A Brief History of Cryptocurrency and Its Benefits

Whether you’re excited about the recent popularity of cryptocurrencies or just want to know how they work, it’s important to understand the history of cryptocurrencies and how digital currencies like Bitcoin and the underlying blockchain technology came to be.

Even though the creator of the leading cryptocurrency Bitcoin is a bit of a mystery, we know a lot about the history of the cryptocurrency that can influence your decisions to invest and trade in this asset class.

Prior to the current iterations of cryptocurrencies, many experiments failed to gain widespread traction. This includes ideas from the early 1980s in the Netherlands and the United States. The first significant digital currency was Digicash, which failed to gain popularity in the 1990s.

PayPal and its competitors emerged later and took a hybrid approach, processing digital transactions with existing currencies. These companies still play an important role in both online and international trade.

Other companies involved in cryptocurrencies or the technology behind them include B-Money, Hashcash, Flooz and Bit Gold. One of the biggest names in early cryptocurrency was David Chaum, the computer scientist and mathematician who created DigiCash and may eventually have played a role in crypto development. However, the true origins of cryptocurrency are still a mystery.

How and When Did Cryptocurrency Appear?

On October 31, 2008, Satoshi Nakamoto published the Bitcoin White Paper, which described the functionality of the Bitcoin blockchain network. Satoshi officially started working on the bitcoin project on August 18, 2008, when he purchased Bitcoin.org. It is worth noting that Bitcoin (and all other cryptocurrencies) would not be possible without the blockchain technology, which in its simplest form involves creating an immutable data structure.

The history of Bitcoin started here. Satoshi Nakamoto mined the first block of the Bitcoin network on January 3, 2009. This first block contained The Times headline, a permanent reference to bank bailouts and financial issues related to Bitcoin’s centralized financial system.

This first block — which resulted in the mining of 50 bitcoins — is now called the Genesis Block. Bitcoin was nearly useless at the time, as it was during the first few months of its existence. Six months after bitcoin became commercially available, in April 2010, one BTC was worth less than 14 cents. In early November, the price rose to 36 cents, before hovering around 29 cents.

In February 2011, it peaked at $1.06 before falling to around 87 cents. In the spring, the price rose in part because of a Forbes story about the new cryptocurrency. From early April to late May, the value of one bitcoin rose from 86 cents to $8.89.

Bitcoin prices continued to climb year after year, rising from $434 in January 2016 to $998 in January 2017. In July 2017, a Bitcoin software update was approved to support the development of the Lightning Network (a layer-2 solution) and improve security.

However, Bitcoin is not the only player in the cryptocurrency game. As the popularity started to increase, other coins were released using the same blockchain technology.

As of 2022, it is estimated that there are around 20,000 cryptocurrencies in circulation.

The Main Benefits of Cryptocurrency

The main advantage of Bitcoin and most other cryptocurrencies based on blockchain technology is that many of them have no central authority, payment processor or business owner. It has several other advantages, such as ease of transaction, potentially higher returns for traders, and even relatively good network security:

1. Easy trade

Crypto transactions can be done easily, often at low cost, and mostly privately. Almost anyone can send and receive various cryptocurrencies using a smartphone app, hardware or exchange wallet.

Some cryptocurrencies can be purchased for cash at a Bitcoin ATM. Cryptocurrencies do not always require a bank account, so it is possible for someone to buy Bitcoin from an ATM and send the coins to their digital wallet or phone.

2. Relatively safe

Cryptocurrencies are based on blockchain encryption and security, so decentralized cryptocurrencies are generally a secure form of payment. As such, the relative safety of cryptocurrencies can be one of the biggest benefits for users.

The security of the encryption is largely determined by the hash rate. The higher the hash rate, the more computing power it takes to damage the network. Bitcoin is considered the most secure cryptocurrency because it generally has a higher hash rate than other networks.

3. Short payment terms and low costs

While some people may want to invest in cryptocurrencies to take advantage of the (potential) price increase, others may want to use cryptocurrencies as a medium of exchange.

Bitcoin transactions can range from a few cents to a few dollars or more. Other cryptocurrencies can be sent cheaper. Payments for most cryptocurrencies are processed in minutes and some in seconds.

4. Exponential growth in the industry

The cryptocurrency industry is one of the fastest growing markets, especially since the industry took off with the debut of Bitcoin in 2009. The total cryptocurrency market in 2013 was around $1.6 billion. By September 2022, it will be worth more than $930 billion. This also includes the so-called crypto winter, which the cryptocurrency market endured for most of 2022.

5. Freedom of transaction

One of the great advantages of crypto is that it can be used to exchange value between two parties. This can be done independently from a third party, making the transaction as free as possible. It’s as simple as giving a dollar bill to a friend.

Banks or other payment processors may decide to terminate someone’s services for any reason. This can make it difficult for some journalists, political dissidents or others working in countries with repressive governments. Since Bitcoin or most other cryptocurrencies are not controlled by a central authority, it is very difficult to prevent someone from using them.

That being said, cryptocurrency seems to be moving towards more widespread use. Although there may be some changes and obstacles along the way, cryptocurrency and blockchain technology will continue to grow in popularity.