A Brief History of Cryptocurrency

Brief History on Crypto Currency

For the history of cryptocurrency, the past decade has seen Bitcoin and other cryptocurrencies move from a niche concept to an asset class with a total valuation above $2 trillion. The incredible rise of cryptocurrency has been turbulent and at times controversial. Here’s a brief history of how cryptocurrency developed from a neat concept into a multi-trillion dollar behemoth.

2008 – 2009: The Creation of Bitcoin

Bitcoin was created amid the financial turbulence sparked by the American subprime mortgage crisis which began in 2007. The crisis saw many major banks and financial institutions across the globe file for bankruptcy or receive government bailouts.

Bitcoin.org was registered as a domain name in August 2008. In October, the Bitcoin whitepaper was published. The author was named as Satoshi Nakamoto. Debate continues to this day over Nakamoto’s real identity.

Bitcoin was then launched with the mining of its genesis block in January 2009. Shortly after, computer programmer Hal Finney became the first recipient of a bitcoin transaction shortly after, receiving 10 bitcoins from Satoshi Nakamoto.

2010 – 2012: The First Bitcoin Purchases and Exchanges

In May 2010, a user of the BitcoinTalk forum offered a reward of 10,000 bitcoins to anyone who could provide him with a Papa John’s pizza. With each bitcoin valued at under 1 cent, this probably seemed like a good deal at the time.

In July 2010, a Tokyo-based platform for trading Magic: The Gathering cards repurposed itself as the first major bitcoin exchange. The launch of the Mt. Gox exchange made it much easier to purchase bitcoins using US Dollars and other fiat currencies.

August 2010 saw the first exploitation of a security vulnerability in the history of cryptocurrency and the Bitcoin network. A flaw in the network’s design allowed transactions to be carried out which created more than 184 billion new bitcoins. This fraudulent transaction was quickly spotted and reversed with a hard fork on the network. This remains the only security exploit which was ever been used directly against the Bitcoin network.

The dark web Silk Road marketplace launched in February 2011. Silk Road quickly found online notoriety as a marketplace where bitcoins could be traded for drugs. In 2012, Silk Road generated $15 million in sales.

The Bitcoin Foundation was created in September 2012 to guide development of the cryptocurrency and the blockchain technology underpinning it. The Bitcoin Foundation also sought to counteract the negative headlines surrounding Bitcoin’s role in facilitating illicit transactions on the Silk Road marketplace.

2013: The First Crypto Bull Run and Bitcoin Crash

By 2013, Mt. Gox was handling 70% of all bitcoin transactions. Notoriety surrounding the Silk Road helped add to the growing attention in Bitcoin. Bitcoin saw its US Dollar rocket from just over $100 in May 2013 to a high of $1,127 in November.

As the history of cryptocurrency went on, trouble was brewing at Mt. Gox. In June 2011, the exchange reported the theft of 25,000 bitcoins with a US Dollar value at the time of $400,000. 2013 saw Mt. Gox’s problems escalate with a $75 million lawsuit launched by its partner CoinLab over a breach of contract. Bitcoin was hit with more problems throughout 2013 as world governments began taking a more proactive stance on the emerging cryptocurrency market. In May, the U.S. Department of Homeland Security issued a warrant to seize funds from Mt. Gox’s American payment processor Dwolla. In October, the FBI arrested Silk Road creator Ross Ulbricht and seized more than 26,000 bitcoins from the platform. In December, the People’s Bank of China announced a ban on Chinese financial institutions using cryptocurrency.

The mounting legal problems at Mt. Gox thought to be behind issues customers faced with withdrawing funds as Bitcoin’s price soared above $1,000 in November. In February 2014, Mt. Gox announced that 850,000 bitcoins had been stolen from the exchange and filed for bankruptcy. The loss represented 7% of the total supply of bitcoins, then valued at $473 million. Bitcoin’s value subsequently fell dramatically, dropping below $500 by April 2014.

2013 – 2015: The Rise of the Altcoins

By 2013, Bitcoin’s early success was inspiring the launch of many new cryptocurrencies based on the blockchain technology it pioneered. Litecoin was one of the first significant altcoins. Created in 2011, Litecoin saw a surge in popularity in November 2013 with its price increasing by 100% in just 24 hours. Dogecoin was launched in December 2013 as a light-hearted alternative to Bitcoin. Dogecoin quickly saw its price exploded by 300% in three days.

Bitcoin Magazine co-founder Vitalik Buterin issued a whitepaper describing the concept of Ethereum in late 2013. Buterin believed blockchain technology was capable of supporting much more complex transactions than a simple exchange of funds. Buterin thought that decentralized applications could be deployed on the blockchain. Real world assets such as stocks and real estate could be represented on the blockchain. Smart contracts could allow funds to automatically be released when certain conditions were met.

In July 2014, development of Ethereum was funded through one of the first Initial Coin Offerings (ICOs). Participants in the ICO exchanged bitcoin for Ethereum. 7 million ETH were sold in the first 12 hours of crowd sale, generating $7 million. The first iteration of Ethereum then went live in July 2015.

Ripple Labs launched the cryptocurrency XRP in 2012. By 2013, Ripple Labs announced several banks had expressed interest in using XRP. XRP was designed to allow banks and other financial institutions to conduct low-cost fund transfers using blockchain technology.

The cryptocurrency exchange Coinbase was created through the Y Combinator startup incubator program in 2012. Several rounds of funding followed. By 2014, Coinbase had reached one million users. A January 2015 funding round saw Coinbase receive $75 million from investors including the New York Stock Exchange.

2016 – 2018: The First Big Boom

Bitcoin was still reeling from the collapse of the Silk Road and Mt. Gox in 2016. But as the concept of cryptocurrency gained more mainstream acceptance throughout the year, the value of each bitcoin steadily rose from lows below $400 in early 2016 to once again break above $1,000 by February 2017.

Ethereum was now an established part of the emerging cryptocurrency ecosystem. 2017 saw an explosion in the number of ICOs being offered for new tokens distributed through the Ethereum blockchain. Some of the significant ICOs during this period included the Brave web browser generating $35 million in under 30 seconds in May and September’s $100 million ICO for messaging app Kik.

Increased popularity also brought new problems for Bitcoin. The growing number of transactions on the network led to increased fees and slower transaction times. Disagreement within the Bitcoin community about how best to resolve these issues resulted in Bitcoin splitting into two competing cryptocurrencies in August 2017. Bitcoin Cash was created as a fork of the main Bitcoin blockchain, meaning all bitcoin holders received the new cryptocurrency at a 1:1 ratio.

Bitcoin hit new all-time highs above $2,000 in the runup to the Bitcoin Cash hard fork. After the split, Bitcoin and other cryptocurrencies saw an even greater surge in value. The unprecedented rush of new money into cryptocurrency pushed the price of each bitcoin to a record high of almost $20,000 in December 2017.

Bitcoin’s price fell back almost immediately. Other altcoins continued to surge as Bitcoin tumbled in January with most recording all-time highly by the middle of the month. But these highs quickly fell as Bitcoin slipped back below $10,000.

Many major cryptocurrency exchanges rose to new heights through the 2017 bull run. Founded in Shanghai in July 2017, Binance quickly captured a huge share of the growing market for cryptocurrency trading. Binance moved its operations to Japan in September as the Chinese government announced a complete ban on its citizens participating in cryptocurrency trading. 2018 then saw Binance open regional offices across the globe. During the peak of the altcoin rush in January 2018, Binance’s market capitalization hit $1.3 billion.

2018 – : The Bubble Bursts

Bitcoin and other cryptocurrencies saw steep declines in their value throughout 2018 as the mania of the 2017 bull run died away. By November 2018, Bitcoin had slipped to less than $6,500. The developments that followed push the price even lower.

Bitcoin Cash’s value drifted away from Bitcoin’s almost immediately following its launch in 2017. But this forked version of Bitcoin retained prominent supporters within the crypto scene including the major Chinese bitcoin mining firm Bitmain.

In 2018, dispute arose within the Bitcoin Cash community about increasing the block size to allow transactions to be processed more quickly. The main supporter of the increased block size was Craig S. Wright, an Australian computer scientist who claimed he had created Bitcoin under the pseudonym Satoshi Nakamoto.

The dispute resulted in what quickly became known as the Bitcoin Cash civil war. The two competing camps direct their mining power away from Bitcoin to try to secure the Bitcoin Cash network from being taken over by the other group. Wright’s efforts to control the existing Bitcoin Cash blockchain were thwarted, resulting in the hard forking of a new cryptocurrency dubbed Bitcoin Cash Satoshi’s Vision.

In the history of cryptocurrency, the mining war saw a further collapse in Bitcoin’s price. Bitcoin fell 50% between November and December, reaching lows of $3,222.

2019 – 2021: The Second Big Boom

The hype of 2017 had largely deserted the cryptocurrency space by 2019. However, many were still optimistic of Bitcoin and other cryptocurrencies reaching new highs.

One factor guiding this belief was the halving of bitcoin mining rewards in May 2020. Regular halvings of mining rewards were a feature built into Bitcoin since its creation. These reward halvings have occurred at four-year intervals. Each time, the halving was followed around a year later by a surge to new Bitcoin all-time highs.

Cryptocurrency was also now a much more established concept following the hype of 2017. A complex ecosystem had developed with many projects following in Ethereum’s wake to propose new applications for blockchain technology.

Some of the new applications which would factor into the next bull run were non-fungible tokens (NFTs) and decentralized finance (DeFi).

Now new things are making up the history of cryptocurrency, NFTs are digital assets which have their ownership recorded on the blockchain. The first NFT project to gain significant attention was the Crypto Kitties game which launched on Ethereum in December 2017. Unique kitties within the game were sold for huge sums including a record $140,000 sale in March 2018.

NFTs generated huge amounts of publicity heading into 2021. Significant stories included the $69.3 million sale of a digital artwork by Beeple through the prestigious Christie’s auction house in March 2021. Crypto Kitties’ creators Dapper Labs partnered with the NBA to launch the Top Shot platform, generating $350 million by March for sales of NFT game clips.

Yield farming emerged around the same time as a DeFi application allowing crypto traders to passively gain financial rewards. One of the most prominent examples of these applications is Pancake Swap, created on the Binance Chain.

The cryptocurrency also saw many developments surrounding institutional investment and legitimacy. Tesla announced in February 2021 that the company had purchased $1.5 billion in Bitcoin. Tesla founder Elon Musk has also been largely credited with sparking an incredible rise in the price of Dogecoin. While Bitcoin and Ethereum saw 2021 highs of around three times their 2017 and 2018 peaks, Dogecoin enjoyed a year-on-year surge of more than 18,000%.

In March 2021, payments giant Visa announced it was trialling the use of Ethereum for large financial settlements. Coinbase’s initial public offering saw it listed on the NASDAQ exchange at $381 a share. This was well above the expected $250 guide price, though Coinbase’s share price has fallen back since hitting a $400 high.

The Future

It remains to be see if the 2021 bull run will be followed by a similar crash to 2018. There are exciting developments on the horizon, particularly for Ethereum. Ethereum 2.0 is expected to launch in October 2021. This will see Ethereum move from mining to staking to verify transactions, rewarding ETH holders with a share of network fees. The next Bitcoin halving in 2024 is another major step in the history of cryptocurrency and moving it forward.

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