If Bitcoins aren't tied to a conventional currency, how did they get so valuable?
Good question! When the bitcoin network was first created in 2009, bitcoins were barely worth anything. Bitcoin lore holds that the very first real-world bitcoin transaction occurred in May 2010, when one early bitcoin user paid another user 10,000 bitcoins for two pizzas. At the time, bitcoins were trading for less than a penny each.
But as the bitcoin community grew, the currency's value steadily climbed. By the time I started paying attention to bitcoin in April 2011, its value had climbed to $1. This was at the start of the first great bitcoin bubble. Media coverage of bitcoin attracted new users, which caused the price to rise. The rising price, in turn, attracted more media interest. The value rose to more than $30 by June, before it crashed and fell to $2 before the end of 2011.