Although the concept of cryptocurrencies has existed since the late 1980s, the first modern cryptocurrency was Bitcoin, made available to the public in 2009. Today, Bitcoin is just one of many cryptocurrencies on the market, part of a new class of digital assets estimated to be worth $1.6 billion in 2021.
If you’re unfamiliar with the world of cryptocurrency, learn everything you need to know about the concept, why Bitcoin is a pioneer, and why crypto is an essential investment today.
What is Cryptocurrency?
Cryptocurrency (or crypto) is a type of digital currency designed to function as a medium of exchange without control or influence from a central authority. Crypto doesn’t rely on a country’s government, central bank, or a similar institution.
A central authority does not issue a cryptocurrency. Instead, the blockchain guarantees the ownership of cryptocurrency coins. The blockchain is a type of computerized distributed ledger protected with strong cryptography.
The role of blockchain technology is to authenticate and protect transactions, limiting fraud such as double-spending. The name comes from the methods employed to structure transaction data. Groups of transactions are grouped into “blocks,” and each block of transactions is “chained” (linked) together in a specific, unmodifiable order.
How crypto wallets work
To hold and spend cryptocurrency, you need a crypto wallet, a cryptographic virtual wallet available as either computer software or dedicated hardware. A wallet consists of public keys (cryptographic code that allows you to receive transactions) and private keys (allows sending transactions).
It is safe to share your public key or your wallet’s address (essentially a shortened form of your public key) because its only purpose is to receive cryptocurrency. In contrast, access to private keys effectively controls access to the cryptocurrency associated with the wallet.
Anyone in possession of a wallet’s private keys can send crypto to any other address, similar to possessing credit card numbers. That’s why it’s critical to avoid sharing or losing them.
The Rise of Bitcoin
Early examples of cryptocurrency were conceived in the 1980s and 1990s. David Chaum’s DigiCash is widely accepted as the first practical implementation of cryptocurrency. However, the first modern cryptocurrency was Bitcoin, pioneering many technologies common to other crypto and virtual currencies.
Bitcoin (BTC) was invented in 2008 by one or multiple software engineers adopting the nickname of Satoshi Nakamoto. In October 2008, the whitepaper for Bitcoin, authored by Nakamoto, was published to a cryptography mailing list.
The whitepaper described Bitcoin as peer-to-peer electronic cash designed to create an electronic transaction system that doesn’t rely on the trust system. Bitcoin employed the Proof-of-Work (PoW) cryptographic verification system to secure each transaction. PoW requires spending a specific amount of computer power to do arbitrary work, typically solving complex mathematical equations.
The Bitcoin network first went online in January 2009, and Nakamoto mined the first Bitcoin block on January 3. This first block (called Block Number 0 or the Genesis Block) yielded 50 bitcoins.
The act of mining a block refers to using computational power to solve PoW equations and generate new coins. Bitcoin miners are individuals or groups who use special computer hardware for the explicit purpose of mining new coins.
How the Crypto Market Came into Existence
Bitcoin became the first successful implementation of a modern cryptocurrency. For years, the term Bitcoin was synonymous with cryptocurrency.
The first bitcoin transaction took place on May 22, 2010, when Laszlo Hanyecz of Florida exchanged 10,000 BTC (worth approximately $40 at the time) for two pizzas from a local Papa John’s restaurant. This transaction became the first cryptocurrency transaction outside of cryptographic circles.
Over time, the value of Bitcoin continued growing, first reaching over $1,000 in November 2013. Although Bitcoin experienced its first crash in 2014, causing its value to hover around $500 for years, it rose above $1,000 again in January 2017.
Since then, Bitcoin has experienced a significant rise, reaching $10,000 in November 2017, $20,000 in December 2020, and $30,000 in January 2021. Bitcoin reached its all-time high in November 2021, exceeding $68,000. As of March 1, 2022, the value of a bitcoin is approximately $44,000.
Throughout Bitcoin’s lifetime, companies and services officially started accepting Bitcoin for products and services. Some of the earliest adopters were Microsoft and PayPal, accepting Bitcoin as early as 2014.
Alternatives to Bitcoin and Today’s Market
A few alternative coins (altcoins) were released in 2011 (Litecoin, Namecoin) and 2012 (Peercoin). However, it wasn’t until the mid-2010s (2013 to 2017) that the altcoin market blew up, creating multiple viable alternatives to Bitcoin.
Some of the most popular alternative cryptocurrencies launched during this period are Ripple (2013), Dogecoin (2013), Monero (2014), Ethereum (2015), Tether (2015), and Cardano (2017).
As the number of people investing in cryptocurrencies continued increasing, Bitcoin’s dominance of the crypto market decreased. This resulted in the rise of numerous cryptocurrency exchange platforms.
A crypto exchange is a website or an application where people can trade crypto coins for other types of crypto coins or fiat currencies (e.g., US dollar, Euro, etc.). Today’s biggest crypto exchanges are Binance, Coinbase, FTX, and Kraken.
Finance is us Helps You Make Informed Investment Decisions
Whether you are new to cryptocurrency or have experience with mining and training, Finance is us has the online resources you need to make the best decisions.
Our team of trained investment and financial service advisors can help you understand the complex and fast-moving world of crypto. Use our resources to inform your financial decisions and make the most out of your digital money.
Disclaimer: All content on this site is information of a general nature and does not address the circumstances of any particular entity or individual, nor is the information a substitute for professional financial advice and services.