A Brief History of Bitcoins and other Cryptocurrencies


WHAT IS A CRYPTOCURRENCY?
A cryptocurrency is a type of digital currency which relies on cryptography, usually alongside a proof-of-work scheme, in order to create and manage the currency. Most cryptocurrencies are peer-to-peer and decentralized and are based on the first cryptocurrency, Bitcoin. They are generally designed to have no inflation (once all the currency has been produced), in order to keep scarcity and hence value. However, a few cryptocurrencies, such as PPCoin, do have a small amount of inflation. Cryptocurrencies are also designed to ensure that funds can neither be frozen nor seized.; Existing cryptocurrencies are all pseudonymous, though additions such as Zerocoin have been suggested, which would allow for anonymity.

The first cryptocurrency was Bitcoin which was created in 2009 by pseudonymous developer Satoshi Nakamoto, and used the cryptographic algorithm SHA-256 as its proof-of-work scheme. Later on, other major cryptocurrencies, such as Namecoin (an attempt at a decentralized DNS), Litecoin (which uses scrypt as a proof-of-work, as well as having faster transaction confirmations) and PPCoin (which uses a proof-of-work/proof-of-stake hybrid, and has inflation of about 1%) were also created. Many other cryptocurrencies have been created, though not all have been successful, especially those which brought very few new innovations. For the first couple years of existence, cryptocurrencies gradually gained attention from the media and public, since 2011, interest has rapidly increased, especially during the rapid price rise of Bitcoin in April 2013.

The Age of the Internet has finally brought upon us a new phenomenon known as cryptocurrency. Satoshi Nakamoto introduced his groundbreaking work Bitcoin to the world in 2009, marking the dawn of a new era in the financial history of human civilization.

The main breakthrough of Bitcoin is the introduction of decentralized public ledger. The term cryptocurrency then refers to the new class of virtual currencies with high degree of decentralization (also known as peer-to-peer in Internet terminology), thus much more resistant to shutdown attempts.

Satoshi Nakamoto, a mysterious genius whose identity remains unknown to this day, was motivated by the vision that cryptocurrency would one day bring freedom back to the world. Before the birth of bitcoin, the world witnessed the shutdown of e-gold, an early Internet digital currency backed by gold. This event has shown that gold alone could not bring back the monetary integrity and freedom once enjoyed by our ancestors. Now bitcoin, referred to in some circles as 'gold 2.0', is poised to lead a revolution in not only our money, but potentially even more profound changes for a free society.



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Updated November 2013