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The First Rise of Bitcoin

The Great Slashdotting

The History of Bitcoin's Creation

The Great Slashdotting

  • The version 0.3 of the software
  • A Presentation for Slashdot
  • Slashdotted!
  • The Creation of Mt. Gox
  • The Accelerating Effect of Slashdotting
At the beginning of the summer of 2010, Bitcoin was based on a shaky foundation despite some encouraging initial developments. The software had few developers other than Satoshi Nakamoto. Miners were amateurs on their personal computers. There were about twenty services related to Bitcoin, and actual exchanges were just as rare. However, things were about to change drastically during the year's second half.
In this chapter, we aim to discuss the "great slashdotting," that is, the sudden influx of users that followed the publication of a presentation of Bitcoin on the popular website Slashdot on July 11, 2010. We will see how this text came to exist as Satoshi's last communication effort and what the direct effects were that followed this popularization of Bitcoin.

The version 0.3 of the software

The beginning of summer 2010 was marked by the release of version 0.3 of the software, which Satoshi Nakamoto and Martti Malmi had long prepared. Compared to version 0.2, released in December of the previous year, this version includes crucial improvements such as a daemon (which would become bitcoind), command line control, an API (via JSON-RPC), optimization of unit generation, and a "hashmeter" estimating the user's hash rate. It also includes support for Mac OS X brought by the contribution of Laszlo Hanyecz and the translation of the graphical interface into German, Dutch, and Italian. On June 22, Satoshi asks forum members to test this software version. He sees the release of this version as a pivotal moment in the development of Bitcoin and considers even dropping the "beta" aspect by directly moving the numbering to version 1.3. However, he reverts to his decision rather quickly.
On July 6, Satoshi Nakamoto announced the release of version 0.3 of the software. Knowing that this version might be significant for the advancement of Bitcoin, he carefully prepares the presentation and writes:
"Here is version 0.3 of Bitcoin, the peer-to-peer cryptocurrency! Bitcoin is a digital currency that uses cryptography and a distributed network to replace the need for a trusted central server. Escape the arbitrary inflation risk of centrally managed currencies! The total circulation of bitcoin is limited to 21 million units. The units are gradually distributed to the network's nodes based on the computing power they provide, so you can get a share of them by contributing your idle CPU time."

A Presentation for Slashdot

On the occasion of the release of the new software version, a forum user named Teppy (the administrator of the MMORPG that started accepting bitcoin in May) proposes to advertise on Slashdot, a very popular news site that covers topics for nerds such as computing, video games, science, the Internet, etc., which gets its name from the two characters /.. On June 22, he asks on the forum whether they should "try for some publicity", specifying that "Slashdot is a good place if we can get it." (original: "Should we try for some publicity? Slashdot is good if we can get it.") Martti Malmi comments writing that "reaching Slashdot, with its millions of technically competent readers, would be awesome, perhaps the best thing one could imagine!"
On July 5, Teppy writes a presentation that he plans to submit himself to Slashdot and publishes it on the forum:
"How's this for a disruptive technology? Bitcoin is a buyer-anonymous, seller-anonymous cryptocurrency with no central bank, and no transaction fees. Using a concept similar to Hashcash, clients burn CPU cycles attempting to discover some of the 21,000,000 Bitcoins that will eventually be found. It is expected that over time, the market value of Bitcoins will reach parity with the energy needed to generate them, resulting in an energy-backed currency outside the reach of any government."
Several forum members make suggestions for improving this text. Satoshi intervenes himself a few hours after the first message to give his opinion. He writes that he "really appreciates the effort," but that "there are a lot of problems," then he lists the elements that bother him:
  • Regarding the absence of state influence, he exercises caution by writing that he does not "certainly engage in that kind of provocation or claim"; (original: "'The developers expect that this will result in a stable-with-respect-to-energy currency outside the reach of any government.' – I am definitely not making any such taunt or assertion.")
  • Concerning the backing by energy, he considers that the currency "is not stable with respect to energy" and adds: "This subject has been discussed. It is not linked to the cost of energy. NLS's energy-based estimate was a good starting point, but market forces will increasingly dominate.";
  • Regarding the anonymous aspect of the system, he states that he does not want to "highlight the 'anonymous' aspect" and that he had "intended to modify the homepage" in this regard. (original "We don't want to lead with 'anonymous'. (I've been meaning to edit the homepage)")
In an email addressed to Martti Malmi a few hours later, Satoshi gives two main reasons to explain this intention to downplay anonymity: the danger to the user and public perception. He writes:
"I think we should de-emphasize the anonymous aspect. With the popularity of bitcoin addresses instead of sending by IP, we can't give the impression that everything is automatically anonymous. It's possible to be pseudonymous, but you have to be careful. [...] Moreover, 'anonymous' sounds a bit suspect. I think the people who want anonymity will find out about it without us promoting it."
He concludes his message on the forum by:
"Sorry to be a wet blanket. Writing a description of this thing for the general public is damn hard. There's nothing to relate it to."
Subsequently, Teppy updated the presentation, taking into account the suggestions. Thus, at the beginning of July, it was observed that the discourse around Bitcoin was well-calibrated, indicating it was ripe for an unprecedented influx.

Slashdotted!

On July 11, 2010, a revised version of the Bitcoin presentation written by Teppy was published on Slashdot. It read as follows:
"How's this for a disruptive technology? Bitcoin is a peer-to-peer, network-based digital currency with no central bank, and no transaction fees. Using a proof-of-work concept, nodes burn CPU cycles searching for bundles of coins, broadcasting their findings to the network. Analysis of energy usage indicates that the market value of Bitcoins is already above the value of the energy needed to generate them, indicating healthy demand. The community is hopeful the currency will remain outside the reach of any government."
The publication was noticed, and nearly 500 comments were posted in a few days. For Bitcoin, this success led to a massive influx of visitors to the site and forum. The use of the blockchain surged: the number of transactions carried out on the network increased from 42 on July 10 to 1,641 on the 12th, reaching 5,554 on the 14th, an all-time high. The system held up despite the increased load. On the 14th, developer Gavin Andresen wrote on the forum:
"I think Satoshi did a fantastic job: in the last two days when Bitcoin was 'slashdotted', I haven't heard of ANY issues with Bitcoin transaction losses, nor network downtime due to the load, or any problems concerning the basic functionalities.
The first consequence of this influx is that the price of Bitcoin experienced a meteoric rise, going from $0.008 to $0.08 in one week, which is a tenfold increase!
Another effect of the influx of people from Slashdot is the increased computing power deployed on the network. Many people start the software and produce blocks with their central processors. Between July 11 and July 17, the hash rate increased from 0.22 GH/s to 2.78 GH/s.

The Creation of Mt. Gox

Among those who discovered Bitcoin thanks to Slashdot was Jed McCaleb, a 35-year-old American entrepreneur and programmer known for co-founding and developing the peer-to-peer file-sharing software eDonkey2000 in the 2000s. Realizing the difficulty of obtaining bitcoin in exchange for dollars, he decided "on a whim" to create an efficient marketplace. To do this, he repurposed one of his old projects developed in 2007: Magic The Gathering Online eXchange (MTGOX), a website that allowed buying and selling cards for the online game Magic: The Gathering Online. He reused the domain name of this project (mtgox.com), which became the name of the new platform: Mt. Gox, pronounced "Mount Gox".
Jed McCaleb in 2013 (source: Ariel Zambelich for Wired)
One week later, on July 18, Jed McCaleb launched his exchange platform and announced it on the forum. Thanks to his expertise, he ensured the platform operated as an automated marketplace, similar to modern online exchanges. According to him, it stood out from Bitcoin Market because it was "always online, automated," "the site was faster and had dedicated hosting," and "the interface was more user-friendly." As a result, Mt. Gox quickly became the primary means of acquiring bitcoin, establishing itself as the benchmark for dollar quotations.
Interface of the Mt. Gox platform in February 2011 (source: Mt. Gox archive)
Initially, the platform accepted payments via PayPal. However, in October 2010, following too many chargeback requests, PayPal blocked Jed McCaleb's account, which forced him to suspend deposits and withdrawals on the platform temporarily. A few weeks later, he restored transfers by adding Liberty Reserve as a payment method. Subsequently, he also accepted transactions via Paxum upon request, and bank transfers in dollars (ACH) and in euros (SEPA).

The Accelerating Effect of Slashdotting

The effect of publishing the introduction to Bitcoin on Slashdot was spectacular for Satoshi Nakamoto's project. The influx of interested people led to a record price and an increase in hash rate. Moreover, it prompted a certain Jed McCaleb to discover Bitcoin and create a worthy marketplace for trading the unit of account under the name of Mt. Gox. In the following months, technical, economic, and mining improvements flourished, making Slashdot the real starting point of Bitcoin as a community movement. However, the most significant changes occurred at the software and protocol levels: major vulnerabilities needed to be fixed. The next chapter focuses on these technical issues, which form a crucial step in the development of Bitcoin.
Quiz
Quiz1/5
What aspect of Bitcoin did Satoshi wish to downplay in his communication in July 2010?