Cryptocurrency is a digital currency that you exchange via a computer network. Unlike traditional or fiat currency, it is not controlled by a central authority such as a central bank. It also uses decentralised blockchain technology to verify parties to a transaction, eliminating the need for banks.
The digital currency is not widely used for online transactions, including gaming, buying goods and services, donating to a worthy cause and cash transfers. Several crypto-gambling sites have also been established. Read the guide to crypto gambling to know more about it.
The use of cryptocurrency has revolutionised transactions across the world. The idea of having such a digital currency started a while back and has evolved over the years. Here is the history of the digital currency.
The Idea Behind Digital Currencies
The idea of having a digital currency was floated in the mid-1980s, with the first digital currency mentioned around 1989. However, the technology behind cryptographic protocols had not developed yet. There were software programs being developed that were called “cyber currencies.”
The first extensive elaboration of the idea came from David Chaum, who published a conference paper that outlined how cryptographic electronic money could work. At the time, the main idea was to bypass the banks. In 1995, the innovative cryptographer put his ideas into work by creating a proto cryptocurrency called Digicash.
Digicash was not a full cryptocurrency, but rather a software programme that could withdraw cash from the bank using a few scripted keys. It could also enable sending cash to other recipients remotely.
The First Step to Cryptocurrency
Three years later, in 1998, another innovator named Nick Szabo created Bit Gold, a direct precursor to the famed Bitcoin. This digital currency requires users to dedicate some computing power to solving cryptographic puzzles. Those who took the time to solve the puzzles got a reward. He combined Chaum’s work with the idea and created the first workable digital currency.
Unfortunately, Szabo could not solve the problem of copying and pasting digital data, which resulted in double spending. Therefore, he did not achieve a truly decentralised currency, but set in motion the wheels that would eventually lead to a fully functional digital currency.
A decade later, a mysterious group calling itself Satoshi Nakamoto created a history of Bitcoin by publishing a white paper that outlined how it could work and achieve both security and decentralisation.
The Beginning of Cryptocurrency
After the publication of the Bitcoin white paper on October 31, 2008, Satoshi
began working on the first truly usable cryptocurrency. They started by purchasing Bitcoin.org and putting in place the blockchain technology required to make it work.
When the initial work was completed, they mined the first Bitcoin in January 2009. To celebrate their success, they embedded the initial block for the first coin, which made a permanent reference to the economic change that was to be brought about by cryptocurrency. It did not create lots of excitement as the concept was new to many people.
The first block resulted in the mining of 50 coins. These coins were later called the Genesis Block. At the time, Bitcoin did not have any value. This continued on for several months after Bitcoin was released to the public. Six months later, Bitcoin became tradable. However, the initial cost of a coin was just 14 cents.
This price remained the same for another five months before going up to just 36 cents. However, it later went down to just 29 cents. It remained this way into 2010.
The Growth of the Crypto Market
After taking some time to gain traction, the crypto market finally started to take shape in February 2011. At this time, the coin rose in value to just over $1 but later came down to about 87 cents. However, the innovators were glad that the currency was finally taking shape.
With the hype that came about with the digital currency, many people started to notice it. By April 2011, the value of Bitcoin had risen to a high of $8.89. Unfortunately, there was still opposition to the use of the cash. Gawker even published it as a story about appealing to the online drug market.
However, this did not dim the market. In a week, the price tripled to about $27. Over the period, the value of Bitcoins in circulation had also grown to a value of a whopping $130 million. Unfortunately, the glory did not last long, as the value went down again to a meagre $4.77.
Later, in October, Litecoin appeared. It used the same technology as Bitcoin, but with a few updated features. Soon, it became the second-biggest currency by market cap. Soon after, there were several other cryptocurrencies. Some of the coins were called altcoins as they forked from Bitcoin, while others were built on a new code.
In 2012, Bitcoin grew steadily along with other cryptos. The Bitcoin Foundation was also established to promote the development of Bitcoin. Later in the year, several cryptocurrency development foundations, including Ripple, were launched.
However, the good times did not last long before digital currency got into problems. There were several regulatory, criminal, federal, and software-related problems that affected the market. This saw the market rise and fall in a few weeks. For example, on November 19, 2013, the price of Bitcoin rose to $7555, only to fall to $378 on the same day. It then went up to about $1,163 before falling to 10% of its value and remaining that way for a year. Other curries did not have a good run either.
There are now dozens of crypto coins on the market today with different values and codes. Unfortunately, the market remains volatile, with prices going up and down over the years. However, the general trajectory over a long period remains headed to the top and the coins are more secure. Investors are still putting their cash in various coins and many more are being used to buy goods and services.