History and Origins of Cryptocurrencies
Tags: Cypherpunk, Cryptocurrency, Bitcoin, History, Cryptography

To this day, we recognize Bitcoin as the “mother of cryptocurrency”, as it was the first to be solidly instituted under this concept in 2008. However, the truth is that the idea of having a digital currency has existed long before. For example, the advances achieved in cryptography during World War II, with Alan Turing as the main exponent, laid the foundations for the development of the technology that supports cryptocurrencies today. More specifically, the fact of using encryption methods to protect transactions is the central idea of the protocols on which digital currency is based today.

There are some subjective factors that were important in driving the development of digital money. Towards the 1980s, an ideology began to develop that vigorously defended free access and use of information. We refer to the Cypherpunk Movement, whose members also advocated the privacy of the basic elements through cryptography. Their aspirations are explained in detail in the Cypherpunk Manifesto. Reading this document is considered by some to be vital to understand the philosophy of cryptocurrencies.

First attempts at digital currencies

The first concrete antecedent of cryptocurrencies arises specifically in 1983. It was a cryptographic system called eCash, conceived by the American cryptographer David Chaum. Through this system, the intention was to make monetary transactions anonymous. Subsequently, in 1995, Chaum created DigiCash in another attempt to have a currency that was not traceable.

A year later, the first formal articles on electronic money began to be published, demonstrating a growing interest in this area. In 1996, the US National Security Agency (NSA) published an investigation titled: “How to make a mint: The Cryptography of Anonymus Electronic Cash.” The research described a cryptocurrency system that had previously been published on an MIT mailing list. This article was subsequently published in 1997 in The American Law Review.

Another important factor in this initial stage is the figure of Wei Dai, a renowned Chinese cryptographer, who is linked to the Cypherpunk community, according to some media. In 1998, he proposed the creation of the electronic currency called b-money, in order to have a distributed system for monetary transactions. Although it was never implemented, it represents one of the most important antecedents for current cryptocurrencies. The theoretical bases of this coin are very similar to those followed today.

The creation of Bitcoin!

Despite the first attempts to create digital currencies, it was not until August 2008 that Bitcoin, currently recognized as the first properly established cryptocurrency, was launched. On October 31th, 2008, the article “A Peer-to-Peer Electronic Cash System”, known as the White Paper of Bitcoin, was published. In this document, Satoshi Nakamoto explained the characteristics and basic principles by which the electronic currency was to be ruled. The most important aspect it deals with is the need to have a Peer to Peer network (P2P), insisting on the advantage of making payments without intermediation from financial entities. It proposes an electronic payment system based on cryptographic evidence explaining the importance of privacy and anonymity.

In its early days, this new technology struggled to make cryptocurrencies a functional and efficient system. One of the most imminent issues was to stop the double expense that was generated in each transaction. This was resolved through an exclusive consensus among all the parties involved, as an essential condition to keep the network running.

On January 3rd, 2009, the first p2p network comes into operation, and the first open-source software to iterate through the blockchain is launched. In this way, the first Bitcoins were created and the Blockchain mining began. The first known transaction was made by Nakamoto himself to Hal Finney, a programmer who was among the first to support and contribute to the currency.

One of the most famous Bitcoins transactions was on May 22nd, 2010, when a Florida programmer named Lazlo Hanyecz, who had supported the creation of the bitcoin, paid 10,000 BTC for 2 pizzas. Hanyecz wrote in the forum where he used to discuss and requested that someone buy him 2 pizzas and deliver them to his home in exchange for cryptocurrencies. A few hours later he received 2 Papa John’s pizzas, thus marking a historic event. This transaction is celebrated in the cryptocurrency community every May 22nd as: Lazlo Hanyecz, who had supported the creation of the bitcoin, paid 10,000 BTC for 2 pizzas.

Initially, in 2010, the value of Bitcoin was approximately $ 0.008; but it was only a matter of time before the price rise to considerable levels. By April 2013 it was already over $ 200. Despite the constant fluctuation, Bitcoin continued an upward trend, and although prices have fallen at times, it has remained the market’s leading cryptocurrency.

Cryptocurrencies emerged after Bitcoin

Bitcoin laid the foundation for other digital currencies with similar principles and structures to be created. The first cryptocurrency that emerged after Bitcoin was Namecoin, followed by others such as Litecoin, and thus began the creation of various cryptocurrencies, some more successful than others. One of those that has managed to position itself in the market is Ripple (XRP), created in 2012 by Chris Larsen and Jed McCaleb. It is a protocol designed to allow fast transactions, being a platform, and also a cryptocurrency. Shortly after, in 2014, Vitalik Buterin presented the Ethereum project, which is a platform with a series of functionalities that also has a currency: Ether (ETH). Ether generally follows Bitcoin in market valuation, hitting a record of $1,448.18 in January 2018.

There are currently more than 2,000 currencies in the crypto market. This amount is increasing due to the large number of projects that, like Ethereum itself, allow the creation of new cryptocurrencies. To date (August 2021) and according to CoinMarketCap, the cryptocurrencies with greater capitalization are: Bitcoin, Ether, Binance Coin, Cardano and Tether. The fact that Bitcoin remains the market leader comes from its supply and demand. This also has to do, without a doubt, with being a pioneer in the sector; which has made it gain popularity and a growing number of followers.

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This information is provided for educational and informational purposes. It should not be considered as a guarantee or indication to buy or invest in certain assets or software. It is important to note that no system or methodology can guarantee a profit or be free from loss. And always remember: don’t risk more than you are willing to lose.

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