It might seem like cryptocurrencies just appeared out of nowhere one day and became something major in the tech world. The truth is that this basic idea for money that would someday, somehow, exist in the digital area lived quite some time ago. More than 10 years before any known cryptocurrency lived, a computer engineer Wei Dai published a paper where he talked about “B-money” - a digital currency that could be sent with a group of untraceable digital pseudonyms. At the same time blockchain pioneer Nick Szabo composed another attempt by the name of Bit Gold that also held the idea of creating a decentralized digital currency. The idea was driven by inefficiencies he saw in the traditional financial system. Even though the ideas were never launched, they were still a part of the inspiration behind Bitcoin.
So, cryptocurrency was always meant to be used as an anonymous payment system, verified over the public network through the cryptographic process. However, the first one to catch on with the public was issued in 2008.
2008 is the year in which Satoshi Nakamoto published the white paper called Bitcoin: A Peer-to-Peer Electronic Cash System, where we can find the description of the functionality of the Bitcoin Blockchain network. Satoshi Nakamoto’s identity was never revealed, however, he or they, as the name might also represent a group of people, effectively conducted the blockchain technology by mining the first block of the Bitcoin network, also known as Genesis Block.
The first digital currency was “officially” born when Nakamoto made a Bitcoin transaction in 2009. And so it began - Bitcoin software became available to the public and mining became a thing. New Bitcoins were made and transactions were recorded and verified on the blockchain.
Next, the programmer Laszlo Hanyecz bought two pizzas for 10,000 BTC on the 22nd of May 2010 and that is the first recorded purchase of goods bought with Bitcoin. At the time, the transaction was worth $41. Today, it would be worth approximately $90 million. This day is still memorialized as the Bitcoin Pizza Day. Until that event, Bitcoin had only been mined, never traded and so it was impossible to assign a monetary value to the units of the emerging cryptocurrencies, which means that with this specific event, Bitcoin received a valuation for the first time.
2011 was the year when cryptocurrency emerged. Bitcoin had gained popularity and the idea of encrypted currencies and decentralization caught on. That was also the time when alternative cryptocurrencies appeared, trying to improve on the original Bitcoin design, with speed, anonymity, and other advantages. Namecoin and Litecoin were one of the first to emerge. As of today, there are over 1,000 cryptocurrencies circulating and new ones are constantly appearing.
In 2013 the Bitcoin price crashed shortly after it reached $1,000 for the first time. The price plummeted to about $300 and it took more than two years for the price to go back up to $1,000.
In February of 2014 Tokyo based exchange Mt. Gox collapsed. Mt. Gox was one of the first prominent bitcoin exchanges that handled 70% of all Bitcoin transactions at the time. It filed for bankruptcy after hundreds of thousands of bitcoins, worth millions of dollars went missing, apparently in a hack. Bitcoin advocates, the Winklevoss twins, were among the notable investors who lost assets in this incident.
At the end of the July of 2015 the Ethereum network was launched - that brought smart contracts to the cryptocurrency world. A “smart contract” is a piece of code that runs on Ethereum. It’s called a “contract” because that piece of code can control valuable things like ETH or other digital assets.
Another turning point for crypto was 2017, more specifically November, because that is the month when the value of Bitcoin went above $10,000. In previous years, bitcoin slowly gained traction and then in 2017, it began to attract business leaders from all over the globe. Bitcoin hit $19,873 in December. That year we were also witness to the Bitcoin cash hard fork, which split bitcoin into two derivative cryptocurrencies - BTC and bitcoin cash.
Another big event that year occurred in April, when Japan legalized Bitcoin as a legal payment method.
In 2018, exchanges in South Korea and Japan were hacked. Scrutiny of the unregulated, decentralized currency came from China and other nations; giants like Google and Facebook banned ads that involved cryptocurrency. The price of Bitcoin fell below $4,000 in December 2018.
In 2019 Bitcoin spiked in value again when Facebook and other organizations showed signs of launching their cryptocurrency. Facebook announced plans to debut “Libra” in 2020, a cryptocurrency supported by an independent organization composed of member companies from various industries, the Libra Association.
Tune in next time when we will examine the rise of the crypto market and get a history lesson on the XRP Ledger. Check part 2 here!