crypto history

A Brief History Of Cryptocurrency

Understand the highs and lows of cryptocurrency history, and what the future will be.

Brandon Bartlett - Crypto consultant and OBR founder

Brandon Bartlett

OBR | CEO

The Idea Of A Digital Currency

The history of cryptocurrency is a fairly short one, one which you’d think would start with Bitcoin. However, digital currencies date back to 1989 when DigiCash, an electric centralised money corporation was founded by David Chaum. Later, more established money transfer companies developed, such as Paypal and Stripe. Decentralised digital currency platforms were proposed as early as 1998, but no one had yet overcome the issue of ensuring that the transactions were secure and verifiable.

Development Of Bitcoin

In 2008, the issue of security and verifiability was finally resolved in a whitepaper written by an anonymous programmer (or programmers) working under the name Satoshi Nakamoto. 

On Saturday, January 3, 2009, the most famous cryptocurrency in the world, Bitcoin was born. With the creation of the very first Bitcoin block, known as the ‘Genesis Block’, the first set of 50 Bitcoin (BTC) was mined into existence. The Genesis block is considered the start of the Bitcoin blockchain, and the beginning of the cryptocurrency revolution.

On January 9, Version 0.1 of Bitcoin was officially released, including the generation system that limits the blockchain to the creation of 21 million Bitcoins by 2040. Satoshi mined the first ever Bitcoin block and hid a secret line of text in it, poking fun at the normal banks. He wrote and modified all the Bitcoin source code for the first couple of years.

Issue Of Double-Spending Resolved

Satoshi’s goal was to create an electronic peer-to-peer decentralised cash system, where others had failed. They could not get past how to deal with the double-spending issue and remove the third-party central authority with success. Double spending is where the currency owner spends the same money twice. If a digital dollar is just information, free from the corporeal structures of paper and metal, what’s to prevent people from copying and pasting it as easily as a chunk of text, “spending” it as many times as they want? The conventional answer involved using a central clearinghouse to keep a real-time ledger of all transactions—ensuring that, if someone spends his last digital dollar, he can’t then spend it again. The centralised ledger prevents fraud, but it also requires a trusted third party to administer it. 

Satoshi solved the issue of double spending, by doing away with the central governing authority in the middle, by publicly distributing the ledger across a network of computers around the world. Each participant (computer) needs to authorize each transaction to be verified on what Satoshi called the “blockchain”. Bitcoin was birthed as the property of the Bitcoin community, without any centralised governing or controlling authority needed for verification. 

Users willing to devote CPU power to running a special piece of software would be called miners and would form a network to maintain the blockchain collectively. In the process, and as a reward, they would also generate new currency. Transactions would be broadcast to the network, and computers running the software would compete to solve irreversible cryptographic puzzles that contain data from several transactions. The first miner to solve each puzzle would be awarded 50 new Bitcoins, and the associated block of transactions would be added to the chain. The difficulty of each puzzle would increase as the number of miners increased, which would keep production to one block of transactions roughly every 10 minutes. In addition, the size of each block bounty would halve every 210,000 blocks—first from 50 bitcoins to 25, then from 25 to 12.5, and so on. Around the year 2140, the currency would reach its preordained limit of 21 million bitcoins.

Spending Bitcoin

The creation of Bitcoin’s Genesis block and the beginning stages of the network slowly started to gather more supporters as time progressed. To this day, we
don’t know what happened to Satoshi when the creator left the scene in 2010, by which point he was credited with having mined close to 1 million Bitcoins. 

A small band of early Bitcoiners went on to share the communitarian spirit of an open-sourced decentralised software project. The first ever BTC/USD exchange rate was launched by pro-Crypto website, New Liberty Standard. The site set the rate of one Bitcoin at $0.0007 on October 5, 2009. In 2010 the first Bitcoin transactions for value begun to occur through users of the Bitcointalk forum.

Gavin Andresen, a coder in New England, bought 10,000 Bitcoins for $50 and created a site called the Bitcoin Faucet, where he gave them away for the hell of it. A farmer in Massachusetts named David Forster began accepting Bitcoins as payment for alpaca socks. Laszlo Hanyecz, a Florida programmer, conducted what Bitcoiners think of as the first real-world Bitcoin transaction, paying 10,000 Bitcoins to get two pizzas delivered from Papa John’s. (He sent
the bitcoins to a volunteer in England, through an exchange on the Bitcointalk chat, who then called in a credit card order trans-atlantically). 

Those two pizzas (worth $30 at the time) are now worth $470,000,000. I think it’s fair to say that they were the two most expensive pizzas in the world!

Bitcoin Gains Traction

It wasn’t until early 2010 that Bitcoin began to gain traction among the general public. Over the next five years, many people were exposed to Bitcoin and the potential for it to change the world. On January 15, 2012 we got to see a price hike of 13% as Bitcoin had its Hollywood debut on hit TV show, “The Good Wife”, which aired Bitcoin for Dummies TV episode.

2011 saw the birth of other cryptocurrencies (often known as altcoins). These alternative coins (one of which was Litecoin) were adapted from Bitcoin’s open-source code but with several modifications. They were intended to improve upon certain elements of the Bitcoin design, such as speed or anonymity.

Along with competitors, Bitcoin’s increasing popularity led to the creation of an online infrastructure for users to trade and store their Bitcoin, with the first Bitcoin exchanges being launched. Bitcoin’s valuation peaked at almost $30 in June 2011 before falling and ending the year valued at just over $5.

This June 2011 peak price coincided with a Gawker article on the Silk Road website, an online black-market, where contraband items such as illegal drugs and false identity cards were traded. With Bitcoin being the only accepted payment method as a result of its pseudo-anonymity. The Gawker article was one of the first relatively mainstream articles on Bitcoin. Bitcoin and the black-market have long been linked as a result of this association.

In 2012, WordPress pioneered the way by being the first major website to accept payment in Bitcoin. It wasn’t long before Microsoft and others followed as more and more adopted Bitcoin as a form of payment. This was considered to be a big step towards Bitcoin and cryptocurrency being widely accepted internationally. By the end of 2012 the value of Bitcoin had reached over US$13.

2012 also saw the development of more ‘altcoins’, including Ripple, a cryptocurrency system with a much faster transaction time than Bitcoin that does not require mining (a polarising concept in the cryptocurrency community).

Bitcoin prices grew steadily throughout 2012, and in September of that year, the Bitcoin Foundation was established. The Foundation aimed to advance Bitcoin technology, promote its use and adoption, and protect Bitcoin’s core values. The Foundation accomplished these goals by providing educational resources and information about Bitcoin to the public.

As Bitcoin was making its voice heard all around the world, BitPay helped pave the way to provide mobile checkout services to companies that wanted to accept Bitcoins.

BitPay soon became the world leader in Bitcoin payment processing, when they surpassed 10,000 Bitcoin merchant transactions in January 2013, with not a single case of payment fraud.

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Bitcoin Becomes Known Worldwide (2016-2018)

Between 2016-2018, there was an exponential influx of investors in the crypto space with everyone, and their dog, creating new altcoins. Interest for this new technology definitely was not waning. Over 1000 different cryptocurrencies became available to investors. However, the majority of these were relatively small and lacked the market capitalisation of their larger competitors.

New and innovative blockchains, such as Ethereum started to make noise during this period within the cryptocurrency sphere. It brought smart contracts to cryptocurrency, opening a wide array of potential uses, and generated over 200,000 different projects on the Ethereum blockchain. All of these projects had their own cryptocurrencies, with their own purposes and goals, which were quite different from Bitcoin’s. There are now other blockchains trying to compete with Ethereum, such as Cardano, NEM, NEO and Waves.

Crypto bust and recovery (2018-Present)

The cryptocurrency market saw an explosive bull run (growth) in January 2018. If investors sold out at the right time, they would have made a lot of money. But many people learned their lesson the hard way, and later realised that “when the market goes up, it must come down” due to its volatility, speculation and lack of regulations. The crypto space spent the next few years recovering.

 

Since January 2021, we have seen a lot more dynamic price movements and now the industry is set to take its next big step. While most investors are aware of Bitcoin and Ethereum, the other cryptocurrencies have also been growing in popularity. For example, Ripple, Stellar and Cardano are all popular digital currencies that are gaining traction with the public. The majority of the top 100 coins have taken some dips in the past but even the strongest crypto assets are currently trading at a fraction of their all-time highs.

The future of Crypto

The last two years have been a rollercoaster ride for the world’s most popular cryptocurrency, Bitcoin, and the land of altcoins. The prices of cryptocurrencies have fluctuated wildly and we have seen some of the biggest hikes and dips in history. However, the fundamentals of crypto are still strong and there’s a bigger future for money in the works, the early stages of which are now taking place.

Cryptocurrencies and faster, more powerful financial technologies, are transforming our concept of money and challenging the financial institutions that currently manage it. The year 2021 was a transformative year for finance, and 2022 is shaping up to bring more change as we witness the dropping value of our countries’ central bank fiat dollars.

Over the next couple of years, you’ll see a lot of interest and adoption of people moving their dollars into precious metals and cryptocurrencies as an investment tool, namely as a store of value and a hedge against the hyperinflation that we are currently witnessing. It is always very smart to diversify your investment portfolio.

If you’re looking to get into the cryptocurrency market, please do not hesitate. Now is the time, whilst you can still find some bargain prices. 

Our team at Orange Brick Road are ready to help you understand cryptocurrency and the blockchain further so that you can take control of your funds and grow your wealth.

If you’d like one of our team members to walk you through step by step, how to add cryptocurrencies to your portfolio, please contact us to set up an appointment.