HISTORY OF CRYPTOCURRENCY.
In 1998, an American cryptographer David Chaum experimented with the idea of electronic cash. He was part of a movement known as the Cypherpunks - activists who defended the idea of using cryptography and computers as a powerful tool to protect the privacy of individuals.
David wanted to create a safer and more anonymous transaction system. His efforts led to the invention of the blind signature protocol breaking grounds for what will become the foundations of the modern blockchain technology.
In the years that followed David Chaum began building his idea of a workable cryptography electronic money system and in 1989, the company Digicash was formed. A notable employee at Digi-cash was cryptographer, Nick Szabo.
In 1993, Digicash developed their E-cash system - a product that pioneered safe and anonymous transaction of money over the Internet.
E-cash was David's answer to what he considered to be the extremely unsafe practice of using debit cards online. According to analysts, E-cash was a technically perfect product that resolved many of the issues that came with credit card payments such as security concerns and fees
Despite his good intentions, what David was doing was considered risky at the time. Digital cryptography was frowned upon with some early cypherpunks having share codes only through shirts or tattoos.
Much like Bitcoin, the E-cash began to gain serious attention from interested parties in digital commerce. David Chaum was contacted by Bill Gates who had wanted to integrate E-cash into every copy of Windows 5. It was reported that he offered David $100 million for the project. David declined the offer and every other offer that came after that. According to ex-employees, David was wary of the intentions of the investors. He also assumed there will be better offers around his product when it is finished.
He wanted E-cash to be perfect and believed in the importance of his work. In 1996, he said that "the difference between a bad electronic cash system and a well-developed digital cash will determine whether we will have a dictatorship or a real democracy."
Due to corporate in-fighting, David eventually lost control of Digicash and the company fell into the hands of external investors. Digicash began marketing its product to banks and several interested firms. Eventually, these firms decided to stick with credit cards which were less complex and by 1998, Digicash was bankrupt. This marked the end of the very first wave of digital currency.
While it seemed like the world was not ready for electronic money/cryptocurrencies, progressive thinkers had seen the potentials of the idea and kept working on it. The idea was not bad - it was well ahead of its time and there was no strong leadership directing the efforts.
In 1999, economist Milton Friedman stated that "an electronic cash is necessary for the newly found internet and also a logical tool for limiting government leverage." In 1998, Wai Dia published a description of 'B-money' which is an anonymously distributed electronic cash system.
Shortly thereafter, Nick Szabo described Bitgold which was a forerunner of bitcoin.
Bitgold was described as an electronic currency system that required users to complete proof of work function with solutions being cryptographically put together and published. All these were important building blocks for cryptocurrency as we know it today.
For almost a decade, there was silence in the cryptographic community. Then on August 13th 2008, the domain name Bitcoin.org was anonymously registered. In October 2008, a paper title "Bitcoin: A Peer-to-Peer Electronic Cash System" was posted to a cryptography mailing list, signed by a pseudonymous developer, Satoshi Nakamoto.
In this paper, Nakamoto presented to the world the fundamental outline for Bitcoin as we know it today. This paper initiated a chain-reaction in the cryptography community that changed the course of financial history.
What separated Bitcoin from previous attempts was its ability to overcome the 'double spending problem.' Unlike a physical store of value, digital money is simply data and data can be replicated and this creates a potential problem of spending a single coin, multiple times. In the past, this issue was resolved by inviting a trusted third party to oversee transactions. In the case of E-cash, that third party was traditional banking.
According to Nakamoto, Bitcoin will overcome the double-spending problem by implementing an updated record of who owns what and at what time. This marked the birth and implementation of the blockchain.
With the double-spending problem solved, the system was tested and brought online, becoming fully functional in 2009.
By July 2010, Bitcoin began trading at the value of $0.0008 and had risen to $0.08 by month end.
Peercoin which launched on 12 August, 2012 used the proof of work/proof of stake hybrid.
Ethereum was conceived in 2013 by programmer and writer, Vitalik Buterin. Buterin became involved with cryptocurrencies early in inception by co-founding Bitcoin Magazine in 2011.
With the help of other founders, development work on the Ethereum project commenced in 2014 which was crowdfunded. The Ethereum network went liveon 30th July, 2015. The Ethereum platform allows anyone to deploy permanent and immutable decentralised applications (dapps) onto it, with which users can interact. Decentralised Finance (DeFi) applications provide a broad array of financial services without the need for traditional financial intermediaries like banks, brokerages or exchanges. This allows cryptocurrency users to borrow against their holdings or lend them out for interest.
Over the years, many cryptocurrencies have launched as well as several exchanges, decentralised applications and blockchain protocols. The decade 2010 - 2020 proved to be the golden age for cryptocurrencies.
Today, nation-states are launching their own digital currencies. PayPal, Mastercards and ApplePay are now integrating Bitcoin as forms of payments while large financial institutions are now accepting exposure to cryptocurrencies.
In June 2021, El-Savador became the first country to accept Bitcoin as a legal tender. They were closely followed by Cuba who accepted Bitcoin as a legal tender in August 2021.
Comments