The first cryptocurrency in the world is considered to be Bitcoin. This coin is still the most popular to this day, being on the first line of the ranking in terms of capitalization.
Developers have been interested in using crypto to make payments since the early ’90s, when a remote prototype of the DigiCash blockchain was created. It was a fully centralized system that was able to survive until 1998, but went bankrupt at the end due to lack of interest from the community and inability to meet customer needs. But it was DigiCash that showed that the idea of virtual payments was not a fiction, but a fairly close reality.
After that, singles and groups of developers began to attempt to create cryptocurrencies. But now everyone focused on the implementation of a decentralized system, because the lack of regulation will provide complete privacy for the transfer of payments.
Zero years was the time when online shopping began to gain momentum. But the current format was inconvenient and cumbersome, because national governments and large corporations literally ran the whole system. Therefore, the emergence of cryptocurrency as an alternative and independent way of making financial transactions was a matter of time.
As a result, in 2008. Satoshi Nakamoto published an article describing the principle of Bitcoin (Bitcoin: A Peer-to-Peer Electronic Cash System). Today, such files are called White List, and they can be found in some other cryptocurrencies. And in early 2009, BTCs were already generated. The first transaction was between Nakamoto and another developer of cryptographic software, Hal Finney.
Who is the creator and developer of the principle
But when you dig deeper into history, you can see that Satoshi Nakamoto is not the first person to go this far in creating a cryptocurrency with a modern look. The reference in the article Bitcoin: A Peer-to-Peer Electronic Cash System (in which Nakamoto said all about his bitcoin) to a certain project called B-Money shows this.A photo of Satoshi Nakamoto is open on the screen.
Wei Dai is a Chinese-American with a bachelor’s degree in computer science and mathematics from the University of Washington. He has worked on cryptography for Microsoft Corporation, as evidenced by the American patents Dai received for his inventions. Wei Dai was the developer of the Crypto++ open-source cryptographic library, and in 2007 he created the universal hashing algorithm with the help of Ted Krawiec.
It was Wei Dai who became the developer of B-Money. The inspiration to deal with cryptocurrencies came to the young man after reading the ideology of crypto-anarchism, the main message of which was the idea: “If the person transferring funds cannot be identified, violence will become impossible”. Of course, we are talking about financial crimes. It was the idea of helping the world that gave the impetus for the development of the project.
It was possible to realize the idea only by creating a new financial instrument, which would be independent from the governments of any countries and the largest corporations in the world. Cryptography, with the help of which it is possible to create an anonymous and decentralized instrument, offered just such an opportunity. Wei Dai then proceeded to develop the basic principles, which were published on his personal website in 1998. They are still used in today’s cryptocurrency projects.
The following theses can be found in these documents:
- The entities in the payment system are digital aliases;
- the system functions through computational work, which is rewarded;
- all performance data is collected in a public log;
- payment authentication and confirmation are done with public-key encryption.
Privacy was the main goal. The same idea was pursued by the developer of the later Bitcoin. The architecture created by Daem is still relevant today, as blockchains are created in its image.
The concept of the first cryptocurrency was called A-Money. But the development turned out to be impractical, as each participant of the payment system had to maintain a database of the available balance independently. Due to the fact that this information must be stored by all users, the free disk space required for this database would increase with the number of participants. All of this led to the development of an alternative in the form of B-Money.
Now the databases were stored only on the servers, while the information remained open to all users. To combat fraudsters, penalties and rewards were introduced into the system.
B-Money had the following similarities with Bitcoin:
- Mining (processing power was used to validate transactions);
- penalties and rewards;
- collective accounting of transactions;
- use of digital signatures for transactions.
But the idea of B-Money remained only on paper. No one dared to create such a revolutionary and voluminous project. His successor was Satoshi Nakamoto, who not only came up with the idea anew, but also managed to implement its improved version.
Pizza for 10,000 BTC and the first purchase for cryptocurrencies
Sooner or later, the first transaction using cryptocurrency as a means of payment had to happen. This happened in 2010, when the main figure was programmer Laszlo Hanec (he wrote the first program that allowed to mine Bitcoin using GPU, although until that moment mining was only possible via CPU).
Thanks to the program he had written himself, the developer was able to mine about 70 thousand BTC. As an experiment, he decided that the coins must be used for their intended purpose. So in May of 2010. Khanec posted a post on bitcointalk thematic forum (it was the place where first enthusiasts who were studying bitcoin and crypto in general gathered), that he was willing to buy two pizzas, but he was offering 10 thousand BTC as payment. On May 22, 2010. Laszlo already got his 2 pizzas for $25. He paid 10 thousand BTC for it.
This transaction should not be viewed as one of the greatest blunders, but as a breakthrough in the cryptocurrency world, because it’s the first deal in the world in which BTC participated.
The emergence of altcoins
While the classic cryptocurrency appeared in 2009, the first altcoin was created in 2011. The term refers to any token other than BTC. The purpose of creating a new kind of cryptocurrency was to remove restrictions and expand the scope of blockchain usage. Today, there are already more than 5 thousand coins.
But during the evolution of the market, the goals of altcoin did not expand, it remained as one of the tools of empowerment. The first significant tokens after Bitcoin:
Namecoin – created in 2011, this is the very first altcoin. The goal of the project was to develop a DNS server system. But NMC was quickly forgotten and did not become so popular. So in 2015, out of 120 thousand domain names registered on Namecoin, only 28 were active.
Litecoin is the second altcoin, which was also created in 2011. The developer was Charles Lee, who wanted to modernize bitcoin, as more and more negative reviews of the world’s first crypto appeared online. In its time, LTC quickly took off and was ranked second among all the tokens in the world. But over time, it began to give way to its counterparts. LTC is still actively used for exchange trading.
Peercoin – appeared in 2012 thanks to the work of Sonny King and Scott Nadal. At one time, it became the first cryptocurrency to use the Proof of Stake consensus. This got rid of the need for mining, now you had to stake to earn coins. Despite the innovative use of PoS, the project has not really gained popularity.
Ripple – launched in 2012, although its history stretches back to 2004. Its goal was to provide a convenient and easy tool for making payments Thanks to its emphasis on cooperation with the banking industry, XRP quickly gained popularity among large financial sector organizations, including Western Union. Today, the token continues to enjoy tremendous popularity.
Dogecoin – memecoin appeared in 2012, surprising everyone until now, because it was created as a joke and non-serious cryptocurrency, which by will of fate is still very popular. Not without the help of Ilon Musk.
Over time, altcoins have become not just improvements to BTC, but something distinctive and new. Today they have clear goals, and in terms of capabilities they are better than the very first cryptocurrency by a hundred times.
Smart contracts as a new milestone
A smart contract is a computer program that executes an agreement between multiple parties if certain conditions are confirmed to be met. It differs from a conventional contract in the way it is written, the legal implications, and the concept of compliance.
The principle of smart contracts was described by Nick Szabo in 1996, when the development of blockchains was out of the question. The programmer created the concept that smart contracts are able to transfer information using mathematical algorithms that fully automate the process. It only requires the fulfillment of the conditions set. The 1996 concept was realized only recently, when its potential could be unlocked thanks to blockchain.
An example of a smart contract: “The rights to the NFT that user B holds will transfer only after user A transfers a predetermined amount. No further action is required from the parties to the transaction, and the rights will be transferred instantly after the money is credited to the account.
Smart contracts are used in the exchange of goods, money, real estate, assets, etc. All contracts are in a decentralized ledger, which completely prevents the possibility of changing or deleting information on file. The only drawback is that the code only works in its digital ecosystem (blockchain). This problem is solved by services linking networks and information from the outside world through oracles.
The emergence of Ethereum
Vitalik Buterin is one of the most influential people in the cryptocurrency community, because it was he who was able to create Ethereum, one of the largest networks and the second most capitalized cryptocurrency in the world. The creation of Ethereum began with a White Paper written by Buterin in 2013. The main goal of the new project is to create decentralized applications. At the same time, a team was assembled, which began development.
Ethereum appeared thanks to Buterin and on smartphones.In 2014, the new token was already announced. The article Ethereum: now going public was written by Buterin himself. It talked about the decentralized organization and many other advantages of the blockchain. A presale was already held in July 2014, during which the company was able to raise about 18.4 million USD.
The very fact that Ethereum appeared is a successful attempt to draw the community’s attention to the fact that it is not the token itself that matters (as was originally the case with Bitcoin), but the blockchain. Today, all community Influencers support Buterin’s ideas. Modern cryptocurrencies also followed in his footsteps, because they are created as a mechanism that ensures the work of a certain project with a clear purpose, occupying its niche in the market.
Emergence of Dogecoin, history of its founder and meme-coins
Dogecoin is a cryptocurrency created in 2013 by the efforts of Billy Marcus and Jackson Palmer. The purpose of the project is just plain fun, because it was during that period that a major frenzy around Bitcoin began, it was being mined, bought, sold, held, and in the national news you could hear this very “Cryptocurrency” more and more often.
The old meme with the Shiba Inu dog was taken as the basis for the look and subsequent PR. And the cryptographic part was borrowed from the token Luckycoin, which is an analogue of Litecoin. The PoW consensus was chosen because of its simplicity and greatest popularity.
Unexpectedly for the developers themselves, the project was warmly welcomed by the public, and people began to buy and use Dogecoin for personal purposes more and more often.
The story of one of the creators – Billy Marcus – attracted a lot of interest. In 2015, he decided to sell off all of his Dogecoin to buy a used Honda car. By the way, a few years later, the capitalization of DOGE became so big that it exceeded that of the entire HONDA concern.
But the story would not have continued had it not been for Marcus’ open letter to the entire community in 2021. In it he told that it took him and Jackson Palmer about 3 hours to create Dogecoin, and that the community began to depart from the ideal, which were comfortable for the developer. So right after being fired in 2015, Marcus sold all of his Dogecoin. Yes, if he had stayed in the project or kept the coins, he would have been able to solve his current financial difficulties (no ability to pay for a house for the material, which would likely cause her to lose it).
Even so, the true Dogecoin community is much more important to him. After all, they were the ones who helped the founder of Save the Dogecoins Foundation to recover the 21 million Dogecoins stolen in a hacking attack on the mock wallet. Since then, the community has continued to donate funds to help many in need, including animals. DOGE has even helped a Jamaican bobsled team make it to the Olympics and a NASCAR driver continue to compete in races.
Marcus was motivated to write this letter by the wave of e-mails he received when the crypto market was booming. All of them had the same message: “Help us get rich. And the arrival of such people saddened him. The programmer uses his story to show that the token was created as a joke, not as a tool to make money, and in the end he did not make any profit from it either. But he had a hand in something more important – he created a responsive community ready to help someone in need.
History of appearance and development of cryptocurrency exchanges, Coinbase IPO
The first online exchange New Liberty Standard appeared in 2009 shortly after the appearance of Bitcoin. It was rather an experiment for developers who wanted to create something new. Due to the absence of some tool for estimating the price of the coin, it was decided to correlate it with the cost of electricity used to mine 1 BTC.
Crypto exchanges in their modern form began to appear a bit later: Mt.Gox, Bitcoin Market, TradeHill, etc. The growth of interest in such exchanges began to increase in 2011.
At first, the exchanges being developed were fully centralized, because no one understood their danger at the time. As a result, hackers began to crack them, the cases of fraud increased, and from the legislative point of view, they were illegal. All of this left a negative connotation on the reputation of cryptocurrency.
The most striking example was the Mt.Gox exchange. 500 thousand BTC were stolen in 2011, due to which the rate of the coin fell from $30 to a few cents. Things got worse in 2014, when the management of the exchange banned withdrawals and the transfer of coins from Japan to the United States. A few days later it declared itself bankrupt. Mt.Gox lost more than 850,000 BTC.
Today they’re trying to eliminate centralization as much as possible, but without losing the necessary benefits of classic exchanges. After all, most traders are willing to take some risks in order to use stable exchanges.
All this led to the emergence of Binance (the largest cryptocurrency exchange, which in a year of activity has a capital of more than $ 1 billion) and its analogues. One of them was Coinbase. Both companies are developing in slightly different directions in order to reduce the competition between each other to a minimum.Coinbase was the first cryptocurrency exchange to hold an IPO.
In late 2020. Coinbase applied to the SEC for an initial public offering. As a result, the IPO was conducted on the NASDAQ exchange (interestingly, Coinbase became more expensive than the operator of the site itself – NASDAQ, based on the sales results).
As a result, in 12 years of development, cryptocurrency exchanges were able to grow from amateur projects to billion-dollar capitalization companies, which can already offer their shares for trading along with other commercial giants.
The development of different areas of cryptocurrency
Blockchain allows cryptocurrencies to be used in many different areas. Not only is it an anonymous means of payment that is not subject to any state, but it can also speed up transactions and much more.
Means of payment
The classic use of cryptocurrency is to pay for goods or services. This is what any means of payment is for. The very way they are used hasn’t changed since the days when those 10 thousand BTC pizzas were bought. The only difference is that cryptocurrency started to be accepted in much larger amounts and by much larger companies. A striking example is Tesla, where it is already possible to buy a car for tokens. It is true that the acceptance of BTC as a payment is suspended due to excessively high energy costs for transactions, but the fact remains the same.
Acceleration of transactions
Each created token has its own characteristics, one of which is transaction speed. With the competent use of cryptocurrency, this parameter will not only allow to quickly move money from point A to point B, but also give the opportunity to improve other areas, such as the transfer of documents. At the same time, everything will be as secure, anonymous and fast as possible.
To compare, BTC has only 240 transactions per second, while today’s Solana has about 50,000. The advantage of new cryptocurrencies is that the set values are not limits, and they can be expanded by introducing refinements.
DeFi is a set of services based on smart contracts and decentralized applications that allow access to financial services without contracting with centralized institutions and companies.
DeFi is an idealized schema of a fully secure and unbiased platform. They come in different directions: credit, exchange, stabelcoin issuance, synthetic crypto-assets, smart wallets, insurance and classic payments. One of the advantages of such services, in addition to decentralization, is the critically low commission: about 1-3%.
The DeFi boom happened in 2020, although still one of the most popular DeFi projects, Maker DAO, was launched in 2017. In such a short period after the boom, all DeFi projects have been able to become broader, covering far more areas than they did before. They are increasingly being looked at to increase their earnings.
NFTs are unique coins. Unlike standard cryptocurrencies, NFT is a vault where you can put any intellectual and digital property, such as a painting, a song, or the right to own real estate. The first project to make NFT mainstream is 2017’s CryptoKitties. The main goal of the game is to breed digital kittens, and the more unique their coloring, the higher the value of the pet on marketplaces.
Today, NFTs are used to sell protected intellectual property, mostly paintings, images, music, videos and collectible cards. Also, the technology is beginning to become an integral part of modern games, because it allows users to sell and buy content on special marketplaces.
What tasks were solved by blockchain at different stages
Initially, blockchain was supposed to solve problems and issues with the transfer of funds around the world. Today, classic transaction methods include the following problems:
The user must remain anonymous, but the bank itself requires identification. Therefore, a dishonest financial institution can use the data obtained for fraudulent purposes.
Possible appearance of contradictory information. For example: the sender sends $100, but the recipient only has a receipt for $10.
Lack of trust. An unscrupulous participant may use the system for his own purposes, as a result one of the parties will not receive payment for a good or service.
The number of servers is strictly limited. If they are disabled, funds will not be available.
High bank charges.
Lack of ability to manage transactions and work scenarios.
Cryptography provides the answers and solutions to all these questions, as blockchain does:
Uses public and private keys for identification, which allows hiding the identity of the sender and recipient.
The data is unified. They cannot be changed or deleted, because they are recorded in a block of a huge unbreakable chain.
The network’s consensus allows you to filter actions and transactions.
Anyone can run their own node or become a validator at all, checking all passing transactions.
The commission has a basis, so it is neither more nor less than a certain figure, which constantly changes depending on the load on the network.
The operation of smart contracts allows you to create any action scenarios. And coupled with oracles, they can work in any of the networks, while communicating with each other or with the outside world for confirmation.
The story of regulation and prohibition
Initially, all countries ignored the existence of this phenomenon altogether. But after the first boom in 2013, some supervisory authorities began keeping an eye on the Bitcoin Foundation and individual users, but no action was taken. After that, there was talk of possibly banning cryptocurrencies altogether, but after the realization that the new electronic asset would be the currency of the future, states began to consider accepting and legalizing coins.
At the moment, the reaction is completely different in different parts of the world. European Union countries not only accept, but are also beginning to integrate cryptography and blockchain capabilities into their financial structures (Swiss banks are an example). China, on the other hand, has chosen a more aggressive policy. In 2017, ICOs, fiat transactions on cryptocurrency exchanges and mining were banned.
Of the CIS countries, Belarus stands out the most, as it has created a system that allows local businesses to open their own token exchanges. But due to strict regulations and lack of tax breaks for non-residents of Belarus, the state was not able to attract investors from Europe and China. But in Moscow there are a couple of dozen crypto ATMs, through which you can buy tokens for fiat.
Growth in 2017, cryptozyme and crypto spring 2021
The fall in quotations in the crypto market is truly frightening, because over this period, coins lose their capitalization by hundreds of times. And there are reasons for all of this.
Cryptozyme 2018 happened because of the rush among retail investors, when millions of newcomers rushed to the market, wanting to increase their own capital (because of this, the largest exchanges even closed the possibility of registration, to somehow fight the influx of willing investors).
Ethereum also spoiled the picture, as it took away from Bitcoin a large percentage of capitalization, and therefore the position of BTC on the cryptocurrency market became shaky. All this with the launch of bitcoin futures on the Chicago Mercantile Exchange, which allowed traders to place downside bets, caused the first major collapse
History of Bitcoin cryptocurrency quotes.The second largest collapse happened in the spring of 2021.Then the reasons for the decline were the same excessive attention and belief in the coins. In 2020. Coinbase became a member of the stock exchange and many other factors increased the price. A large number of traders began betting on further price increases over a long period of time. But at one moment their expectations did not come true, and the purchasing power was not enough. The continuing aggressive selling was one of the reasons why BTC began to fall in price, and with it the whole market.
Ilon Musk also contributed to this, stating on May 13, 2021, that Tesla stops accepting BTC as a payment for cars, because their transaction requires too much electricity. On the same day, the price dropped even more.
Big Capital’s Interaction with Cryptocurrencies
Large companies (Walmart, Amazon, Apple, etc.) are increasingly looking for employees who are familiar with digital and cryptocurrency products. All applicants must deal with digital currency strategy and other nuances of alternative payments. All this interest is for a reason.
The crypto market is already catching up with the classic financial market in terms of capitalization. Therefore, it is becoming a highly competitive market that should be taken up as quickly as possible. As with any other innovation: the first to occupy the market gets a huge advantage over competitors.
Cryptocurrencies will continue to be introduced into our lives. We will see them not only in private financial instruments, but also in state structures. Well, the application of blockchain, which works thanks to tokens, has almost unlimited possibilities to connect all sectors of the governing apparatus, making life easier for people all over the planet.