The Fascinating History of Cryptocurrency, Then & Now
The history of cryptocurrency is a much older and more interesting story than most people believe.
Cryptocurrency history is a history of trying to solve problems that have plagued mankind and money systems since they began. It’s a combination of several ongoing systems that give hope to a whole generation that the future will be brighter.
How was cryptocurrency invented? Why was cryptocurrency invented? Who invented cryptocurrency?
These are good questions with complicated answers. Keep reading to see the story of the real history of cryptocurrency.
The Beginning Of Modern Fintech
Electronic payment systems are quite a bit older. The first one appeared in 1871 with the advent of wiring money. The first company to facilitate these transfers was the Western Union Telegraph Company.
At this point, though, currencies are still the hard currency we’ve had since the Macedonians invented the “shekel.” Wire transfers were in essence an agreement between banks based on morse code and telegrams. They didn’t trust the account holders, and it wasn’t peer-to-peer.
If they didn’t trust anyone else, banks did trust each other.
It took about a hundred years before SWIFT took the baton in 1973 and Nasdaq got founded in 1971 that the economy went more or less digital.
As amazing as those events are, the true beginning of “Fintech 2.0” was the invention of the ATM, or Automated Teller Machine, in 1969.
But there were massive issues with these systems that still plague them today. Electronic exchanges and digital payments are a hotbed of inefficiency, double-spending problems, and more. Traditional ATMs are security nightmares between hacks, card skimming, PIN keylogging, and more.
Credit and charge cards complicated things even further. We needed a change.
The First Cryptocurrency
So, when was cryptocurrency invented? If you said 2009 with Bitcoin you’d be… wrong? Yep, it was actually created earlier than that!
As you may have already heard, the word cryptocurrency is a marriage between “cryptographic” and “currency.” Satirists describe the technologies of cryptocurrency as what you’ve never understood about computers and money in one package.
Putting the ‘Crypto’ In Cryptocurrency
In order to remain secure, you need to encrypt all digital and electronic payments. The Enigma machine from World War II sums up modern E2EE or end-to-end encryption depictions. The machine spurned the need for a computer, even though it had much opposition and was never imagined before.
The man we have to thank was Alan Turing, who was finally successful in 1939. But for 16 years prior, it was the plague of anti-Nazi forces. The only way he was successful in breaking these cryptographic codes was by inventing the first computer. This is significant because the work they were doing is exactly what Proof-of-Work cryptocurrency miners are doing every second of the day.
The Enigma codes done by hand required over 12,000 people to break a code with 10114 permutations — that’s a ten with 114 zeros behind it. Because of the enormous effort to break relatively simple codes of the time, cryptographic technology was considered a weapon of war and a matter of national security.
1976 was the birth of the Diffie-Hellman key exchange, which involves a public key and a private key. Only three years later, Ralph Merkle who worked on public-key cryptography alongside Hellman as an undergraduate, co-invented hashing and Merkle trees.
These public-key hash cryptography and Merkle trees are at the very heart of every cryptocurrency.
The How Cryptography Becomes Value
Double-spending is the single largest hurdle that any digital currency had to overcome. The problem was approached twice before Bitcoin came along.
This was attempted by Wei Dai with B-Money and Nick Szabo with Bit Gold. The similarities of these two currencies to Bitcoin are very high. So much so that both individuals endure constant scrutiny as the possible real identities of Satoshi Nakamoto.
Satoshi Nakamoto, of course, is the pseudonymous creator of Bitcoin. He wrote the white paper for Bitcoin, launched the network, cultivated and protected the network until 2011, and then left without a trace.
The problem that both B-Money and Bit Gold in 1998 tried to overcome is called the “Byzantine general problem.” The problem centers around trust and consensus. If you can trust no one, how can you reach a consensus about anything?
For ages, the one we had to trust was a central party like a bank or a government.
We had no other option than to trust that the gold wasn’t laced with impurities when held against a weight, or that the weight itself was accurate. The weights were made by trusted manufacturers that are in turn trusted by the government. Later, we had to trust that our fiat currency’s monetary policies were in good hands and backed by a powerful, knowledgable government.
Bitcoin offered another option — trustlessness and consensus in a decentralized peer-to-peer manner.
B-Money and Bit Gold weren’t the only times people tried to make digital cash. Most of these attempts took place between 1990 and the early 2000s. Most of them also never quite made the money created on these systems fungible.
The issue with non-fungibility is that they made, in essence, cryptographic gift cards. It took several attempts to make a system that worked. All the technological and philosophical pieces were there but scattered about.
It took a brilliant mind or minds to simply put them together to create a digital currency that we today know as Bitcoin. The truth is that making a Bitcoin-like digital currency is an inevitability.
How was cryptocurrency invented? Over a course of decades. The first cryptocurrencies were not successful. Nevertheless, it’s important to note their contributions to our current cryptocurrency ecosystem.
- The Netherlands petrol payment experiments
- “Blinded cash” in the 1980s
- PayPal and other web payment services in the 1990s
- Bit Gold and B-Money
Standing on the shoulders of these giants, Bitcoin found its way. This first cryptocurrency to make it all work had two secret weapons the others didn’t.
- Blockchain technology as a concept
- Decentralized ledger and PoW operations
Without those two pieces, the whole structure collapses quickly. This is one reason why people said that a digital currency, Bitcoin specifically, was a fad and would fail.
The Cambrian Explosion Of Cryptocurrency
The history of cryptocurrencies doesn’t end there. Just as new biological traits began an era of biological diversity we call the Cambrian explosion, so too did cryptocurrencies.
A cryptocurrency is a bit difficult for a lot of people to differentiate between a network, a protocol, a smart contract, a blockchain, and a ledger.
After 2009’s launch, it only took Bitcoin about 10 months to complete its proof-of-concept. After that, it needed to garner more use and gain value in order to actually use it in the real world.
For many months it had no real-world value, as the first miners and users just transferred it back and forth to get the ball rolling. Now that the technology has been proven, there are a number of other projects exploding on the scene.
Blockchain Networks Of Note
The major separate blockchains on most people’s radars are:
- Bitcoin Cash
A few things to realize is that there are a number of “Bitcoin clones.” Those are based on Bitcoin but altered in some way to accommodate the wishes of the developer and group that forked the protocol.
Bitcoin Cash, Litecoin, Marscoin, and Dogecoin are examples of this. Each is cloned and altered for a specific reason.
Bitcoin Cash is made to be better at handling greater numbers of transactions at a higher rate. Litecoin is easier to mine and is less scarce. Dogecoin is a fork of Litecoin, which is a fork of Bitcoin.
Marscoin is an interesting fork being researched for the specific needs of those who will be the first to step foot on Mars. Until that time, the value that accumulates in Marscoin works to further endeavors to reach the planet and colonize it.
The more unique blockchains in the system are the likes of Ethereum, TRON, EOS, and Tezos.
Modern blockchains are pushing the technology further than the purpose-built Bitcoin.
Ethereum and Tron are arguably in the lead regarding experimentation around smart contracts and proof-of-stake (PoS) models. Tezos is not far behind, however.
These blockchain models exist around the idea of operating as a virtual machine, powered by the native currency. Ethereum uses ETH natively, but hosts applications on the virtual machine in a decentralized manner. TRON is meant as a decentralized media distribution network in direct competition to Twitch, YouTube, Netflix, and others.
Decentralized Apps Enter The Picture
Decentralized apps (dApps or Dapps) are bundles of smart contracts working together, executing actions on the Ethereum (or other) blockchain network. Often this is to create tokens that are either fungible or nonfungible.
An example of a fungible token is “wrapped” bitcoin (WBTC) or Tether (USDT). DAI, Maker (MKR), and UNI are other examples of fungible tokens on the Ethereum VM.
Ethereum, and TRON especially, also host NFTs. TRON is meant for NFTs, or non-fungible tokens, which are unique pieces of art or media. There are even those who are looking to use NFTs to create cryptographic titles and deeds for houses and cars.
The question, with all of these currencies, coins, blockchains, and tokens (over 7000 at the moment), is: “How do you buy and sell them?”
Buying & Selling Cryptocurrencies
In the beginning, Satoshi created the coin and the protocol. Now, the network was formless and empty, with a darkness across it. Satoshi’s will roamed across the void and said: “Let there be Bitcoin mining,” and there was mining.
It isn’t so biblical and dramatic, but in the beginning, Nakamoto did mention in the white paper that mining is at the heart of the operation of Bitcoin. To help incentivize this, miners would get rewards with bitcoins every time they mined a block on the network — in addition to normal minimal fees.
The last bitcoin is expected to be mined sometime close to 2140.
Other than mining on Proof-of-Work networks, you can buy the earned currency from someone for real fiat currency face to face. You give them cash and they give you bitcoins. This worked well early on, in a bartering system, when the population on the network was small.
As Bitcoin grew, it needed to have a way to exchange fiat and other currencies for Bitcoin. There are a number of ways to do this now.
- Gift cards
- Cash exchanges P2P
- Centralized Exchanges (Kraken, Gemini, Binance)
- Decentralized Exchanges (Uniswap, Curve)
Which is best for you? It’s hard to say, really. Decentralized exchanges (DEXs) are very popular right now, but impossible to enter using fiat currencies.
Centralized exchanges (CEXs) have tons of paperwork, are generally slow-moving, base themselves on custodial wallet systems, and may freeze trading during times of high demand.
It’s just as difficult to buy digital gold with physical gold, though it is possible if someone is willing to enter into a peer-to-peer barter. The same goes with fiat cash or gift cards.
A Bitcoin ATM or cryptocurrency ATM, on the other hand, has incredible upsides. Of course, there is a network fee the operator must take to continue operating and turn a profit for reinvestment. As the first ATMs sparked Fintech 2.0 so too are cryptocurrency ATMs revolutionizing the fintech space.
Not only in the USA are cryptocurrency ATMs an onramp or offramp to cryptocurrency markets, but they are also enabling the wider developing economies to interact directly with the latest technologies. This enables them to send remittances cheaper than ever before to places in Africa, and Asia, such as the Philippines, Nigeria, the DRC, Zambia, India, and beyond.
The inclusion of these developing markets is the so-called Fintech 3.5 boom (Bitcoin and blockchain truly sparking Fintech 3.0).
The History Of Cryptocurrency: Into The Future
It’s good to know the history of cryptocurrency in modern times. However, it’s better for you if you know the future.
Africa and other emerging markets are underbanked and primed to make their mark on the world as never before seen. You too, can be part of the future of the cryptocurrency economy and the world future.
Speaking Of ‘The Future’, Have We ‘Arrived?’
Just this week, El Salvador President Nayib Bukele announced that the Central American country is adopting Bitcoin as legal tender. Making history and shall we say, progress this is BIG NEWs for a small country, boasting just about six and a half million residents, El Salvador is now the first country to esteem Bitcoin as an official national currency!
“By using bitcoin, the amount received by more than a million low income families will increase in the equivalent of billions of dollars every year.”
70 percent of Salvadorans lack bank accounts. Because people can transmit bitcoin to relatives and businesses on their smartphones, without the need for a bank account, the move to make Bitcoin legal tender could help achieve the “moral imperative” of financial inclusion, and provide “a space where some of the leading innovators can reimagine the future of finance, potentially helping billions around the world.”https://twitter.com/nayibbukele
Leaders like Nayib Bukele, are paving the way for others to choose true freedom. Bitcoin is the way and it’s beginning to become more and more prominently so.
How Can You Join The Crypto Space?
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Find a Bitcoin ATM near you today, register, and invest in the future!