History of Cryptocurrency
Whether you've been swept up in the recent popularity of cryptocurrencies or just curious how they work, it's important to understand the history of cryptocurrencies and how digital currencies like Bitcoin and the underlying blockchain technology came into being.
While the creator of the cryptocurrency Bitcoin, the flagship of the cryptocurrency, is somewhat of a mystery, we know a lot about the history of cryptocurrency that can influence your decisions about investing and trading in this relatively new asset class.
The challenge of digital currency
Digital currencies offer a unique challenge compared to traditional currencies such as dollars and euros, called "trust" currencies in the crypto community. That's because, unlike dollars and cents that can be physically traded and traded, cryptocurrencies exist only in the digital domain.
Digital assets are inherently difficult to protect. Just as you can copy a photo of your dog or children in an email to their parents or friends, most digital files are easy to replicate and send to everyone.
Creating a digital currency means creating a digital asset that cannot be duplicated and traced back to a single verified owner.
While your bank may have dollars in your name, you cannot copy those dollars to double your holdings. They are safe in the bank. You, the bank, and the US government agree that what is in a bank account is your money. With digital currencies, many of these systems would have to be recreated from scratch.
This led to several cryptocurrency attempts before current versions, based on a technology called blockchain, took off and became popular.
Initial concepts of cryptocurrencies
Before the current iterations of the cryptocurrency, various attempts did not get widespread traction. This includes ideas from the early 1980s in the Netherlands and the United States. The first noteworthy digital currency may be the Digiash, which failed in the 1990s.
Later PayPal and its competitors emerged and took a hybrid approach, handling digital transactions in existing currencies. These companies continue to play an important role in online and international commerce.
Other cryptocurrency attempts or their underlying technology include B-Money, Hashcash, Flooz, and Bit Gold. One of the biggest names in early cryptocurrencies is David Chaum, a computer scientist and mathematician who created DigiCash and may have played a role in the later development of crypto.
But the true origins of Bitcoin remain somewhat mysterious.
Blockchain and Bitcoin
Modern cryptocurrencies were first described in 1998 by author Wei Dai. The concept was fully born in 2009 with the release of a whitepaper that explains the fundamentals of blockchain and bitcoin. The author of the white paper is "Satoshi Nakamoto", which is probably a pseudonym for a person or group of people.
Bitcoin runs on a technology called blockchain, which the Bitcoin Foundation calls a "triple entry" accounting system. Every time there is a new transaction, the sender, the recipient, and a third party must confirm and accept the transaction.
Each Bitcoin transaction is recorded in a triple entry digital ledger called a "blockchain"; any Bitcoin transaction can be located in this digital register.
This allows for a combination of trust and a certain level of anonymity, as you can trace each transaction to a specific Bitcoin wallet, but you don't necessarily know who owns that wallet.
This is great for privacy advocates, but it can be challenging for anti-terrorism and anti-money laundering authorities who want better ways to track digital currency transactions around the world.
The total value of all bitcoins, known as "market capitalization," exceeded $ 1 trillion in March 2021. The currency is highly volatile and often undergoes significant changes in short periods of time.
An explosion of cryptocurrencies
Bitcoin is not the only player in the crypto game. As its popularity began to grow, other coins were launched using the same blockchain technology. The most notable Bitcoin alternative is Ethereum, which has the second largest market capitalization in the crypto market.
However, there are many others to choose from. The following list shows the coins with the largest market capitalizations available for trading on the popular Coinbase stock exchange as of March 30, 2021:
Ethereum / Ethereum 2
This list contains currencies that change in value with market demand, such as Bitcoin, and currencies pegged to the US dollar. Tether and USD Coin are two of the top "stablecoins" that track major fiat currencies.
The future of cryptocurrencies
It seems that the cryptocurrency is on the way to wider adoption. While there may be some changes and obstacles along the way, cryptocurrencies and blockchain technology are likely to continue to grow in popularity.
It has the attention and support of large investment banks such as Goldman Sachs and JP Morgan. It's not just a crazy meme for internet fans. It is a risky investment opportunity that is attracting interest and recognition around the world.
Mathew McDermott, Managing Director of the London-based Goldman Sachs digital assets team, told Financial News that we have "crossed the line" in an era of adoption where cryptocurrencies are a widely accepted store of value and hedge.
There is no way of knowing whether cryptocurrencies will outperform or underperform traditional assets. But there is little doubt that Bitcoin and other cryptocurrencies are here to stay.
We hope you enjoy watching this video about the history of cryptocurrency
Source: Mark Grabowski
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