History of Cryptocurrency: Navigating Its Past, Present, and Future

While the history of cryptocurrency may be relatively short, it’s one of the most fascinating stories of the 21st century. The concept has been around for 40 years, and that idea evolved into something bigger in 2009 through the creation of Bitcoin – the first cryptocurrency that is worth over $70,000, at the time of writing. 

Knowing that, are you asking yourself, “How did cryptocurrency start and evolve into the worldwide phenomenon it is today?” Let's explore the history of cryptocurrency together, from its early days to its potential in the future of digital currencies.

If you want to practice investing or trading cryptocurrency yourself after learning about its origins, ensure that you choose reputable and secure crypto exchanges, such as Binance, ByBit, or Kraken, to safeguard your assets and guarantee trustworthy transactions.

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Early Digital Currencies

If you ask, “When did cryptocurrency start?”, the answer goes back to the history of cryptocurrency during its early attempts in 1983, which paved the way for the development of various digital currencies like Bitcoin.

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In that year, American cryptographer David Chaum originated the idea of cryptographic electronic money called “eCash”. Two years later, he implemented it through DigiCash. This set the foundation for the origins of cryptocurrencies. 

DigiCash aimed to replicate the anonymity of cash transactions in the digital world by using cryptographic techniques. Users could make electronic payments without revealing their identities to third parties, protecting their privacy.

Despite its innovative technology, DigiCash struggled to gain widespread adoption due to regulatory challenges and the lack of infrastructure for digital payments at the time. The company eventually filed for bankruptcy in 1998.

In the same year, computer scientist Wei Dai proposed “B-Money”, a theoretical concept for a decentralized digital currency. This concept would become an important idea for the entire history of cryptocurrency.

B-Money imagined a currency system where issuing money and verifying transactions were spread out among people in the network instead of controlled by a central authority.

It suggested using encryption and digital signatures to make transactions secure and trustworthy without relying on middlemen. Even though B-Money never became a real, functional system, its contribution provided valuable insights for decentralized cryptocurrencies that came after, like Bitcoin.

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2008: The Launch of Bitcoin, A Milestone in the History of Cryptocurrency

After addressing the question, 'When did cryptocurrency start?', let’s delve into one of the most pivotal events in the narrative: the launch of Bitcoin in 2009. It marked a significant event in cryptocurrency history as it’s the first decentralized crypto. 

Thanks to blockchain technology, this innovative asset introduced a groundbreaking concept that allows individuals to make transactions directly without the need for intermediaries like banks or financial institutions.

Wonder who started cryptocurrency? This digital asset was introduced by a pseudonymous individual or group, Satoshi Nakamoto, whose identity has remained unknown until now^[1].

Satoshi Nakamoto drew inspiration from the cypherpunk movement. Cypherpunks were a group of computer scientists, cryptographers, and activists who advocated for the use of cryptography and decentralized technologies to protect individuals’ freedom and privacy in the digital age.

During Bitcoin's early days following its launch, the cryptocurrency underwent several significant phases: 

• Mining. This process involved creating new Bitcoin and verifying and adding transactions to the blockchain. Early adopters engaged in mining activities using their computer hardware to support the network, and earned rewards in the form of newly minted Bitcoin.
• Experimentation. This period showcased various innovations and enhancements to the Bitcoin protocol, focusing on improving its scalability, security, and usability.

Even though some people at that time worked hard to promote Bitcoin, the cryptocurrency faced skepticism and scrutiny from mainstream institutions and the general public. They thought it was just a temporary trend or a risky investment.

2011-2013: Rise of Altcoins

As we delve deeper into the origins of cryptocurrencies, a significant development emerged from 2011 to 2013.

Alongside Bitcoin, numerous alternative cryptocurrencies (altcoins) were created. These altcoins experimented with different consensus mechanisms, block sizes, transaction speeds, and privacy features, aiming to carve out their niche in the cryptocurrency market.

Examples of early altcoins include:

• Litecoin. Introduced in 2011 by Charlie Lee, Litecoin was one of the earliest altcoins and aimed to improve upon Bitcoin's limitations, such as transaction speed and scalability. Litecoin uses a different hashing algorithm called Scrypt, which allows for faster block generation times compared to Bitcoin.
• Namecoin. Launched in 2011, Namecoin was designed to serve as a decentralized domain name system (DNS) and digital identity platform. It enables users to register and transfer domain names on a blockchain, providing censorship-resistant and secure domain name registration services.
• Peercoin (PPC). Introduced in 2012 by Sunny King, Peercoin was the first cryptocurrency to use a hybrid Proof-of-Work/Proof-of-Stake consensus mechanism. This approach aimed to address Bitcoin's energy consumption concerns by allowing users to earn rewards through both mining and holding coins in a wallet.
• Feathercoin (FTC). Released in 2013, Feathercoin was created as a faster and more lightweight alternative to Bitcoin. It features a unique hashing algorithm called NeoScrypt, which aims to resist ASIC mining and promote decentralization.
• Ripple (XRP). Although Ripple's history dates back to 2004, it was officially launched as a digital currency in 2012. Ripple aims to facilitate fast and low-cost cross-border payments by using its consensus ledger technology.

In the middle of the growing excitement within the cryptocurrency community, Ethereum was launched. It was conceived in 2013 by programmer Vitalik Buterin and other co-founders – Gavin Wood, Joseph Lubin, Anthony Di Iorio, and Charles Hoskinson. 

Buterin created ETH with the goal of expanding blockchain technology’s capabilities beyond simple transactions. The programmer aimed to build a decentralized platform for executing smart contracts and deploying decentralized applications (dApps).

He recognized the limitations of Bitcoin's blockchain, which primarily focused on supporting peer-to-peer electronic cash transfers. Buterin dreamed of a more versatile blockchain platform that could support programmable contracts and applications, enabling developers to make decentralized solutions for a wide range of use cases.

2013-2016: Cryptocurrency Adoption and Mainstream Recognition

The years between 2013 and 2017 answer your question, “When did cryptocurrency start to get mainstream recognition?”.

It was a time when the crypto market grew, blockchain technology started to shake things up in different areas, and the risks were highlighted due to Mt. Gox’s collapse.

Let's take a closer look at what happened during this era in the history of cryptocurrency!

2014-2016: The Ethereum Launch and DAO Event 

The Ethereum project conducted a highly successful crowdfunding campaign in mid-2014, raising over $18 million through the sale of the ETH tokens. This initial funding provided the resources necessary to support further development and establish the Ethereum Foundation.

In July 2015, “Frontier”, also known as Ethereum 1.0, marked the official launch of the ETH platform.

Frontier Ethereum introduced several key components and concepts that form its ecosystem’s foundation, including:

• Ether (ETH). It’s the native cryptocurrency of the Ethereum blockchain, used for paying transaction fees, executing smart contracts, and incentivizing miners.
• Smart contracts. Self-executing contracts with predefined rules and conditions written in Ethereum's programming language, Solidity. These enable decentralized applications to perform automated actions and execute transactions without third parties.
• Decentralized applications (dApps). Apps built on the Ethereum blockchain that use smart contracts to provide decentralized functionality and services. dApps can range from financial applications to gaming platforms.
• Mining. The process of validating transactions and adding new blocks to the Ethereum blockchain through computational work. Miners are rewarded with Ether for their contributions to securing the network.
• Gas. The unit of measurement for transaction fees and computational work on the Ethereum network. Gas fees are paid in Ether and serve as an incentive for miners to include transactions in blocks.

In 2016, a decentralized autonomous organization named The DAO raised a record $150 million in a crowd sale to fund the project. However, The DAO was exploited in June when $50 million of DAO tokens were stolen by an unknown hacker.

In response to the hack, the Ethereum community decided to perform a hard fork. A hard fork is a major change to a blockchain protocol that is not backward-compatible. In simple terms, it creates a split in the blockchain. After a hard fork, two separate versions of the blockchain exist: one that follows the old rules and one that follows the new rules.

The fork caused ETH to split into two blockchains:

• Ethereum (ETH). The majority of the Ethereum community migrated to the new chain, which continued to operate under the name Ethereum (ETH). The hard fork rolled back the blockchain to a previous state before the DAO hack happened, resetting the transactions associated with the exploit.
• Ethereum Classic (ETC). A minority faction within the Ethereum community disagreed with the decision to execute the hard fork and continued to operate on the original Ethereum blockchain, known as ETC. Ethereum Classic retained the original transaction history, including the transactions associated with the DAO hack, without any modifications or rollbacks.

The split had a profound impact on the Ethereum ecosystem. ETH emerged as the dominant chain, gaining broader developer support. Meanwhile, ETC, though smaller in market capitalization, continued to attract a dedicated following among those who valued the immutability of the original blockchain. 

2014-2016: Blockchain Technology Applications in Different Industry

Along with the rise of Bitcoin and altcoins, significant advancements were made in blockchain technology.

Originally conceptualized as a decentralized ledger to record Bitcoin transactions, blockchain technology proved to be versatile and adaptable, with applications extending beyond digital currency.

Blockchain technology enabled secure, transparent, and tamper-resistant record-keeping. Developers and entrepreneurs began exploring its potential in various industries, including finance, supply chain management, and healthcare.

One early initiative that explored this concept was the MedRec project, developed by researchers at the Massachusetts Institute of Technology (MIT) in 2016. The system gave patients a comprehensive, immutable log and easy access to their medical information across providers and treatment sites.

By storing medical records on a decentralized blockchain, the project sought to address issues related to data silos, data breaches, and fragmented health information systems.

From 2016 onwards, there were also several projects on blockchain-based e-voting systems^[2]. One of them was POLYAS, used by some European countries and the USA.

In the same year as this project, merchant adoption of cryptocurrencies, particularly Bitcoin, as a form of payment increased significantly. This marked a significant milestone in the history of cryptocurrency.

Major companies and retailers started integrating Bitcoin payment options into their platforms, allowing customers to use this digital asset to purchase products or services online and in-store.

Some of the major companies that pioneered Bitcoin payment options were:

• Microsoft. This technology company allowed buyers to purchase digital content on its Windows and Xbox platforms.
• Overstock. The online retailer started accepting Bitcoin payments in 2014, enabling customers to buy a wide range of products, including furniture, electronics, and clothing, using BTC.
• Shopify. This eCommerce platform used by businesses to create online stores integrated Bitcoin payments into its platform in 2013. It enabled merchants to accept BTC as a payment option for their products and services.
• Expedia. The popular online travel agency began accepting Bitcoin payments for hotel bookings in 2014, providing travelers with the option to pay for accommodations using the digital currency.

These leading companies helped make Bitcoin a recognized payment method and opened the door for cryptocurrencies to be more widely accepted in mainstream commerce.

2014: Mt. Gox and Turbulent Times

Although there was a milestone in the crypto’s underlying technology in this period of the history of cryptocurrency, the Bitcoin journey was shaken due to the collapse of Mt. Gox. It was once one of the largest Bitcoin exchanges in the world based in Tokyo, Japan, founded by Jed McCaleb in 2010.

This crypto exchange handled over 70% of all Bitcoin transactions at its peak, but it suddenly held all Bitcoin withdrawals, mentioning technical issues and security concerns. 

It soon became clear that Mt. Gox had been the victim of a long-term hacking attack and lost hundreds of thousands of Bitcoin belonging to its customers, worth millions of dollars at the time. The exchange then filed for bankruptcy protection in Japan. 

This attack resulted in the loss of around 850,000 BTC, belonging to both customers and the exchange itself, citing liabilities of over $64 million. Mt. Gox couldn’t recover the stolen funds or repay its customers' losses, leading to a lengthy and complex legal process.

The Mt. Gox collapse sent shockwaves in the cryptocurrency community and impacted the Bitcoin market significantly, including:

• Bitcoin's price fluctuated wildly, reaching highs of over $1,000 in January before dropping below $400 after the Mt. Gox collapse.
• The incident highlighted the security risks of digital assets, making investors panic and lose confidence in crypto exchange reliability.
• Regulatory concerns and crackdowns in various countries, such as China and the United States.

Let's discuss what happened after the Mt. Gox collapse and how the cryptocurrency community had adapted to mitigate risks, especially with the government interference and widespread attention. 

2017-Present: Regulatory Challenges and Legal Developments

The history of cryptocurrency has continued to unfold as its popularity has increased. Moreover, several financial institutions adopted crypto, leading to some governments assessing whether regulation is needed to protect users. So, if you ask, “When did cryptocurrency start to boom?”, the answer would be around this era. 

In 2018, the UK published a final report on a commissioned study regarding cryptocurrencies and their potential impact on the UK economy.

Initiated in August 2014, the Treasury commissioned the study to explore the role of cryptocurrencies and whether regulatory measures were needed. It finally made conclusive findings, among which were:

• Recognition of cryptoassets. The report acknowledged different kinds of cryptoassets and the use cases of blockchain technology, especially in the UK market.
• Regulatory framework. The HM Treasury, FCA, and Bank of England will work together to reduce the risks associated with crypto assets for consumers and market integrity. They aim to prevent crypto assets from being used for illicit activities and protect against potential financial threats.
• International collaboration. The report highlighted the need for collaboration between regulators, industry stakeholders, and international partners to address the global crypto asset markets.

In 2021, El Salvador became the first country to formally classify Bitcoin as legal tender after its parliament passed with 62 out of 84 votes.

This event, known as Resolution 215, was remarkable in the history of cryptocurrency as it made Bitcoin a legitimate form of currency for transactions, payments, and other financial activities within the country.

President Nayib Bukele said that using Bitcoin would help Salvadorans living abroad send remittances back home while still keeping the US dollar legal tender. This country’s economy relies heavily on money sent back from citizens working abroad, with remittances to the country making up nearly $6 billion.

In the same year, Cuba followed El Salvador’s Resolution 215 to recognize and regulate cryptocurrencies, including Bitcoin.

Despite the positive reactions from governments in South America, China declared all cryptocurrency transactions illegal while the country was one of the world's largest cryptocurrency markets. It’s because the government viewed cryptocurrencies as a speculative investment and a way to launder money.

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2017: Bitcoin Hard Fork

Following the Ethereum Hard Fork in 2016, the Bitcoin network also experienced a hard fork in August 2017, resulting in the creation of a new cryptocurrency called Bitcoin Cash (BCH).

This split was caused by disagreements within the Bitcoin community over how to scale the network to accommodate increasing transaction volumes and reduce fees.

One faction wanted to apply Segregated Witness (SegWit), a protocol upgrade designed to increase the Bitcoin network’s capacity. Meanwhile, another faction supported a different approach known as a block size increase – adjustment of the maximum size limit for transaction blocks that can be added to the blockchain.

Unable to reach a consensus, the network split, leading to the creation of BCH. As a result of the hard fork, Bitcoin holders at this point in cryptocurrency history received an equal amount of Bitcoin Cash tokens in their wallets.

2019: Rise of Decentralized Finance (DeFi)

DeFi is a movement that aims to transform traditional financial services using blockchain technology and smart contracts. It started to gain traction as a significant trend throughout the history of cryptocurrency in 2019.

Unlike traditional finance, which relies on centralized intermediaries such as banks and financial institutions, DeFi platforms operate on decentralized networks. As a result, users can access financial services directly without intermediaries.

It offers a wide range of financial services, including lending, borrowing, trading, asset management, and insurance, all within a decentralized and permissionless environment.

DeFi protocols are the building blocks of the decentralized finance ecosystem. They’re blockchain-based platforms or applications that provide specific financial services and functionalities.

Some of the key DeFi protocols include:

• Decentralized Exchanges (DEXs). Platforms that facilitate the peer-to-peer trading of cryptocurrencies without the need for intermediaries. Examples are Uniswap, SushiSwap, and PancakeSwap.
• Lending and borrowing platforms. These sites allow users to lend or borrow cryptocurrencies through smart contracts, often earning interest on their assets. Examples include Aave and MakerDAO.
• Yield farming platforms. Platforms that incentivize users to provide liquidity to DeFi protocols in exchange for rewards, often in the form of additional tokens. Examples include Yearn Finance and Harvest Finance.

These key DeFi protocols work together to create a decentralized and open financial system, offering a variety of services to users worldwide.

2020-2023: The Pandemic and Its Impacts on Cryptocurrencies 

Like other industries, the COVID-19 pandemic affected the history of cryptocurrency, notably sparking increased interest in the digital currency market.

The economic uncertainty in traditional financial markets prompted many investors to turn to cryptocurrencies as a safeguard against inflation and currency devaluation. This interest contributed to a surge in trading volumes and prices during the pandemic. In fact, Bitcoin surged by 300% in 2020^[3]!

Studying the history of cryptocurrency in this era won’t be complete if we aren’t talking about the Non-Fungible Token (NFT) trend. During the COVID-19 pandemic, NFTs were so popular because many in-person events, including art exhibitions, concerts, and conferences, were canceled or moved online due to lockdowns.

NFTs offer a way to create and monetize virtual events and experiences, such as virtual art galleries, digital concerts, and VR exhibitions. Investors could also make a profit from the booming digital collectibles, which can be bought, sold, and traded using cryptocurrencies as payment, typically using Ethereum (ETH).

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2022: Crypto Winter

While the cryptocurrency market appeared to thrive during the pandemic, there was a period of decline known as a “crypto winter”. It caused significant price drops in popular cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), Cardano (ADA), and XRP (XRP). Bitcoin, for example, experienced declines of more than 55%.

Who started cryptocurrency declines in this period?

The declines were initiated by the Federal Reserve, which aggressively raised interest rates in response to US inflation. This action prompted investors to sell off risky assets such as cryptocurrencies and stocks.

The effect continued when crypto lenders Voyager Digital and Celsius Network filed for bankruptcy protection in July 2022. FTX, a global cryptocurrency exchange at that time, also faced a downfall due to liquidity problems.

The Future of Cryptocurrency: Trends and Speculations

The origins of cryptocurrencies can be traced back, but what lies ahead for this digital asset industry?

Looking at the history of cryptocurrency, I think we can expect crypto usage in everyday transactions as payment gateways and merchant adoption expand. This trend aligns with the growing acceptance of digital currencies as alternatives to traditional payment methods.

We can anticipate that more industries will explore and implement cryptocurrency solutions. From real estate to healthcare, sectors across the economy are recognizing the potential benefits of blockchain technology and digital currencies for streamlining processes, enhancing security, and reducing costs. 

Statista even mentioned that the crypto market's revenue is expected to have an annual growth rate (CAGR 2024-2028) of 8.62%, resulting in a projected total amount of $71.7 billion by 2028.

In the future, it's likely that we'll also see more innovations in mining technology that consume less energy, along with the emergence of eco-friendly cryptocurrencies.

Current environmental concerns related to cryptocurrency primarily come from the energy-intensive nature of certain mining processes, particularly those associated with the Proof-of-Work (PoW) consensus mechanisms.

PoW mining, as used by Bitcoin and many other cryptocurrencies, requires significant computational power, leading to high electricity consumption and carbon emissions.

Also, as the cryptocurrency market matures, I think we can expect clearer regulatory frameworks. This might help provide much-needed stability and legitimacy to the industry, encouraging more investors and institutions to participate.

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Conclusions

So, “How long has cryptocurrency been around?” and “How did cryptocurrency start?”, you asked. The history of cryptocurrency traces back to the early 1980s when David Chaum implemented the idea of cryptographic electronic money through DigiCash.

The launch of Bitcoin in 2009 marked a pivotal moment in cryptocurrency history, which has since become a global phenomenon. Although who started the cryptocurrency boom through Bitcoin remains a mystery, this digital currency has challenged traditional financial systems over the years. 

By understanding the origins of cryptocurrencies, we can expect this financial innovation to continue unfolding, with new technologies, applications, and possibilities yet to be explored!

Are you excited? If you want to dip your toes into the crypto world, you can start trading or investing using a beginner-friendly crypto exchange like Binance. It’s the world’s largest cryptocurrency exchange that you can access from your mobile phone to buy 400+ digital assets.

The content published on this website is not aimed to give any kind of financial, investment, trading, or any other form of advice. BitDegree.org does not endorse or suggest you to buy, sell or hold any kind of cryptocurrency. Before making financial investment decisions, do consult your financial advisor.

Scientific References

1. Kuzubov, A. A., Shashlo, N. V., Rodionov, A.V.: ‘Cryptocurrency market: prerequisites of formation, economic features, prospect directions of development’;

2. Berenjestanaki, M. H., Barzegar, H. R., Ioini, N. E., et al.: ‘Blockchain-Based E-Voting Systems: A Technology Review’;

3. Sarkodie, S.A., Ahmed, M.Y., Owusu, P.A.: ‘COVID-19 pandemic improves market signals of cryptocurrencies–evidence from Bitcoin, Bitcoin Cash, Ethereum, and Litecoin’.