The history of Cryptocurrency is very interesting. Most cryptocurrencies today are variations of Bitcoin, which was the first widely used cryptocurrency. It was founded in 2009 by a programmer called Satoshi Nakamoto to bring in a new technological age of blockchain and decentralized digital currencies.
That sounds like a mouthful, but it will be made clear soon.
Satoshi Nakamoto is an anonymous name, as it is still unknown who they are or if they even exist at all. It is rumored that Satoshi Nakamoto is the pseudonym used by the creators of Bitcoin, so it is very possible that Satoshi Nakamoto could be a group of individuals instead of one person. If they were just one person they would be a billionaire now.
Bitcoin began with a whitepaper, which is a document that contains concise information about the subject it concerns. The Bitcoin whitepaper was released in 2008 and was revolutionary.
Bitcoin was the first cryptocurrency that is widely recognized today, but others predate it and had a hand in inspiring its creation.
Smart Cards
One of the first attempts made was in The Netherlands in the 1980s, with the creation of smart cards for gas stations that were prone to nighttime thefts. This was a huge problem because gas stations had to open overnight so that trucks could refuel. A bunch of developers got together and linked money to smart cards for the drivers to use. Truck drivers used the cards to pay, so that the gas stations kept no cash and couldn’t be robbed.
Flooz
Flooze.com started using its e-currency in 1998, which was part of its marketing scheme. You could buy one Flooz for $1 and then spend it on the company site. This currency could also be used on other online sites. Stores that participated in this received bonuses, so it encouraged more stores to be part of their campaign.
It cost $1 million to market, which included Whoopi Goldberg as their spokesperson. The premise was good and popular enough, so much so that it raised venture capital to the tune of $35 million (Rossen, 2017).
Unfortunately, it was not sustainable and cost the company heavily. Not all the stores participated, which led to the company making a deal with the vendors guaranteeing its transactions, regardless of whether they were fraudulent or not. This led to Russian and Philippine hackers using stolen credit cards on the Flooze.com platform to make purchases, which caught the eye of the FBI. It was not safe and secure, which made it open to scammers that crippled it enough that it closed down.
A lot of the ideas that are used in cryptocurrency today are taken from that attempt, which had great promise but terrible timing.
Digicash
An American cryptographer named David Chaum came up with the concept of a token that could be safely passed between individuals and replace currency.
It was encrypted using what he called a ‘blinding formula’ or Blind Signature Technology and he published a scientific paper on it in 1983. That means that the token would have a signature of authenticity and could be modified without being traced, even for banks or governments.
Chaum created Digicash in 1989 so that he could use this formula, but unfortunately it didn’t stick and so the company went bankrupt in 1998. It seemed too complicated and investors weren’t ready to support something so risky in their eyes, especially as e-commerce was too alien to them at the time.
That doesn’t mean it was all in vain, as many of the Digicash concepts and formulas and encryption tools played a role in the current digital currency development.
B-Money
Also in 1998, an anonymous, distributed electronic cash system called B-money was proposed by developer Wei Dai.
Dai suggested that two different protocols be used, making B-money very different from Bitcoin in structure. B-money was similar to Bitcoin in what it stood for: to have a secure, private system to transfer money through a decentralized network without the use of a third party.
B-money didn’t take off, despite the whitepaper written on it, because investors were not ready to take a chance on such a thing and it wasn’t exciting enough for people to pay attention to at the time. To his credit though, Wei Dan’s B-money was referenced in the Bitcoin whitepaper because of the impact it had on Bitcoin’s creation.
PayPal
The 1990s saw the rise of many startups and a large chunk of those were formed on a similar premise to that of Digicash. The most popular was PayPal, which is still being used today. It was one of the first to allow for online payments, doing so by allowing individuals to transfer money via web browsers quickly and securely.
PayPal then connected with eBay, which was a great move as it didn’t just grow its user base but the company itself. That is why it is still popular. PayPal is backed by countries around the world and is a popular platform for freelancers to receive payment for work done.
PayPal is so established these days as something most of us use that it is odd to think that a few decades ago, it was revolutionary!
E-Gold
Inspired by PayPal’s web base technique, E-gold dealt with the trading of gold online and then included junk silver and other precious metals. In exchange for these items, users of the platform were offered online credit. It was quite popular, especially because onshore approval in the United States was not needed.
Launched in 1996, E-gold was also not secure enough and its popularity attracted organized crime syndicates that used malware and phishing scams to attack the company.
Things got so bad that the United States federal government had to shut it down in 2005.
BitGold
Although it has a similar name to gold, BitGold didn’t deal with gold exchange. Its name comes from the need for the currency to reflect real gold. It was a move to decentralize currency. The concept was proposed around the same time as B-money, 1998, by Nick Szabo.
This computer scientist, legal scholar, and cryptographer designed BitGold so that computers would be involved in solving cryptographic puzzles: in other words, very complicated puzzles that are impossible for a human to solve. The puzzles solved would go to a secure encrypted registry and the solver would get a public key. And then a new puzzle would start based on the prior solve, thus creating a chain. This practice is the basis for crypto-mining today.
Despite it just being a concept, BitGold has been the base of a lot of digital currencies that are available today. Many have ironed out the bugs and structured their currencies around BitGold.
Hash Cash
Adam Black, a British cryptographer and cypherpunk (someone who advocates for privacy and cryptography for political change) created this piece of software in 1997.
The purpose of Hash Cash was to stop spam emails and denial of service attacks via a proof-of-work system. What this means is that one party needs to prove that the work done by the computer is correct, and this is done with a lot of backend programming involving cryptography. So, once again, difficult puzzles are solved by computers: a pattern emerges.
This software is still around. In fact, it is used in cryptocurrency and especially Bitcoin as part of their mining structure.
