A Brief History of Cryptocurrencies
But before taking a look back on the history of currency, let’s discuss what cryptocurrency is.
What is Cryptocurrency?
Cryptocurrency is referred to as the digital currency, which involves encryption techniques to regulate the production of units of currency and verify money transactions. Cryptocurrencies are decentralized and therefore, operate independently with no involvement of governments or central banks. Cryptocurrencies do not have intrinsic value like fiat currencies or commodities like gold.
More simply, cryptocurrency is a web-based medium of exchange that involves cryptographical functions to execute financial transactions. Fundamentally, cryptocurrencies exploit blockchain technology to obtain decentralization, immutability, and transparency.
Historical Foundations of Cryptocurrencies
You need to know that the concept of digital currency is not new. Several attempts have been made in history to create one. Technical foundations of cryptocurrencies were laid in the early 1980s by David Chaum (American Cryptographer) who first invented the binding algorithm that is central to the existing web-based encryption.
This blinded algorithm allowed unalterable information and secure exchanges between parties. This digital asset was known as ‘blinded money’ or ‘B-Money’.
Afterward, Chaum established ‘DigiCash’ to produce units of currency using a blinded algorithm. However, unlike Bitcoin and other cryptocurrencies, DigiCash was not decentralized, and that enabled banks to exercise a monopoly on this digital currency just as they do on fiat currencies.
In 1998, Wei Dai (computer engineer) published a paper on ‘B-Money’ in which he discussed the digital currency that can be sent to many people of untraceable digital pseudonyms. However, this virtual currency could not be deployed as a means of exchange.
In the same year, Nick Szabo (blockchain pioneer) made another attempt to create digital currency and named it ‘Bit Gold’. Szabo’s idea was encouraged by the inefficiencies of conventional financial systems like the need for metal to create coins and to reduce the involvement of third parties in transactions. Similar to DigiCash, Bit Gold did not gain popularity and is no longer used.
Bitcoin- First Ever Cryptocurrency
Bitcoin (BTC) is the first modern cryptocurrency that was invented by anonymous ‘Satoshi Nakamoto’ in the white paper in 2008. In this white paper, the Bitcoin blockchain network and its functionality as described.
Later in 2009, Bitcoin was first announced publicly. It is basically a peer-to-peer electronic cash system. By 2010, Bitcoin gained monetary value as users started trading it too along with mining.
Bitcoin is used as a means of exchange that combines user anonymity, decentralized control, and record-keeping through blockchain.
Adoption of Cryptocurrency
It was only by 2011 when rival cryptocurrencies emerged such as Altcoin with the purpose to improve the design of original Bitcoin and enhance its speed, anonymity, transparency, and other benefits. By 2013, other cryptocurrencies that emerged after Bitcoin were Litecoin and Ripple. Presently, there are more than 2000 cryptocurrencies in circulation.
The rise in Cryptocurrency Market
In June 2011, Mt. Gox (Bitcoin exchange platform) got hacked, and around 2000 Bitcoin was stolen with a value of approximately $30,000 at that time. Likewise, in 2013, after the shutting down of Silk Road (dark website), more than 26,000 Bitcoin were seized that led to a reduction in prices of Bitcoin from $139 to $109.
After these debacles, a negative perception prevailed towards Bitcoin. In the later years of 2014 and 2016, the price of Bitcoin plummeted almost by 50%.
In 2016, the Ethereum platform was developed with its native cryptocurrency Ether (ETH). Ethereum gained traction due to the emergence of ICO (Initial Coin Offerings). These are the fundraising platforms that offer investors opportunities to trade cryptocurrencies.
By 2017, Bitcoin’s price rose to $10,000 and since then it has continued to grow gradually. Currently, large banks like CitiBank, Barclays, and Deutsche Bank and BNP Paribas are finding ways to work directly with Bitcoin.
Now you have developed a comprehensive understanding of the history of cryptocurrencies. Also, the list of cryptocurrencies is constantly expanding at a rapid pace. Many industries are thinking to integrate these digital assets as a method of payment in their operations. With cryptocurrencies, you can control your digital assets on your own.
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