A brief history of
Cryptocurrency
What is Cryptocurrency?
Cryptocurrencies are digital assets that can circulate without the need for central institutions, such as banks or governments, which allows transactions to occur between two parties without any middlemen – i.e. “peer-to-peer”. They are not physical currencies, as they only exist as digital entries to online databases and are stored in digital wallets. The breakthrough, delivered by Satoshi Nakamoto, was the combination of these elements into a working decentralized money, in contrast to traditional government-issued currencies, whose issuance is managed by arbitrary decree.
Before Cryptocurrency
Cryptocurrency itself did not exist until the late 2000s, but many of its component parts were developed in the decades prior. David Chaum invented a digital currency and started a company called Digicash, which relied on cryptography to verify and secure transactions. It had some similarities to cryptocurrency, because transactions could be conducted without the user having to divulge any personal information and it allowed users to trade with cyberbucks, a digital currency that was decentralized and not connected to a bank. However, it remained a centralized company, and did not have lasting success, declaring bankruptcy in 1998.
The Creation of Bitcoin
The 2008 economic crash exposed flaws in the existing financial system and, as a result, public trust in banks and financial institutions declined. The creator of Bitcoin, Satoshi Nakomoto, cites the financial crash as the inspiration for creating a decentralized alternative.
A year after publishing this paper, the first block of bitcoins was created through a process called mining, and on January the 12, the first ever bitcoin transaction occurred when Nakamoto sent 10 bitcoins to computer programmer Hal Finney. Today, bitcoins are mined at a rate of 6.25 Bitcoins per block and the number of Bitcoins in circulation will be capped at 21 million, which is predicted to occur in 2140. Over 90% of all bitcoins have already been mined, and it will take until 2140 to mine the last 10%. Satoshi’s identity has remained a secret even as they went silent in December 2010, leaving the project to be maintained by an open source community.
The First Bitcoin Purchase
In 2010 the first cryptocurrency purchase took place. Laszlo Hanyecz spent 10,000 Bitcoins at Papa Johns to purchase two pizzas. This 10,000 BTC was valued at only $25, so at that point a single Bitcoin had the value of a fraction of a penny. In 2021 on its 11th anniversary bitcoins price was at a high of $63,000, so at that point the transaction for those two pizzas would be worth around $630 million.
Emergence of Alternative Cryptocurrencies
After the creation of Bitcoin other cryptocurrencies began to emerge such as Litecoin (2011), Etherum (2013), Dogecoin (2013). Many cryptocurrencies have unique features to differentiate them from Bitcoin and other cryptocurrencies. These distinguishing features include differences in scripting language, additional security, choice of consensus mechanism, target audience and so on. However the cryptocurrency market is still dominated by Bitcoin, in 2022 it had a 44.68% market cap with the second most dominant cryptocurrency being Ethereum at only 19.06%. When Bitcoin value changes, other cryptocurrency tends to follow so when Bitcoin goes up other digital tokens will likely increase in value, and when Bitcoin declines they also decline.
Price History
Cryptocurrency has a very volatile trading history and over the years most cryptocurrencies have undergone several rallies and crashes. On the cryptocurrency exchange the value of the currency is entirely dependent on investor demand and if the market declines so does the value of a cryptocurrency. Compared to other asset classes it has one of the most volatile value histories.
In 2017 Bitcoins price stayed around $1,000 but by May it broke $2,000 and then dramatically shot up to $19.345 in December. However, in December of 2019 the value was much lower at $6,635.84. The Covid-19 pandemic saw a huge increase of people purchasing Bitcoin and in December 2020 the price had shot up to $29,000. In November 2021 Bitcoin reached an all-time high of over $68,000 but by January 2022 had rapidly declined to $35,000.
Cryptocurrency has a very volatile trading history and over the years most cryptocurrencies have undergone several rallies and crashes. On the cryptocurrency exchange the value of the currency is entirely dependent on investor demand and if the market declines so does the value of a cryptocurrency. Compared to other asset classes it has one of the most volatile value histories.
In 2017 Bitcoins price stayed around $1,000 but by May it broke $2,000 and then dramatically shot up to $19.345 in December. However, in December of 2019 the value was much lower at $6,635.84. The Covid-19 pandemic saw a huge increase of people purchasing Bitcoin and in December 2020 the price had shot up to $29,000. In November 2021 Bitcoin reached an all-time high of over $68,000 but by January 2022 had rapidly declined to $35,000.
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