Bitcoin Pizza Day

Wonder

1. What is a new money worth before anyone has traded it?
2. Why would anyone accept a few dollars of pizza for ten thousand coins?
3. When does a curiosity become a means of payment?

Explore

1. For most of 2009, bitcoin had no price. Coins were mined by a handful of enthusiasts and occasionally sent between them, but no one bought or sold them for money. A currency with no market has a quantity and a ledger but no exchange rate; its value is a question no one has yet answered by trading. The first answers came from people willing to put a number on it, however arbitrary.
2. On 5 October 2009, a service called New Liberty Standard published a rate of 1,309.03 BTC to one US dollar. It reached that figure by estimating the cost of the electricity needed to mine a bitcoin, valuing the coin at its cost of production. The method was crude, but it was a starting point: a public quote at which someone stood ready to trade. Early sales on this basis were tiny, often a few dollars at a time.
3. Markets followed. BitcoinMarket.com, generally described as the first bitcoin exchange, opened in early 2010 and let users post bids and offers against each other rather than against a single dealer. Prices began to reflect what buyers would actually pay, not only what mining cost. Volumes remained small, payment methods were awkward, and the few participants were mostly hobbyists, programmers and people curious to see whether the experiment would work.
4. On 18 May 2010, the Florida programmer Laszlo Hanyecz offered 10,000 BTC on the BitcoinTalk forum to anyone who would get him two large pizzas. On 22 May another forum member, Jeremy Sturdivant, ordered two pizzas from Papa John’s and had them delivered; Hanyecz sent the coins. The pizzas cost about $25; the 10,000 BTC were worth roughly $41 at the time. It is often cited as the first purchase of physical goods with bitcoin, and 22 May is now marked each year as Bitcoin Pizza Day.
5. Hanyecz was also among the first to mine bitcoin on graphics cards, writing GPU mining code in 2010 that did many times more hashing than a CPU. That began the shift from hobby mining on ordinary computers toward specialized hardware, raising difficulty and changing who could mine profitably. The same person who made the most famous early purchase also helped end the era in which anyone could mine meaningful amounts on a laptop.
6. The pizza purchase is usually retold as a joke about what those coins became worth. The more useful reading is about how money gets a price at all: through trade between people with different needs, starting from rough guesses such as production cost and novelty. Find the transaction on a block explorer (it was confirmed on 22 May 2010) and look at its inputs: many small coinbase-era outputs gathered to make up 10,000 BTC.

Key facts

Exercise nine, six, three, one

Fact check

Dates, figures and claims checked against the published sources listed below.

• L. Hanyecz, 'Pizza for bitcoins?', BitcoinTalk forum (May 2010)
• New Liberty Standard exchange rate archive (2009)
• N. Popper, Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money (2015)