I
pron.
12c. shortening of Old English ic, first person singular nominative pronoun, from Proto-Germanic *ek/*ik (cognates: Old Frisian ik, Old Norse ek, Norwegian eg, Danish jeg, Old High German ih, German ich, Gothic ik), from PIE *eg-, nominative form of the first person singular pronoun (cognates: Sanskrit aham, Hittite uk, Latin ego (source of French Je), Greek ego, Russian ja, Lithuanian aš). Reduced to i by mid-12c. in northern England, it began to be capitalized mid-13c. to mark it as a distinct word and avoid misreading in handwritten manuscripts.
The reason for writing I is ... the orthographic habit in the middle ages of using a 'long i' (that is, j or I) whenever the letter was isolated or formed the last letter of a group; the numeral 'one' was written j or I (and three iij, etc.), just as much as the pronoun. [Otto Jespersen, "Growth and Structure of the English Language," p.233]
The form ich or ik, especially before vowels, lingered in northern England until c.1400 and survived in southern dialects until 18c. The dot on the "small" letter -i- began to appear in 11c. Latin manuscripts, to distinguish the letter from the stroke of another letter (such as -m- or -n-). Originally a diacritic, it was reduced to a dot with the introduction of Roman type fonts. The letter -y- also was written with a top dot in Old English and early Middle English, when it tended to be written with a closed loop at the top and thus was almost indistinguishable from the lower-case thorn (þ).