitcoin payments due to a lack of demand. TigerDirect began in January accepting bitcoins, though had some time thereafter removed the payment option.
Newegg began in July accepting Bitcoin. “Adopting bitcoin as a payment method is another way we’re responding to our customers’ diverse needs,” said Soren Mills, Chief Marketing Officer for Newegg North America. “Working with BitPay to implement a bitcoin payment option at Newegg was a seamless process and our partnership gives us the capabilities we require for high-volume e-commerce.”
North Carolina-based REEDS Jewelers began in June accepting bitcoins. With 64 retail locations at the time, the company, which had been in business since 1946, used Coinbase as its payment processors, and customers could pay with bitcoin both in-person and online.
That’s 2014 in review. Coming Soon: The Year 2015