The History of Cryptocurrency
Angela Ye
The rise of cryptocurrency is one of the most fascinating stories of the 21st century. This article will summarise all significant events that occurred in the history of cryptocurrency and how it became so influential today.
Chain 1: Who came up with the idea of cryptocurrency?
David Chaum invented the idea of cryptocurrency decades before the invention of Bitcoin in 1983. Chaum published a [white paper](https://libguides.uml.edu/whitepaper_style#:~:text="A whitepaper is a persuasive,and promote a particular methodology.) (Blind Signatures for Untraceable Payment) detailing how transactions could be conducted with decentralized digital currency. Later, in 1989, Chaum founded the firm 'Digicash' and created a decentralized digital currency named 'eCash'. In the 1990s, eCash as well as other cryptocurrencies such as Bitgold and Hashcash were promising but ultimately unsuccessful in a world that was not ready to adopt such as radical currency. Nevertheless, the idea of a decentralized digital currency paved the way for future cryptocurrencies.
Chain 2: How did crypto become popular?
When the 2008 financial crisis severely shook public faith in centralized institutions, Satoshi Nakamoto published a white paper (A Peer-to-Peer Electronic Cash System) that detailed the technical workings behind cryptocurrency and the logistics behind a newly created decentralized currency called ‘Bitcoin’. The purpose of the creation of Bitcoin was to create 'peer-to-peer' electronic transactions so that currency did not rely on centralized institutions and a currency based on proof rather than trust.
The most significant turning point for cryptocurrency occurred in 2009. Laszlo Hanyecz made a real-world purchase with Bitcoin when he bought two pizzas for 10,000 Bitcoins, giving the cryptocurrency a real monetary value and its first valuation.
Chain 3: How have cryptocurrency prices evolved over the last decade?
In the last decade, cryptocurrency prices have experienced significant fluctuations. In 2011, in the early days of Bitcoin, cryptocurrency prices were relatively stable at a few cents per coin. However, with increasing media and public attention. The price of Bitcoin rose from just $13.30 USD per coin in 2013 to $770 USD per coin in 2014–a staggering 5569% increase. Attracted by the prosperity of Bitcoin, other cryptocurrencies, such as Litecoin and Ethereum, began appearing on the crypto market.
However, this rapid growth was disrupted in 2014 with the collapse of the major Bitcoin exchange 'Mt. Gox'. The exchange's collapse emphasized the importance of improved regulation and security measures in the cryptocurrency industry. Therefore, the price of cryptocurrencies fell substantially to around $200 USD in 2014.
Although the hacks led to a loss of confidence in cryptocurrency, they emphasized the importance of strict regulations in the cryptocurrency industry. They allowed cryptocurrency prices to continue to grow during 2015-2021 despite the shock of cryptocurrency prices in 2014. By the end of 2017, the total market capitalization of all cryptocurrencies had reached its peak of over $830 billion. Bitcoin reached nearly $20,000 in December of that year. From 2017-2018, Bitcoin's price earned $20,000, and major companies like Microsoft, MicroStrategy, and Tesla began investing in Bitcoin. In 2021, the cryptocurrency market cap reached a historical peak valued at an astounding $3 Trillion USD.
This period of phenomenal growth ended abruptly in 2022. The Luna / Terra crash wiped out billions in value overnight, and FTX filed for bankruptcy near the end of 2022. The flow-on effects also drove the value of Bitcoin and Ethereum down by about 75%, resulting in a total crypto market cap of around $800 million. However, although the scams and bankruptcies of the crypto winter have caused many to become pessimistic about crypto's future, the crypto market value is still retained at $1.06 trillion USD.
Chain 4: What is the history of crypto mining?
Cryptocurrency mining refers to verifying transactions on blockchain networks by adding them to the [public ledger](https://www.investopedia.com/tech/what-cryptocurrency-public-ledger/#:~:text=A cryptocurrency public ledger is,transactions executed between network participants.) in exchange for a reward. In 2009, after Satoshi Nakamoto mined the first Bitcoin Blockchain, he wanted to incentivize other people to participate in the verification process. Therefore, Satoshi introduced crypto mining, rewarding successful miners with mined bitcoins.
Since the launch of Bitcoin, mining has become increasingly competitive. Nowadays, mining requires specialized hardware called [ASICs](https://www.investopedia.com/terms/a/asic.asp#:~:text=An application-specific integrated circuit (ASIC) miner is a,or set of related functions.) (Application-Specific Integrated Circuits), specifically designed for mining. As competition has increased, increasingly vast amounts of energy are needed to mine crypto, which has become a considerable environmental concern in recent years.
Chain 5: Conclusion
Despite its phenomenal growth in the past decade, cryptocurrency is still in its early stages of development. A currency that aspires to become mainstream must be feasible and stable. However, cryptocurrency still remains too volatile and uncertain for mainstream implementation. Therefore, the degree of regulation and securitization in the cryptocurrency industry will determine the success of cryptocurrency in the years ahead.
