A Brief History of Cryptocurrency

To many people, cryptocurrency might seem like something that emerged out of
nowhere to become a huge force in both the technological world and the realm of
personal finance. The digital coins have the potential to replace the current
method by which we both pay for products or services and receive payment for
those things. They also might someday be the impetus for individuals taking
control over aspects of their lives that were once governed by middlemen and
third parties.

People may not realize that cryptocurrency has some history behind it. Not a
very long history, but it definitely had some major signposts and events that it
had to experience before it could reach where it is today. At different points
in its existence, cryptocurrency has seemed like both a sure thing that would be
indispensable in the future and a scourge of society that only held value for
those who were up to no good.

It is important to examine the history of anything that has the potential to
shake up the world. Cryptocurrency certainly has that ability, which is really
quite impressive for an innovation that is barely ten years old.

Before Bitcoin

Starting in the 1980s, there were several developers and innovators who had
the idea for money that would exist in the digital realm. These people didn’t
get very far with their work. But they at least planted the seed for the future
and those who would create cryptocurrency as we know it.

Many of the ideas that would drive crypto were already in place in inventions
such as ecash or bit gold.

These early forms of cryptocurrency were meant to be
anonymous payment systems that were verified over a widespread network via a
cryptographic process. For whatever reason, none caught on with the public like
a certain piece of writing that would be issued in 2008.

The Origins of Bitcoin

In that fateful year of 2008, someone named Satoshi Nakamoto wrote a white
paper, which is a technical document explaining some scientific project. They
titled the paper “Bitcoin: A
Peer-to-Peer Electronic Cash System.”
Around this time, someone also
registered the domain Bitcoin.org, while Nakamoto published the software
allowing Bitcoin to be mined for the first time.

The identity of Nakamoto has always remained a closely-guarded secret.
Various investigative efforts have attempted to learn who this person is and if
they used a pen name; some even suggest it is a pen name representing multiple
people. In any case, Nakamoto sent some Bitcoin to a friend in 2009, and the
world’s first digital currency was born.

Bitcoin started to attract some attention in certain online communities for
the ingenious way that it left banks and other financial institutions out of the
equation. It really was a peer-to-peer method of payment between parties. The
currency operated over a decentralized network, and the cryptographic process
that had been in place in early digital currency attempts was refined.

In this new invention, a network of computers all worked at verifying the
transactions made between parties. This process eliminated the concerns about
double payments that had slowed up similar projects that had been attempted
previous to this. Bitcoin could conceivably be used to pay for something, and no
one but the parties involved would need to be a part of the process.

Bitcoin’s Development

Bitcoin has remained the most popular and lucrative cryptocurrency ever since
that white paper was published. But the road for the coins to get to that point
has been long and often quite bumpy. And in many ways, it still has a long way
to go in terms of being a viable payment system, if only because it isn’t used
often enough in that manner.

The first cryptocurrency transaction allegedly occurred when someone paid
10,000 Bitcoin to another person for some pizza. At the time, the coins had no
real value. That amount of Bitcoin would be worth a fortune today.

Eventually Bitcoin started to gain value and occasionally lose it thanks to
simple principles of supply and demand. Because Nakamoto had capped the supply
of the coins in his original paper, it meant that the demand for them would have
an effect on the value in a somewhat volatile way.

Interesting Note

Bitcoin was meant to act as
currency, but in terms of its actual value, it fluctuated as if it were a stock.

The first widespread public awareness of Bitcoin came with a negative spin
attached to it. When a large criminal network known as Silk Road was busted in
2013, it came to light that those in charge of the operation hid their doings by
using Bitcoin. That’s because payment with Bitcoin requires the transacting
parties to sacrifice no personal or financial information beyond the money that
changes hands.

Bitcoin’s Imitators

Bitcoin’s value steadily grew, however, so much so that the currency
eventually attracted some coins that were built in its image. After all, the
original software was open source, meaning that anybody could take it and try to
build their own projects from it. Coins with names like Litecoin and Swiftcoin
started to appear in the same circles in which Bitcoin was traded.

These newer coins utilized the same blockchain technology that Bitcoin had
enacted. But they made subtle changes in an effort to take care of the issues
that many thought plagued Bitcoin, such as the ability to handle a large number
of transactions in the network.

Ultimately, these other Bitcoin-like coins have had a hard time gaining
ground on the original. There is even a spin-off called Bitcoin Cash that was
created when some enthusiasts couldn’t convince the main Bitcoin network to
switch the size of the data that could be verified at one time. In any case,
Bitcoin still holds the largest market capitalization of cryptocurrency by a
wide margin, and those figures take into account a new generation of coins that
began entering the picture.

The Second Generation of Cryptocurrency

Bitcoin spawned a lot of imitators in the early days of cryptocurrency, with
most of these coins doing the same thing that Bitcoin did, only in slightly
different ways. Somewhere along the line, people began to realize that the
blockchain technology that led to Bitcoin’s creation was more versatile than
that. If the blockchain could verify a financial transaction, why couldn’t it
fill in as the mediator and validator for other peer-to-peer interactions?

The answer was, of course, that it could do those things. Hence came the
second generation of cryptocurrency. While many of these coins could indeed
serve as a digital currency, they also could be spun off to fulfill other

Ethereum, which came into existence in 2015, was the first of these
alternative coins, or altcoins, to make a widespread impact. The blockchain
network of Ethereum, which is fueled by its native coin called Ether, can
execute smart contracts. These contracts can be written up by two parties and go
into effect automatically when terms are met.

Another Ethereum innovation was the creation of decentralized applications,
or dApps. These are similar to the apps that you might find on a cell phone or
an internet network, only they are completely decentralized, meaning that the
creators maintain absolute control over them instead of ceding control to a
third party.

There have been many other coins in this second generation that have made a
dent on society already. Many of them were no more than ideas originally that
eventually came to life when the creators secured funding, which led to another
cryptocurrency innovation known as the ICO.

The Rise of the ICOs

An ICO, or initial coin offering, occurs when the entrepreneurs and technical
directors behind a new cryptocurrency need money to help them turn their ideas
into concrete results. The cryptocurrency project reaches out to investors who
are interested in funding the projects. Those investors usually pony up Bitcoin
or Ether and receive the new coins of the startup project in return.

Ethereum’s ICO was such a major success that most other coin projects quickly
followed suit and headed straight for retail investors for funding. Millions
were raised in this way, and new coins proliferated. The only thing that seems
even remotely able to slow down the rise of ICOs is regulation, which has its
own odd history with cryptocurrency.

Cryptocurrency and Regulation

The way that the financial situation has always worked is that a country
issues money and then reserves the right to impart regulations on that money as
they see fit. But cryptocurrency is a decentralized currency, meaning that there
are no “powers that be” in charge of it. That has led to the financial
regulatory bodies of various nations throughout the world attempting to make
difficult decisions about cryptocurrency.

Some countries have aggressively attempted to cut out the legs of
cryptocurrency initiatives. Others have been more receptive. That same sort of
polarization is evident in the reactions of large financial institutions like
banks or investment firms to cryptocurrency.

While there have been many conflicting decisions made by governing bodies
around the world, there hasn’t really been any consensus reached. The only thing
that can be said for certain about cryptocurrency and regulation is that there
has been subtle progress towards the coins being accepted into the mainstream.
That kind of mainstream push will only come in full, however, if regulatory
bodies take more of an active stance, one way or the other, on the coins.

Investment History of Cryptocurrency

Cryptocurrency was first created to be the solution to a problem concerning
personal financial independence. What it became, almost inadvertently, was a
huge investment property. As the coins became more popular, their values started
to rise, and they made steady progress throughout the middle of this decade.

But it was 2017 when the prices of cryptocurrency really went off the map.
Some of it was spurred by the popularity of the coins and increased public
awareness of their usefulness in society. And some of it was driven by that old
investment maxim of fear of missing out, with investors rushing in to become
involved in cryptocurrency even though, in some cases, they had no idea of what
it really was.

However it happened, the prices spiked in 2017 to unheard-of levels. Bitcoin,
of course, led the charge, with the coins at one point topping the $20,000 price
mark. Other coins also rose dramatically. For a while, it seemed like the
cryptocurrency market would never stop rising.

There was, however, a backlash coming. Many governments started to actively
monitor the coins, while regulatory bodies began to step in to check their
unabated progress. In this past year, Bitcoin has fallen back down to a level of
about 70% below its peak. Other coins fell even harder, making investors who
came to cryptocurrency a little late

wonder why they did
in the first place.

Bitcoin and the rest of the cryptocurrency market have stabilized some in the
past few months. But the coins have an innate volatility that likely will remain
until they start to establish themselves as useful to a large percentage of the

Cryptocurrency Adoption

One of the things holding cryptocurrency back from rising to previous levels
is the fact that not enough of the coins have actually been used in the
situations for which they were intended. That means that Bitcoin isn’t accepted
by many places as payment, even though it gains more traction every day. And it
also means that many of the second-generation coins have not yet delivered on
the kind of game-changing innovations that they promised.

Many of the detractors of cryptocurrency point to this lack of usage as a
sign of its weakness as an investment vehicle. Its proponents think otherwise,
pointing to the steady progress the coins are making towards saturation on a
widespread level.


In many ways, the history of cryptocurrency has displayed almost as much
volatility as the prices of the coins themselves are apt to do at any given
time. But the historical surge of cryptocurrency has largely been headed in a
positive direction, even though the sample size of ten years is awfully small to
make definitive judgments on where it is headed in the future.