The History and Evolution of Cryptocurrency
Cryptocurrencies may have entered the mainstream in 2013, but their history goes back to the birth of the Internet, meaning there’s more to the story than meets the eye. Here, we’ll go over this story and the significant milestones of this young currency.
What Is Cryptocurrency?
Cryptocurrency is a form of online money that can be used to purchase goods or invest. It is not considered legal tender, so it is not widely accepted. Cryptocurrency transactions are made and recorded on a decentralized network called a blockchain.
Though they have similarities, cryptocurrency should not be confused with electronic cash or Automatic Clearing House (ACH) payments involving legal tender. Cryptocurrency is a decentralized currency that is not regulated or backed by a government. Both ACH and cryptocurrencies have limited acceptance, with select options for making purchases. However, if you look around, you’ll discover casinos that accept ACH payments, crypto betting sites, and even options for purchasing luxury goods or real estate using these payment methods.
Early Cryptocurrencies and Influential Digital Concepts (1989 - 1998)
The first versions of cryptocurrencies were developed in the early days of the Internet, with one of the first versions, DigiCash, becoming available in 1989, just six years after the official birth of the Internet. These currencies were pioneers of crypto as we know it today, laying the groundwork for its later success.
DigiCash (1989)
David Chaum developed the concept of DigiCash in 1983. He aimed to enable people to securely and privately transfer funds online by encrypting the transaction. DigiCash launched in 1989 but was bankrupt by 1998.
E-Gold (1996)
E-Gold was initially designed to allow people to trade gold online and was tied to the value of physical gold. It was a popular currency, but its money laundering issues caused it to shut down in 2009.
Hashcash (1997)
Hashcash is not an early cryptocurrency but an early proof-of-work system considered a model for Bitcoin’s mining system, making it an important milestone in crypto history. Hashcash, which began in 1997, requires users to solve a mathematical equation or puzzle before accessing a service or sending an email. It was developed to prevent spam or bots from filling up email inboxes, and major tech giants like Microsoft used it.
B-Money and Bit-Gold (1998)
Other early cryptocurrencies connected to Bitcoin are B-Money and Bit-Gold. Both focused on developing secure and decentralized ledgers. Bit-Gold was the most similar to Bitcoin in theory. It was designed by Nick Szabo to operate as a decentralized system using a proof-of-work mechanism to transfer funds. Although it was never fully operational, many of its concepts, such as decentralization, can be found in Bitcoin.
The Birth of Bitcoin (2009)
Bitcoin, the first fully functional cryptocurrency, is among the best-known and most influential cryptocurrencies to hit the market. It was launched anonymously under the name Satoshi Nakamoto (some theorize that this is Nick Szabo). The white paper was published in 2008, and it officially launched in January 2009.
Bitcoin’s defining characteristic was its blockchain, which allowed the transfer of funds to be traced and securely executed by being unalterable and shared across computers within a network. It also allowed people to transfer money without needing a bank, thereby creating a decentralized system.
The first real transaction with Bitcoin occurred in January 2010, when Laszlo Hanyecz ordered two pizzas from Papa John’s for delivery. Initially, interest in Bitcoin was limited to programmers, developers, and those keen on new technology. It took a few years for Bitcoin to become widely known.
The Creation of Altcoins (2011 - 2013)
After Bitcoin’s inception, other cryptocurrencies were developed and made available to the public. Some, such as Litecoin, Peercoin, and Feathercoin, aimed to improve upon Bitcoin’s capabilities. Others developed unique uses, such as registering or transferring domain names through a decentralized system.
Crypto Becoming Part of the Mainstream (2013 - 2016)
In 2013, Bitcoin became widely known after its value surged from $213 to $1,200 in less than a year. Although it dipped in value by the end of the year, the spike was enough to garner interest and bring Bitcoin into the mainstream. Since 2013, Bitcoin has experienced ups and downs, making it a risky investment.
However, Bitcoin is not the only influential cryptocurrency on the market. Ethereum, another widely recognized cryptocurrency, was released in 2013. It was developed to build on Bitcoin’s capabilities and make the technology useful for various applications, including decentralized contracts and decentralized apps (dApps).
Between 2013 and 2016, major organizations such as Microsoft, Shopify, and Expedia made Bitcoin a payment option for their users. The potential of blockchains beyond cryptocurrencies garnered attention, and the technology is now used for diverse services, including storing and maintaining medical records, voting systems, and entertainment like gaming.
The Decentralized Autonomous Organization (DAO) was launched in 2016. However, it fell victim to a hack, resulting in the loss of $50 million worth of tokens. This hack wasn’t the first to impact the crypto industry, but it has prompted changes to blockchain systems, such as implementing “hard forks” to enhance security. It also increased apprehension toward using cryptocurrencies more broadly.
Current Crypto Trends and Recent Developments
In 2019, decentralized finance (DeFi) gained traction, increasing interest in cryptocurrencies like Bitcoin and Ethereum, as well as crypto-lending platforms. The pandemic significantly impacted crypto, increasing its popularity as a potential inflation hedge. Cryptocurrency values rose once again. As the pandemic waned, crypto values began to decline, leading to what’s been called a “crypto winter.” Following the 2024 US election, however, crypto values have risen again, with many hoping for a continued upward trend due to Donald Trump’s vocal support of crypto.
Final Thoughts
Although cryptocurrencies are still young, they hold many possibilities. The technology extends beyond purchasing, showing promise as a more secure way to store and share personal information. The history of the concept has been filled with both positive and negative events, and the market’s volatility suggests that there will be many more notable events to watch for in the future, making the future of the industry hard to predict.