You may have heard of cryptocurrencies recently, but how much do you know about the origins of cryptocurrencies? Read on to find out where cryptocurrencies came from.
Where did they come from?
Cryptocurrencies existed as a theory long before most people had access to the internet. The idea of cryptocurrencies is based in maths and computer science and was created as a concept to try and solve the political and practical shortcomings of our traditional currencies.
In the 1980s, an American cryptographer called David Chaum created what is know as a
”blinding” algorithm. This algorithm is something that is still at the heart of web-based encryption as it allows for secure information to be exchanged between two or more parties in a way that it cannot be altered as it is transferred. Not only did this algorithm lay the groundwork for all future electronic money transfers, but it also laid the groundwork for cryptocurrencies.
DigiCash the first Cryptocurrency
In the 1980s, Chaum relocated to Holland in order to start DigiCash, in an attempt to commercialise his concept of what we now think of as cryptocurrencies. However, unlike modern cryptocurrencies, DigiCash held a monopoly on the supply and control of the currency, much like central banks in traditional currencies. Modern cryptocurrencies are decentralised.
Originally, DigiCash sold directly to individuals. However, this did not sit well with the banks in Holland. They presented Chaum with an ultimatum, which ended in DigiCash agreeing to only sell to licensed banks. This somewhat shrunk the potential market for DigiCash. Microsoft later approached DigiCash interesting in allowing early Windows users to purchase the cryptocurrency, but terms could not be agreed upon, and no deal was ever made. By the late 1990s, DigiCash was no more.
DigiCash is not the only failed cryptocurrency that has existed though. Around the same time as Chaum, Wei Dai, a software engineer, published a white paper on the topic of b-money. It was a concept that shared a lot of the basic components that modern cryptocurrencies have, but it was never anything more than a theory.
The only other failed cryptocurrency worth mentioning is Bit Gold. It was developed by an associate of Chaum’s, Nick Szabo. The system used the blockchain system that is used by most modern cryptocurrencies, but like DigiCash, it never gained enough popularity to sustain it, and it soon ceased to be.
Modern Cryptocurrencies
The first modern cryptocurrency is generally accepted to be Bitcoin. It was outlined in a white paper in 2008 and in 2009 it was released to the public. It did not take long for other cryptocurrencies to appear. In 2012, WordPress became the first major company to accept Bitcoin as a method of payment. The value of cryptocurrencies has soared, and some have generated a great deal of wealth from mining and trading the resource.
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