Since Bitcoin’s unprecedented price spike (and subsequent evening out) last December, it seems you can’t go a week without somebody talking to you about cryptocurrency. Whether it’s a water-cooler conversation between two dumbfounded people desperately trying to parse what exactly “blockchain” means, or a high-profile financial expert decrying Bitcoin’s long-term potential, it’s difficult to escape the discussion of this futuristic and often-intimidating new form of payment.
But in the midst of all this chatter about Bitcoin and its cryptocurrency cousins, it’s worth asking: Where did cryptocurrency come from and what is the actual cryptocurrency history? For many of us, it may appear that Bitcoin appeared in cyberspace overnight last year, but in reality, it’s been simmering beneath the surface since way back in 2009.
Since the internet began to dominate commerce in the late 90s, dozens of very smart people had mulled over a means to avoid the need for a trusted third party financial institutions to mediate between transactions. In an effort to devise a system that could circumvent these middlemen while also avoiding “double-spending” fraud, one Wei Dai published a proposal for so-called “b-money” that would use an inimitable “proof of work” function to create digital money. Later, others, like Nick Szabo would put forth similar proposals, building on a growing body of knowledge on the subject, but none actually came to fruition.
That is, until one intrepid individual, posting under the pseudonym Satoshi Nakamoto, sent a paper called “Bitcoin: A Peer-to-Peer Electronic Cash System” out to a popular cryptography community in 2008. Breaking down his line of thinking is a task for another, much longer article, but in effect, it solved all the pesky problems of digital, mintless currency.
Within a year, Bitcoin mining — by which transactions are verified in the blockchain and new Bitcoin is created — was well underway. Though it took a year for the new cryptocurrency to be assigned a monetary value. Back then, one user decided arbitrarily to sell 10,000 Bitcoins for two pizzas. Those turned out to be $65 million pizzas, by today’s valuation.
Over the coming years, new forms of cryptocurrency hit the market. Ethereum, Ripple, Cardano, Stellar, and thousands of others appeared, each with their own spin on the blockchain currency formula.
More and more people began to invest, and in November of 2013, Bitcoin’s value hit $1,000 for the very first time. This was met with cheers of victory among many members of the community, who promptly cashed out and made a lot of money — though shortly after the price plummeted as thousands got out of the market. In fact, it would take two more years to reach past the $1k mark again, though when it did, it did so with a vengeance.
Last December, Bitcoin reached its highest valuation ever at $19,783.06 in mid-December of last year. And though it dipped sharply again soon after and began to fluctuate wildly (today’s Bitcoins are valued at around $6,500) it remains a promising investment for thousands of individuals. But whether Bitcoin fails — as many pundits warn it inevitably will — or continues to soar, the can of worms is already open. Thousands of cryptocurrencies are now available, and this new market is here to stay. Though it remains to be seen just what impact this will have on the world at large.
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