It seems like the only thing everyone talks about these days is cryptocurrency. But, do you know the history of cryptocurrency? Today, we’re going to have our first history lesson: Cryptocurrency 101. Luckily for you, the history of cryptocurrency is a short one.
Before cryptocurrencies existed, we’ve had digital currency systems in place, but they’re not the same – these versions were centralized whereas these new forms of currencies (e.g., bitcoin and Etherum) are decentralized.
For a long time, people had always been trying to create an online digital cash system but had failed due to centralization issues. Examples of these include B-Money and Bit Gold, which were built but never developed. What’s wrong with centralization you may ask? Anything centralized is vulnerable to hacks or failure. They slow things down, where transactions could take days or weeks to send money overseas and is very costly due to high transaction fees.
In 2008, a white paper was sent to a mailing list about cryptography. This paper outlined new thing called the bitcoin protocol, a way for people to make transactions peer-to-peer online without an intermediary to establish trust. If you haven’t guessed, the paper outlined the first cryptocurrency, bitcoin, which was sent in by a man under the alias Satoshi Nakamoto - it's still unclear whether this is an individual or a group of people.
Satoshi knew that building another online centralized cash system would only result in failure due to previous attempts by other individuals, so he decided to build digital cash system that had no centralized authority. Thus, gave birth to bitcoin, the first decentralized form of digital cash with user anonymity, no governing body, record-keeping via a blockchain, and built-in scarcity.
In early 2009, bitcoin was released to the public for the first time. Enthusiastic supporters soon began exchanging and mining the bitcoin – the process of creating new bitcoins and transactions recorded and verified on the blockchain.
Since Satoshi’s invention, the foundational technology of blockchain has opened a gateway of possibilities. All forms of centralized authority will be challenged to be replaced with a decentralized, open source trust, and peer-to-peer protocol. To know the full extent of the power of blockchain, check out this video:
In the era of 2008 when bitcoin was created, it had a value of a single cent. However, in 2009, this amount grew to $27, which now has exploded to over $7,500 in 2017. With bitcoin able to prove to the world its ability to function in real-world situations and real purchasing power, more and more businesses from online retailers to banks to investment firms have adopted it as a legit form of payment.