The Incredible History of Cryptocurrency

By Kirsty Moreland

You need to learn about the history of cryptocurrency before getting into the deep! i.e. bitcoins, mining, blockchain transactions and so on –  it’s important to understand its context of emergence. Beyond timeline, grasping the history of cryptocurrency and why it was even created at first will help you understand how crypto works.

History of crypto: shared principles

Bitcoin might well be the OG of crypto, but it wasn’t the first attempt; many iterations of digital currency had already taken place, but without success. As early as 1998, the concept had been introduced by computer engineer Wei Dai through a paper in which he discussed the idea of a digital currency. That same year, another attempt was drafted by blockchain pioneer Nick Szabo.

The main issue most of the digital currencies prototypes were facing was the double spending problem. Simply put, double-spending is the digital equivalent of counterfeiting. What if you could take your 100 dollars bill, make 10 copies and end up with 1.000 dollars? It barely happens because the traditional financial system prevents it with control and regulation entities. Now when it comes to digital currency, the challenge is to ensure that a digital asset is used only once.

Think about concert e-tickets. If the event you are wishing to attend is sold out, you can still buy your ticket from a ticket holder. But how do you make sure that the holder would only sell their e-ticket once, as PDF copies are easy to duplicate. A convenient solution would be TicketSwap. In other words, to rely on an intermediary. Similarly, most early attempts at creating digital money were actually solving this issue by relinquishing some control to a central authority. 

In 2008, Satoshi Nakamoto gave birth to Bitcoin, the first successful decentralized digital currency. In the context of an economic crisis, he managed to solve this double-spending problem without sacrificing the principle of decentralization. 

2008: crisis, Bitcoin and aftermaths

The year of 2008 was critical for the infamous 2007-2008 global financial crisis. And it might not be a coincidence that Bitcoin had been created this particular year. But no one will ever know for sure. Without going into the details of the whole timeline – we can let The Big Short movie take care of it – September is considered to be the climax of the crisis: after the US bank Lehman Brothers went bankrupt, the economy was very close to complete collapse.

At that time, a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System was published by a mysterious and pseudonymous Satoshi Nakamoto. Four months later, Satoshi Nakamoto created the first block of the Bitcoin network on the 3rd of January 2009, known as the “Genesis Block”. It marks the beginning of Bitcoin, and of blockchain. Within this Genesis Block’s raw data, Nakamoto embedded a secret message: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” Actually quoting an article headline in the same day edition of The Times about the British government’s failure to react to the financial crisis. Even if Nakamoto never commented, most believe that the Genesis Block and its message act as a statement.

The message was pretty clear. As well as Satoshi’s vision for Bitcoin and cryptocurrency in general. During the short time he remained active in the community, he continued to share his vision with people. For instance, he explicitly shared his hostility towards central banks, in his opinion, they did not deserve people’s trust as the financial crisis had just proved. Plus, he was convinced that a peer-to-peer system would give people back their freedom, especially against governments.

Satoshi’s legacy: the beginning of a cryptocurrency market

Over time, Bitcoin’s creation led to the birth of the  cryptocurrency market we know of today. New use cases emerged, alternative cryptocurrencies were created, Bitcoin’s popularity increased.

First, platforms had to be created in order to buy and trade cryptocurrency, aka exchanges. These exchanges allowed you to convert fiat into cryptocurrencies, and vice versa. Also, in February 2010, the first Bitcoin purchase was made as the programmer Lazslo Hanyecz bought pizza with it. While it could appear anecdotal, it has put a price on Bitcoin for the first time: two pizzas for 10000 BTC, equivalent to 20$ at market price. 

Two years after the creation of Bitcoin, many other cryptocurrencies started to appear. Some had new innovative rules aimed at experimenting with blockchain possibilities or improving Bitcoin features. But few were successful as they brought little in technical innovation. In 2015, the Ethereum network was launched and quickly became the number two cryptocurrency in terms of market share.

The cryptocurrency market currently hosts over 6000 digital currencies and is still expanding. Cryptocurrencies are slowly but surely becoming global. Major companies show an increasing interest in blockchain and cryptocurrencies by investing in them. More shops have started accepting cryptocurrencies as a method of payment and store of value. Crypto assets are being used as a form of fundraising. It’s even possible to travel around the world with only crypto in your wallet!

This list is expanding at a rapid pace, similar to cryptocurrency prices. And this is just the beginning. Do not forget that four years ago, BTC’s price was below 1000 USD! In this ever changing universe, the more you know, the more confident you are. And the more you’re in control. So keep the pace!

Knowledge is power.

So keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block episode all about crypto’s biggest year to date!