FIRST SIGNS OF LIFE

There were a lot of firsts to be ticked off in Bitcoin’s maiden month, and on January 12th, 2009, one of the most significant occurred when the network recorded its first transaction featuring Hal Finney.

On January 11th, Hal had already claimed another first by becoming the first person to tweet about Bitcoin. His immortal two-word message simply read “Running bitcoin.” A day later, Hal’s wallet received 10 BTC in a transaction sent to him by Satoshi. This was about more than awarding Hal the bragging rights to the first Bitcoin transaction: it was verifiable proof that the network was working as intended.

Hal was a natural choice to receive the first BTC transaction: he’d been one of the first to respond to Satoshi’s Cryptography Mailing List announcement a few days earlier and had wasted no time in spinning up his own node. He promptly became the Robin to Satoshi’s Batman, corresponding with Bitcoin’s pseudonymous creator via email and pinpointing minor bugs.

Quietly Making History

While great significance is now rightly accorded to the first ever Bitcoin transaction, at the time it was an unremarkable event; two like-minded internet strangers patching software and testing node configurations. Years later, Hal would fondly recall: “After a few days, bitcoin was running pretty stably, so I left it running. Those were the days when difficulty was 1, and you could find blocks with a CPU, not even a GPU.

“I mined several blocks over the next [few] days. But I turned it off because it made my computer run hot, and the fan noise bothered me. In retrospect, I wish I had kept it up longer, but on the other hand I was extraordinarily lucky to be there at the beginning.”

Bitcoin’s UTXO model means that each transaction typically contains multiple parts that are transferred to different recipients, including a small fee paid to the miner who published the transaction in a new block. In the case of the network’s first transaction, the coins Satoshi sent came from a 50 BTC coinbase reward, since mining was the only way to obtain bitcoins back then. As a result, this single 50 BTC input was broken into two, with 10 BTC going to Hal and the remaining 40 BTC being returned to Satoshi’s wallet in the form of a separate UTXO.

Back in those early days, there were no network fees for sending bitcoin. Which means that the transaction between Satoshi and Hal was not just the first of its kind – it was also one of the cleanest. One input and two outputs were all it took to make Bitcoin start working just as the title of its whitepaper described: as a peer-to-peer electronic cash system.