Cryptocurrency and its short history
Rarely does a day go by when the word “cryptocurrency” doesn’t appear in the news. Nowadays its popularity is rising among private investors, companies and even governments. But although this mysterious concept has been around for some time now, many people do not know anything about the history of cryptocurrency. How did it all start and who was the founder of this decentralised and complex system? Find the answers below in this article.
The first cryptocurrency
The first concept of cryptocurrency was created back in 1983 by the American cryptographer David Chaum, with a pioneering concept that allowed for fiat currencies to be transacted between banks and third parties, in a secure digital manner. Chaum then started the company ‘DigiCash’ in 1989, which allowed for the first cryptocurrency, ‘ecash’ to make its debut. Ecash worked similarly to credit cards, where transactions were free to the purchaser, but the merchant had to pay a transaction fee. Various other cryptocurrencies were later created, based on this new concept, including the well-known Bitcoin.
The creation of Bitcoin
The US abandoned the gold standard in 1971, by which all global currencies were valued against the price of gold. Subsequently, all other major global currencies left the gold standard, and as of today, all major currencies across the globe use fiat currencies which are backed mainly by speculation and money printing, rather than actual intrinsic value. Fiat currencies have no intrinsic value as such and are therefore susceptible to inflation and hyperinflation. The Zimbabwean dollar was a good example of how hyperinflation due to overprinting can make a currency become worthless and finally collapse. Fiat currencies throughout history have always failed over time and they are only as valuable as the strength of a country’s economic and political stability.
Bitcoin, on the contrary, was created using a mathematical model based on an algorithm to work as a currency that retains its value and that is not susceptible to inflationary risks like fiat currencies. The computerised algorithm stated how many Bitcoins can ever exist, and over how long a period the Bitcoins would be distributed through crypto mining. This means that there are a finite number of Bitcoins that can ever be issued, unlike fiat currencies where the money can be printed over and over, with little oversight.
This decentralised concept of cryptocurrency is what we have come to know as the modern digital cryptocurrency. Since the introduction of Bitcoin, many other cryptocurrencies, digital assets and tokens have come to flourish, which are now known as ‘altcoins’.
Bitcoin – Who invented it?
Bitcoin was then created in 2008 and introduced back in 2009, becoming the first decentralized cryptocurrency to ever be issued. It is thought to have been created by an individual or group that goes by the pseudonym ‘Satoshi Nakamoto’, although no one really knows for certain who created Bitcoin. This has created a lot of speculation as to who is the real inventor of Bitcoin.
Bitcoin vs. Fiat Money
Bitcoin also allows parties to make secure and direct transactions anywhere in the world, bypassing the banks, and therefore the governments of these banks also. Huge transaction fees can be almost eliminated by bypassing the banks in this way, international sanctions can be circumvented, and the transactions are done much quicker than banks can facilitate, which increases the flow of international business and industry by reducing the transactional processing time to about 10 minutes. Bitcoin also allows for anonymous transactions to be made, with little scrutiny, therefore becoming a great tool for governments, businesses and individuals to circumvent such scrutiny when making transactions.
Amongst the many other advantages Bitcoin has over fiat currencies that use banks to manage transactions, you can already start to see why Bitcoin has taken the main stage in recent years. It offers huge advantages to the international community. It is comparable to when emails replaced the need to physically send documents through the postal system, thus saving more time and expense. Cryptocurrencies may eventually replace the need for banks to manage our transactions and to store money, and entirely revolutionise global currencies that are in use today.
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