With almost everything going virtual (thanks to the internet), the idea of virtual currency never seemed too farfetched. Virtual currency is perhaps the most simplistic way of defining the phenomenon of cryptocurrencies. Brought to mainstream in past few years, it has been there for quite some time now. So, let’s have a look at:
Evolution of Cryptocurrencies – A Brief Chronology
Chaum’s Contribution – The Foundation Stone of Contemporary Digital Currencies
Most experts believe that the buzz about currently existing forms of cryptocurrencies started back in 1982 when Dr. David Chaum published his paper titled, ‘Untraceable Electronic Mail, Return Addresses, and Digital Pseudonyms’, where he gave the idea of using cryptography to secure online communication or exchange of data between any two entities. Let’s have a look at the actual excerpt from his paper:
“A technique based on public key cryptography is presented that allows an electronic mail system to hide who a participant communicates with as well as the content of the communication – in spite of an unsecured underlying telecommunication system. The technique does not require a universally trusted authority.” (Chaum, 1982)
The key elements of his publication setting the foundation of cryptocurrencies can be summarized as:
- Use of public key cryptography
- Concealment of the content as well as the participants in communication among different entities
- Non-reliance on a universally trusted authority to carry out any such activity
In fact, these are the same basic underlying principles found in cryptocurrencies in existence today. That’s why Chaum’s work is regarded as the foundation stone of contemporary digital currencies.
e-Gold – The Next Step
Inception of ‘e-gold’ in 1996, brainchild of Doug Jackson, is seen as the next major landmark in evolution of cryptocurrencies. The distinguishing feature of e-gold was that it was backed by actual gold and a number of special cryptocurrency exchanges were set up to facilitate and encourage people to promote and use it.
Bitcoin – The True Game Changer
However, what truly turned the concept of cryptocurrency into one of the biggest internet phenomena is a paper titled, ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, by Satoshi Nakamoto published in 2008. The character of Satoshi Nakamoto has been shrouded in deep mystery, with no authentic record or proof of who actually this person is or was. Some also believe it’s a pseudonym used to hide the identities of not a single person, but a whole team. Mysteries and controversies aside, fact remains that prior to Bitcoin, none of the earlier versions of cryptocurrencies could truly make it to a global scale.
- By January 2009, the first version of Bitcoin was introduced (Bitcon v0.1) via public announcement, with its source code made public, turning it into an open source project. Almost everyone believes that this is one of the biggest reasons behind the true success and longevity of Bitcoin compared to its predecessors.
- For one reason or the other, it was able to grab people’s attention and its price rose much quickly than anyone ever anticipated, and by February 9th, 2011, it stood equal to US $1. As of early 2017, Bitcoin market cap has escalated to a staggering $ 18 billion.
- Being open source, Bitcoin also paved way for others to come up with their own variations of cryptocurrency, and now there are around 700 different types of cryptocurrencies around the globe, collectively referred to as alternative coins or altcoins. While most of them fail to make some real impact, 12-13 of them fare quite well and many more progressive versions continue to surface till now, such as ‘Goldime‘, ‘Abundeum’, ‘Hedgenickel’ and so forth.
To surmise, based on recent growth and evolution, cryptocurrencies are highly likely to make even more impact on global economy in the times to come and it’s really interesting to see how things unfold from here on.