First mentioned in a 2008 paper published under the pseudonym "Satoshi Nakamoto", Bitcoin became operational in early 2009 with the release of the first open source client or wallet, Bitcoin-Qt,
and the issuance of the first bitcoins. The currency had early technical problems such as a 2009 exploit that allowed the creation of unlimited bitcoins. Historically,
Bitcoin-Qt was the sole software that could facilitate bitcoins transactions, and it initially also supported mining. This feature was later removed because specialized mining software is more efficient. By May 2011 interest in Bitcoin was growing, as were concerns.
A report by Jason Calacanis included statements such as "Bitcoin may be the most dangerous technological project since the internet itself."
The price of bitcoins has fluctuated wildly since its inception, going through various cycles of appreciation, which have been referred to as "Bubbles".
In 2011 the value of one bitcoin rapidly rose from about US$0.30 to US$32, reached parity with the USD for the first time in February 2011[15] before falling back down to US$2. Following increased media attention in the latter half of 2012 and the 2012-2013 Cypriot Financial Crisis, the bitcoin price began to rise again in early 2013 reaching a peak of US$266 on April 10 before crashing to around US$50 In March 2013 a technical glitch caused a fork in the block chain with one half of the network adding blocks to one version of the chain, and the other half adding to another. For six hours there were effectively two Bitcoin networks operating at the same time, each with its own version of the transaction history.
The core developers called for a temporary halt to transactions, sparking a sharp sell-off. Normality was restored when the majority of the network downgraded to version 0.7 of the Bitcoin software from the flawed version 0.8. In 2013 some mainstream services began accepting it as a form of payment. Certain non-profit or advocacy groups such as the Electronic Frontier Foundation also began accepting bitcoin donations. 2013 also saw the first interventions by law enforcement. Assets belonging to the Mt.Gox exchange were seized, and the Silk Road drugs trading website was shut down.
During November 2013, the China-based Bitcoin exchange BTC China overtook Japan-based Mt.Gox and Europe-based Bitstamp to become the largest Bitcoin trading exchange by trade volume. On 19 November 2013, the value a bitcoin on the Mt.Gox exchange soared to a peak of US$900 following a United States Senate committee hearing, at which the committee was informed that virtual currencies were a legitimate financial service. On the same day, one bitcoin traded for over RMB¥6780 (US$1100) in China. With roughly 12 million bitcoins in existence as of November 2013, the new price increased the market cap for Bitcoin to at least US$7.2 billion.
By November 23, 2013 the total market capitalisation of all bitcoins in existence exceeded US$10 billion for the first time. On 5 December 2013, the People's Bank of China announced it was prohibiting Chinese financial institutions from using bitcoins. Following the introduction of these new rules, the value of bitcoin dropped and Chinese internet giant Baidu reversed its policy of accepting bitcoins for certain services. Starting in October 2013,
Baidu had been allowing clients of website security services to pay with bitcoins. Buying real-world goods with any virtual currency has been illegal in China since at least 2009.