History of Cryptocurrency: The Evolution of Cryptocurrencies
The Evolution of Cryptocurrency
Although the history of cryptocurrency is brief, it is undoubtedly one of the most intriguing stories of the 21st century. From modest beginnings, bitcoin has become a household name; In 2021, the market cap of all cryptocurrencies is set to reach $3 trillion.
If Bitcoin becomes the world’s reserve currency, Economics 101 classes may soon require students to read extensively about cryptocurrency history. Reviewing the peaks in cryptocurrency history is a good idea for those who want to stay on top of emerging trends.
History of Cryptocurrency
Digital or virtual money that is encrypted using cryptography is known as cryptocurrency. It runs independently of a central bank and uses a decentralized system to track transactions. Although cryptocurrency has little history, it has already established itself as a prominent actor in the financial and technological spheres.
The First Cryptocurrency: Bitcoin
Bitcoin was the first cryptocurrency, developed in 2009 by an unidentified individual or group operating under Satoshi Nakamoto. With no need for a third party, such as a bank or the government, Bitcoin was created to be a decentralized, peer-to-peer electronic cash system that could be used for online transactions.
Blockchain technology, a public ledger of all previous transactions, is the foundation of how Bitcoin operates. A list of recent transactions is contained in each block of the chain, and once a block has been added to the chain, it cannot be changed or removed. Because of this, it is very challenging to hijack the system or fake transactions.
Bitcoin immediately became well-liked by investors and computer enthusiasts, and its value soared in the years that followed its inception. Nearly $20,000 per coin was an all-time high for Bitcoin in 2017.
Other cryptocurrencies, referred to as altcoins, were made possible by Bitcoin. Several of the most well-known alternative coins are:
- Ethereum: A decentralized platform for creating decentralized programs and smart contracts.
- Ripple: A global payment protocol that makes payments quick and secure.
- Litecoin: Peer-to-peer cryptocurrency Litecoin is speedier and less expensive than Bitcoin.
- Bitcoin Cash: A cryptocurrency known as Bitcoin Cash was produced as a result of a hard fork in the Bitcoin blockchain.
Although these cryptocurrencies have distinct benefits and features, they all work on a decentralized platform.
The impact of cryptocurrency
The concept of money and finance could be completely transformed by cryptocurrencies. The following are a few benefits of cryptocurrencies:
- Decentralization: Cryptocurrency runs without the aid of a single central authority, making it less susceptible to fraud and corruption.
- Security: Because blockchain technology is used, it is very challenging to attack the system or fake transactions.
- Privacy: Because cryptocurrency transactions are anonymous, consumers’ privacy may be protected.
However, there are certain drawbacks to cryptocurrencies as well, such as:
- Volatility: Cryptocurrency is a risky investment because its value can fluctuate greatly.
- Lack of regulation: Because cryptocurrency is mostly uncontrolled, fraud and abuse is possible.
- Limited Acceptance: While some companies accept cryptocurrencies as payment, their acceptance is still limited.
Cryptocurrency Market Growth (2010-2014)
Bitcoin didn’t have its first real “price pump” until Forbes covered it in 2011. Following the publication of this report, BTC reached an all-time high of approximately $9. BTC was formerly trading for about $1 per coin.
However, not all of the initial excitement surrounding Bitcoin was favorable. Early on, Bitcoin developed a reputation on grey marketplaces online, particularly the Silk Road. The transactions’ pseudonymity is primarily to blame for this. Despite research from Chainalysis suggesting that 0.15 percent of crypto addresses are linked to illicit activity, Bitcoin is still overcoming this negative connotation.
The Bitcoin community established the nonprofit Bitcoin Foundation in 2012 to aid in advancing Bitcoin’s adoption and acceptance. The same year saw the debut of the first issue of Bitcoin Magazine.
New Blockchain aficionados joined the fray as Bitcoin started to gain popularity. The majority of the initial cryptocurrencies were “forked” off of Bitcoin as a result of this. Some of these original altcoins, like Litecoin and Ripple’s XRP, are still actively traded even if many of them are no longer well-known.
The popularity of cryptocurrencies has increased since 2018
The price of Bitcoin soared between 2017 and 2018. It broke through the $10,000 mark for the first time ever and briefly reached $20,000 before plunging into a “crypto winter.” During this time, developers frequently engaged in contentious debates on how to expand the Bitcoin network. While some left Bitcoin to form Bitcoin Cash, Bitcoin supporters proposed adding a unique settlement layer—now known as the Lightning Network—on top of Bitcoin.
The Ethereum ecosystem underwent a lot of changes at this time as well. Notably, after the game CryptoKitties caused congestion on the blockchain, NFTs began to develop as distinctive digital collectibles. Decentralized exchanges (DEXs), one of the DeFi projects, have also begun to be built on Ethereum.
Despite all of this innovation, the crypto market didn’t come back to life until 2020. Bitcoin reached its peak during this bull cycle at approximately $70,000 per coin. The balance accounts of large corporations like MicroStrategy and Tesla include Bitcoin. In actuality, El Salvador has approved Bitcoin as legal money. Due to the rising popularity of NFTs and metaverse games, Ethereum also drew more users.
However, most of this excitement faded as 2021 gave way to 2022. In addition to macroeconomic challenges, TerraForm Labs’ U.S. dollar stablecoin UST dropped to zero, dealing a serious blow to the cryptocurrency market. UST-affiliated centralized lending organizations and crypto VCs saw the same decline as the overall crypto market.
Despite these unfavorable stories, the crypto sector’s 2022 market cap remains at $1 trillion.
In conclusion, although the history of cryptocurrencies is brief, they have great promise. The decentralized, safe nature of blockchain technology has the potential to completely alter the way we think about money and banking, just as Bitcoin paved the path for other cryptocurrencies. Cryptocurrency does, however, face several difficulties, including regulatory ambiguity and security issues. Despite these obstacles, cryptocurrency development is expected to continue, and its effects on the financial and technological worlds will undoubtedly be profound.