History of cryptocurrency
Since their launch in 2008, do you know that digital coins and cryptocurrency projects have found incredible use in many areas of human activity? In this article, we’re going to tell you about the origin and history of cryptocurrencies and some of those projects that are behind their development.
The history of cryptocurrencies is thought to have started with the appearance of bitcoin in the world. From our perspective, it happened much earlier, when David Chaum, a famous American cryptographer, launched an anonymous cryptocurrency known as Digicash in 1995. It is important to note that Digicash was the prototype for the cryptographic electronic payments we know today. After that, Nick Szabo introduced the concept of Bit Gold digital currency which is considered the predecessor of modern crypto-currencies, such as bitcoin.
The idea of Bit Gold mining was also introduced when participants in the system, who wanted to earn money and receive rewards in cryptocurrency, were offered to solve complex cryptographic problems using extremely powerful central processing units. The answers were then sent to other participants in the system for validation. In this way, the Bit Gold network was supported and moderated by the users themselves, which led to an increase in the turnover of cryptocurrencies. However, the problem of double spending of money was not solved, so that the wallet owner could copy the answer to the mathematical problems and pay twice with the same money. To solve this problem, it was proposed to create a central monitoring body, which would keep the history of transactions in the computer network nodes. But this solution was not implemented, as it violated the basic idea of a decentralised network, requiring a single supervisory authority. Eventually, the crypto-currency project was suspended due to the lack of appropriate technology and a common vision of what the project should be.
Later, an anonymous developer, Satoshi Nakamoto, revolutionised the cryptocurrency market in 2008 by introducing the blockchain-based bitcoin. This new distributed ledger technology was a real breakthrough, which gave impetus to new projects in the financial sector as we know it today, and led to the creation of the cryptocurrency market. It is said that the success of the blockchain comes from the fact that it is an open and transparent network in which blocks of information about a transaction are stored. Anyone can check that this information is correct, which makes it virtually impossible to falsify data and avoid the possibility of spending the same amount twice. In addition, bitcoin is considered a very volatile asset because its market rate is not regulated by anyone, so it can change quickly in a matter of hours. This volatility is considered a disadvantage, as prices are not stable. At the same time, this volatility allows traders to make short-term gains, as the value of bitcoin is affected by many factors, such as statements on Twitter, legislative regulations, press articles, and very high buying or selling volumes.
Bitcoin gained popularity within the crypto community and triggered the emergence of alternative cryptocurrencies (also called altcoins) in 2011. One of the main features of altcoins is the speed of transactions, as payment with bitcoin is too slow, effectively taking 20–60 minutes. The Ethereum (ether) platform was launched in 2015 to facilitate smart-contracts and decentralised applications that have had a big impact on the development of crypto-currencies. Today, according to CoinMarketCap, there are over 9,000 altcoins in circulation. Litecoin and Namecoin were the first alternative crypto-currencies to emerge on the market. However, bitcoin has come a long way to get to where it is today. Its existence has allowed for the emergence of new projects related to the cryptographic industry, which find use in our daily lives.
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Valentina BEREZA, Team bit4you
