An Idea Is Born

A person, or perhaps a group of people, going by the name Satoshi Nakamoto publishes a paper outlining a peer-to-peer electronic cash system.

The idea represents a breakthrough in using software code to authenticate and protect transactions without resorting to a centralized bank or government treasury.

A Currency for the Times There are differing theories about why Mr. Nakamoto proposed the currency alternative. One prominent notion is that it was a response to the global financial crisis.

In the bitcoin network’s transaction database, there is a note by Mr. Nakamoto in the original entry:

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”

The passage is a reference to a Times of London article about a British official weighing the merits of a second bailout for banks.

Hungering for Something Tangible

A person uses bitcoins to order pizza three months after a marketplace was established for the currency. The pizza cost the person 10,000 bitcoins.

Early Hints of Safety Concerns

The virtual currency is exposed as being just as vulnerable as the paper kind, when bitcoin accounts were subject to hacking and theft.

At least one group that collected donations in bitcoins decides against using them because of possible legal entanglements.

Despite Risks, a Growing Legitimacy

The use of the currency grows, but it's largely relegated to corners of the Internet, including black markets that sell illegal goods.

Nonetheless, several enterprising groups begin devising ways to legitimize bitcoins, including the Paly Entrepreneurs Club, an extracurricular group at a high school in Palo Alto, Calif., that works to organize a trading network for the currency.

Coinbase, a Silicon Valley start-up, also aims to provide a nontechnical solution to using bitcoins.

A Lot of Coin

After a price surge that began in January, the collective value of all bitcoins passes a billion dollars.

That is a lot of coin in any form, and the billion-dollar milestone turns the once-obscure online currency into a media sensation.

So why the sudden run-up in value? Some point to the recent economic crisis in the European Union, which makes a currency beyond the control of governments more tempting. And as with a run-up in anything tradable — tulip bulbs, dot-com shares — there is also the hypnotic logic that says the price went up today, so that means it will go up tomorrow.

What is clear, however, is that the main use of the currency appears to be illicit activity. There are the online gambling sites that use bitcoins. And the anonymous online marketplace Silk Road, which accepts only bitcoins, is “overwhelmingly used as a market for controlled substances and narcotics,” according to a paper on Silk Road written by a Carnegie Mellon professor.

Never Mind Facebook

The Winklevoss twins, Cameron and Tyler — Olympic rowers, nemeses of Mark Zuckerberg — amass what appears to be one of the single largest portfolios of the digital money.

The Winklevii, as they are known, say they own nearly $11 million worth.

In addition to the twins, Silicon Valley investment firms, while not holding bitcoins, are starting to show interest in the technology, and a group of venture capitalists, including Andreessen Horowitz, finance a bitcoin-related company, OpenCoin.

Winklevoss Brothers Want More

The Winklevosses file a proposal with securities regulators that would allow any investor to trade bitcoins, just as if they were stocks.

The plan involves an exchange-traded fund, which usually tracks a basket of stocks or a commodity, but in this case will hold only bitcoins.

It is part of a broader effort to remove the stigma hovering over bitcoin and other online money endeavors, which face a barrage of regulatory questions and enforcement actions.

Around this time, the world’s largest trading exchange for bitcoins, Mt.Gox, files with the Treasury Department to register itself as a money services business and comply with money-laundering laws.

A Ponzi Scheme in Texas

A Texas man, Trendon T. Shavers, is sued by the Securities and Exchange Commission and accused of running a Ponzi scheme that collected bitcoins from investors, promising them 7 percent weekly returns.

Mr. Shaver was selling some of the bitcoins and using the proceeds for his “rent, car-related expenses, utilities, retail purchases, casinos, and meals,” according to the complaint.

Betting on the Price of Bitcoins

SecondMarket, which allows investors to buy shares of hot private companies like Twitter, raises money for an investment fund that will hold only bitcoins.

The fund, the Bitcoin Investment Trust, aims to provide a reliable and easy way to bet on the future price of bitcoin, a currency generally traded on unregulated, online exchanges based overseas.

Silk Road, a Black Market Powered by Bitcoins, Is Shut Down

F.B.I. agents arrest Ross Ulbricht, 29, the man believed to be behind the Silk Road marketplace, on narcotics and money-laundering charges.

Silk Road began in 2011 as an underground online marketplace for drug users, a site where endless varieties of marijuana — as well as LSD, ecstasy and prescription pills — could be bought from sellers across the world.

It worked on one basic principle: Everyone remained anonymous. Users could gain access to the network only through software meant to ensure anonymity. Credit cards and PayPal were not accepted. Bitcoins, a virtual currency, were, and even those transactions were scrambled.

Silk Road is believed to have been responsible for something approaching half of all transactions involving bitcoins.

Moving Mainstream, Bitcoin A.T.M. Opens in Vancouver

The kiosk, which looks like an average A.T.M. but with hand and barcode scanners, opens for business at a trendy coffee shop in Vancouver, British Columbia.

With the A.T.M., users scan their hand to confirm identity, then funds move to or from a virtual wallet on their smartphone. The system limits transfers to $1,000 a day, in an effort to curb money laundering and other fraud.

Regulators See Value; Investors Hasten to Agree

Federal officials indicate at a Senate hearing on Nov. 18 that such digital currency networks offer real benefits for the financial system even as they acknowledge that new forms of digital money have provided avenues for money laundering and illegal activity.

The Senate hearing is the clearest indication yet of the government’s desire to grapple with the consequences of this growth, and the recognition that bitcoin and other similar networks could become more lasting and significant parts of the financial landscape.

Value Surpasses $700 The price of a bitcoin on an exchange that converts them to dollars rises to $780, a meteoric gain from its beginnings in 2010. The total outstanding pool of bitcoin — which is created by a network of users who solve complex mathematical problems — is now worth more than $7 billion.