Cryptocurrencies are digital currencies that use cryptographic protocols that are based on sophisticated engineering and mathematical principles. Today, many people are investing in Bitcoin and are getting a lot back from it. If you’re wondering which cryptocurrency you should invest in, make sure to check out this cryptocurrency buying guide from thecoinoffering.com.
Even before the emergence of the first digital currency, the concept of cryptocurrency has already existed as a theoretical construct. If you’re wondering about how cryptocurrency came to be, here are some of the most important events that ushered its rise:
Bitcoin might be the most successful and most widely known cryptocurrency today, but it’s not the first of its kind. Other virtual currencies predate the development of Bitcoin, but all of them have failed for one simple reason: developers were unable to resolve the inherent problem of double spending.
Essentially, double spending means that one party spends the same amount twice. Because digital currencies are decentralized, it’s difficult to have a consensus about the validity of transactions.
Here are some of the digital currencies that were developed and released before Bitcoin:
- eCash – Formalized in 1982 by David Chaum based on a blinding algorithm that allowed the secure and unchangeable exchange of information between two parties. The company serving as the central authority for eCash closed down in the late 1990s.
- Hashcash – Developed in 1997 by Adam Back.
- BitGold – Invented in 1998 by Nick Szabo, an associate of David Chaum. BitGold, unfortunately, never gained traction and is no longer an active digital currency.
- B-money – Conceptualized in 1998 by Wei Dei. Although never formally deployed as a digital currency, b-money included features that served as the basis for modern cryptocurrencies. This includes decentralization and identity protection.
- RPOW or reusable proof of work – Created in 2007 by Hal Finney, a computer programmer.
Emergence of Bitcoin
In 2008, a white paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System” was released by Satoshi Nakamoto. This white paper outlined the new payment system’s mechanisms and features, and served as the currency’s initial coin offering.
Satoshi Nakamoto is widely believed to be a pseudonym used by a team of cryptographic developers. Many have come forward claiming to be Bitcoin’s developer, but to date, Nakamoto’s real identity remains a mystery. In any case, Nakamoto resolved the issue of double spending by creating a peer-to-peer network, where everyone has the full record of all transactions and the balance of every account.
Bitcoin is transparent, open-source, and decentralized. This means that all transactions done using the cryptocurrency can be verified on the Blockchain, a term used to denote the system’s master ledger. This ledger stores and records every single transaction, and is used to validate ownership of the currency’s units at any given point in time.
Here’s a timeline of the significant events that shaped the rise of Bitcoin following the release of Nakamoto’s white paper:
- January 2009 – Nakamoto mines first bitcoin block. Almost a week later, the software for Bitcoin was released. A few days after that, the first ever Bitcoin transaction between takes place after Nakamoto sent 10 BTC to Hal Finney.
- October 2009 – Bitcoin is priced at 1309.03 BTC = 1 USD.
- May 2010 – Laslo Hanyecz makes the inaugural bitcoin transaction with his legendary purchase of two pizzas for 10,000 BTC.
- August 2010 – Developer Jeff Garzik unearths a highly irregular transaction involving 184 billion BTC. This discovery brings to light a major vulnerability in the network.
- September 2010 – Slush Pool, the first ever bitcoin mining pool, is established.
- 2011 – Bitcoin garners heavy criticism after its role in dark web transactions, particularly on sites like the Silk Road, comes to light.
- 2012 – The Good Wife, a TV series in the United States, airs an episode centered around Bitcoin. This marks the period when cryptocurrencies start entering popular consciousness. Later in the year, WordPress becomes the first merchant to accept Bitcoin as a payment method. Other companies like Expedia and Microsoft soon followed.
Bitcoin is now regarded as the first modern cryptocurrency and is considered as the gold standard for the entire cryptocurrency industry.
Rise of Alternative Cryptocurrencies
Since the release of Bitcoin, the use and trade of cryptocurrencies has skyrocketed. While most individual cryptocurrencies are still highly volatile, the industry is seeing an upward trend in overall market value.
Today, there are more than 1,600 altcoins to choose from such as Zcash, Ethereum, Monero, Litecoin, Dash, and Ripple. Some of these are more stable than the others, so make sure that you do your research first before deciding to invest.
Here are some quick notes about the development of the most popular cryptocurrencies around today.
- Ethereum – Vitalik Buterin developed this cryptocurrency in 2015. It’s currently considered as the second most popular and most stable digital currency after Bitcoin. Ethereum does not just process transactions. It can also work for programs and sophisticated contracts.
- Ripple – Known for its consensus ledger system, Ripple released XRP, its native cryptocurrency, in 2012. XRP, however, functions more as a way to secure the network against spam rather than as a means of exchange. While it is easier to convert Ripple to standard currency units (i.e., dollars, yen, euros, etc.) compared to the other types of cryptocurrencies, critics claim that the network is also more vulnerable to security threats.
- Litecoin – Released in 2011, this cryptocurrency has a lot of similarities to Bitcoin. In terms of market capitalization, Litecoin is ranked the second or third most popular digital currency. Most investors consider it as a backup currency in case Bitcoin fails.
- Dogecoin – Dogecoin is best known for its mascot, an adorable Shiba Inu. It is regarded as an inflationary cryptocurrency because it has no known supply limit. Dogecoin is similar to Litecoin, although the former has more coins in circulation and a shorter blockchain generation time.
The history of cryptocurrencies may be short, but new developments are taking place every day. With more alternative currencies making its way to public consciousness, cryptocurrencies are no longer confined to the realm of tech insiders and experts. Today, cryptocurrencies offer real and optimistic opportunities for real people.