Brief History of Cryptocurrency (Bitcoin)

 

It all began in the 1990s when American cryptographer, David Chaum, created what was

considered as the first kind of online money in the Netherlands: DigiCash. He created DigiCash

as an extension of an encryption algorithm that was considered popular during those times,

which was RSA. The technology he created, together with its eCash product, was able to

generate a huge amount of attention from the media. It became so popular that Microsoft

Corporation tried to buy DigiCash for $180 million with the intention of placing DigiCash on

every computer in the world that ran on the Windows operating system. One of the crucial

mistakes Chaum and his company made was to reject Microsoft's $180 million offer and earn the

ire of De Nederlandsche Bank (Netherland's Central Bank), which was the Netherland's primary

monetary authority. All of those crucial mistakes eventually led to the demise of DigiCash in

1998, when the company went bankrupt.

The second generation of Internet money was borne from the learning experiences of DigiCash.

Companies from this generation came up with alternative payment solutions and money systems

that were also Internet-based but with small but important changes. Of these companies, the

clear winner was PayPal. The reason why PayPal trumped its competition was its ability to give

users what they really wanted in the first place, which was money on the web browser platforms

they were already familiar with. PayPal - unlike its peers back in the day - was able to give its

users the ability to transfer money to and from merchants and buyers, respectively, using a

seamless peer-to-peer money transfer system. PayPal's massive success is very obvious by the

fact that next only to credit cards, it's the most popular means by which to transact online.

But wait - there's more! PayPal's success led to other companies emulating it. One of the

systems that tried to walk on the same path as PayPal was e-Gold. Unlike PayPal, its primary

currency was gold, i.e., it received physical gold as deposits from its users and in return, it issued

e-Gold or gold credits. E-Gold was able to manage a relatively healthy amount of cross-border

transactions using gold. But because of the prevalence of fraudulent investment scams like

Ponzi schemes, e-Gold was closed.

The next significant event in the history of cryptocurrencies is the 2008 subprime mortgage crisis

that nearly crippled the financial system of the United States and affected many of the world's

major financial institutions. This event served as some kind of wakeup call to many of the

world's major economies and has led to the emergence of what is now popularly known as the

blockchain, which is the foundation of cryptocurrencies today as we know them.

In 2009, an anonymous person (or group) that went by the identity of Satoshi Nakamoto

published a white paper that expounded, among other things, the source code, technology and

concept of what is now called the blockchain. And together with the blockchain, he launched the

granddaddy of all cryptocurrencies as we know it; Bitcoin. The blockchain, while not an

earthshattering, disruptive or incremental technology, was considered a foundational one. Why

foundational? It's because it was meant to - and it still does - serve as a bedrock upon other data

network storage technologies can be built. The blockchain naturally challenges all the

conventional online data management protocols of that time, which included centralization of

data.

Today, there are more than 16 million units of Bitcoin that are circulating in the digital financial

system and these have a total market capitalization of around $50 billion. More importantly,

Bitcoin's already garnering increasing acceptance and support from both the I.T. and business

communities alike. As part of its gradual integration into the financial mainstream, some

economic powerhouse countries like Australia, Canada and Japan have already begun regulating

Bitcoins through tax and legal measures.

Since 2009, the growth in the popularity of the blockchain and Bitcoins has surged. This surge

in popularity gave birth to other cryptocurrencies, which are referred to as altcoins or alternative

coins to Bitcoin. Today, there are more than 850 cryptocurrencies in the digital financial system

being transacted internationally, which include Ethereum (Ether), Ripple, Litecoin, Monero and

Stratis. And if you combine the total market capitalization of all altcoins with that of Bitcoin, the

result would exceed $100 billion.

Because of the massive expansion of cryptocurrencies, it appears that cryptocurrencies have

created an entirely new and global industry. Because of the massive advances in the blockchain

technology, as evidenced by the growth in the number of cryptocurrencies on the market today,

newly developed apps that will be created upon the blockchain technology will naturally use

cryptocurrencies. And as more and more cryptocurrency platforms and exchanges start to

emerge, more and more people will be able to use blockchain-based apps, which in turn will

make the latter industry grow even more.