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What is the history of Cryptocurrencies?
In today's blog feature, we will look at the history of Cryptocurrencies and how they came to be such a phenomenon in the world of finance!
The term cryptocurrency is often used interchangeably with Bitcoin which regularly confuses many as to the differences between the two.
A Cryptocurrency is a form of electronic cash that exists without the presence of a central bank or government, that operates on a peer-to-peer basis allowing users to make payments to each other in a concealed manner (Bank of England, 2021). I'll go into more detail on how they operate in next weeks blog.
Bitcoin is just one form of cryptocurrency, even if it was the first and the most well-known, along with others such as Litecoin and Ethereum. Each of these operate as their own separate currency in the marketplace, in the same way that there is a difference between the Dollar and Euro.
A lot has happened since they were first introduced in 2008, so I am going to begin this blog series by looking at where Cryptocurrencies started and some of the major events that have taken place regarding them in their short life span!
Document
2008
The Beginning
The history of cryptocurrencies dates back to 2008 when an alias by the name of Satoshi Nakamoto released a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System,” (Nakamoto 2008). In this they laid out how through the use of an electronic system 'Bitcoin', the need for oversight and trust in the payment processing flow would no longer be needed as the system would operate in a completely secure manner.
2009
A year later in 2009 Satoshi released the first piece of Bitcoin software that effectively launched it into the world, even though take up and public knowledge of the currency was still extremely low.
2010
Bitcoin Pizza Day
The first transaction involving purchasing a product with Bitcoin was completed in 2010, when a Bitcoin holder paid 10,000 Bitcoin for two pizzas. Now known as ‘Bitcoin Pizza Day’ (Thompson, 2019), the $30 worth of Bitcoin used in 2010 would now be worth over $550 million dollars at today’s market rate (Yahoo Finance, 2021). That’s some pretty expensive pizza!
2011
Launch of Others
2011 saw the launch of other rival cryptocurrencies off the back of Bitcoin. Operating on largely the same basis and technology, competitors such as Litecoin, Namecoin and Swiftcoin were released (Bigmore, 2018). Today, because of how they are built on open source software and a lack of regulation that makes them relatively easy to set up, there are more than 2000 Cryptocurrencies in circulation, with market capitalisation of more than 970 billion Dollars (Statista, 2021).
2014
Weaknesses Revealed
2014 revealed the some of the weaknesses of Bitcoin and Cryptocurrencies as it was subject to its biggest hack to date. Hackers stole almost 750,000 Bitcoins from the Mt Gox. exchange, the largest at the time. This resulted in up to 6% of all Bitcoins being stolen (Greenberg, 2014), causing the exchange to close and victims left with no government or central body to turn to, to help recover their stolen funds.
2017
Hitting The Mainstream
2017 was the year when Bitcoin and Cryptocurrencies started to hit the mainstream. Prices had risen dramatically, rising from $2000 at the start of the year to highs of over $11,000 with fluctuation in between (Murphy, 2017). On top of this Japan became the first country to accept Bitcoin as a legal payment method (Graham, 2017).
2021
New Surge
Having failed to live up to their 2017 price rises for a number of years, Cryptocurrencies have come back in fashion in a big way. Prices have skyrocketed, giving Bitcoin alone a market capitalisation of $1 trillion (Pound, 2021). With organisations such as Tesla bringing Bitcoin and Crypto use more into the mainstream through large purchases and plans to accept them as payment methods (Kovach, 2021), this suggests our use of Cryptocurrencies is only going to increase in the future. This assumption will be tested in later weeks of the Crypto College blog.
Next week I'll be looking at Cryptocurrencies are created and traded so make sure to check back. For the latest Crypto news and developments make sure to follow @CryptoCollege2 on Twitter!
References
Bank of England. (2021). What are cryptoassets (cryptocurrencies)? Available at https://www.bankofengland.co.uk/knowledgebank/what-are-cryptocurrencies (Accessed February 15th 2021)
Bigmore, R. (2018). ‘A decade of cryptocurrency: from bitcoin to mining chips’, The Telegraph, May 25th. Available at https://www.telegraph.co.uk/technology/digital-money/the-history-of-cryptocurrency/
Graham, L. (2017). ‘As China cracks down, Japan is fast becoming the powerhouse of the bitcoin market’, CNBC, September 29th. Available at https://www.cnbc.com/2017/09/29/bitcoin-exchanges-officially-recognized-by-japan.html
Greenberg, A. (2014). ‘Bitcoin's Price Plummets As Mt. Gox Goes Dark, With Massive Hack Rumored’, Forbes, February 25th. Available at https://www.forbes.com/sites/andygreenberg/2014/02/25/bitcoins-price-plummets-as-mt-gox-goes-dark-with-massive-hack-rumored/?sh=7bc8d787ce1f
Kovach, S. (2021). ‘Tesla buys $1.5 billion in bitcoin, plans to accept it as payment’, CNBC, February 8th. Available at https://www.cnbc.com/2021/02/08/tesla-buys-1point5-billion-in-bitcoin.html
Murphy, H. (2017). ‘Drivers and risks of the cryptocurrency boom’, The Financial Times, November 29th. Available at https://www.ft.com/content/8db6ce04-d458-11e7-8c9a-d9c0a5c8d5c9
Nakamoto, S. (2008) ‘Bitcoin: A Peer-to-Peer Electronic Cash System’. [Online]. Available at https://bitcoin.org/bitcoin.pdf
Pound, J. (2021). ‘Bitcoin hits $1 trillion in market value as cryptocurrency surge continues’, CNBC, February 19th. Available at https://www.cnbc.com/2021/02/19/bitcoin-hits-1-trillion-in-market-value-as-cryptocurrency-surge-continues.html
Statista (2021) Bitcoin (BTC) market capitalization as of February 2, 2021 [Online]. Available at https://www.statista.com/statistics/377382/bitcoin-market-capitalization/ (Accessed 15th February 2021).
Yahoo Finance. (2021). Bitcoin USS (BTC-USD) Price. Available at https://finance.yahoo.com/quote/BTC-USD/ (Accessed February 15th 2021)
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