History of Cryptocurrency

Alyze Sam
13 min readMar 2, 2022

By Alyze Sam and Tech & Authors

First, Fiat

To understand where crypto came from, one must start at the history of fiat, you can find that blog post here. After you’re versed in fiat, enjoy this unbiased and poetic overview of cryptocurrency, starting with the birth of blockchain technology.

Blockchain History

Blockchain is a complex technology where digital information is saved within the “blocks” and stored on a public database termed the “chain.” Within each block, there is a unique code termed “hash,” which is its identification. Hashes are cryptographic codes created by specific algorithms. The purpose of blockchain is to allow digital data to be recorded and distributed.

Blockchain technology was fundamentally sketched in 1991 by Stuart Haber and W. Scott Stornetta, two researchers who aspired to execute a system where document timestamps could not be tampered with. Approximately two decades following in January 2009, the launch of Bitcoin birthed blockchain technology’s initial real-world application.

The Bitcoin protocol is constructed on blockchain technology. In the research paper, or ‘white paper’ introducing the digital money, Bitcoin’s pseudonymous originator Satoshi Nakamoto introduced it as “a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”

Bitcoin, a proper blockchain application, saw success within financial technology when other digital assets failed to solve the double-spending problem.

The double-spending dilemma arises when digital transactions are mimicked, allowing assets to be spent twice. Bitcoin has thrived as it solves this problem.

The original decentralized cryptocurrency, Bitcoin, was produced in 2009 by pseudonymous developer Satoshi Nakamoto. It used SHA-256, a cryptographic hash function, as its proof-of-work system.

In April 2011, Namecoin was a resolution to establish a decentralized DNS, making internet censorship difficult. Litecoin was released six months later. It was the earliest successful cryptocurrency to employ a script as its hash function alternative to SHA-256. Another notable cryptocurrency, Peercoin, was the initial project to use a proof-of-work and proof-of-stake hybrid.

Blockchain Protocol

When one spends or trades Bitcoin, ASIC Miners, or computer elements on the Bitcoin network, compete to validate transactions. To do so, users run a program on their processors to solve complex mathematical puzzles called a “hash.” When a processor resolves the problem by “hashing” a block, its algorithmic work will verify the transactions.

As mentioned, the accomplished transaction is openly documented and saved as a block of data on the blockchain, becoming immutable unless 51% of miners agree to change it. Bitcoin and many blockchain protocols utilize machines that successfully verify blocks to obtain rewards for their labor paid in cryptocurrency. This method is termed “mining.”

Although events are publicly documented on the blockchain, user information is not — or, at least, not in maturity. To conduct transactions on the Bitcoin network, participants must run a program called a “wallet.”

Each wallet consists of two unique and distinct cryptographic keys: a public key and a private key. The public key is the location where transactions are deposited to and withdrawn from. This is also the key that appears on the blockchain ledger as the user’s digital signature. Even if a user receives a payment to their public key, they will not be able to withdraw without its private counterpart.

A user’s public key is a shortened version of their private key, created through a complicated mathematical algorithm. However, due to the complexity of this equation, it is almost impossible to reverse the process and generate a private key from a public key. For this reason, blockchain is considered confidential.

Public and Private Key Basics

We can think of a public key as a school locker and a private key as the locker sequence.

Anyone can slip notes into the hole in a locker. However, the only character who can reclaim the contents is the entity with the individual key or combination.

Nevertheless, it should be recorded that while school locker combinations are kept in the principal’s office, there is not a central server that retains a record of a blockchain network’s private keys. In the event someone misplaces their private keys, access to their Bitcoin wallet is also lost.

Single Public Chain

The Bitcoin blockchain is shared and maintained by a public network of users and is a community consensus model. When users join the network, their processor obtains a duplicate of the blockchain that is renewed whenever a new block of events is computed. Nevertheless, what if, through human error or a hacker’s efforts, one user’s copy of the blockchain was altered?

The blockchain protocol discourages the existence of multiple blockchains through a process called “consensus.” In the presence of multiple, differing blockchain copies, the consensus protocol will adopt the longest chain available. More users on a blockchain mean that blocks can be added to the end of the chain faster. By that logic, the blockchain record will always be the one agreed upon by the majority of the participants. The consensus protocol is one of blockchain technology’s most significant strengths but also a potential weakness.

Hacker-Proof Ecosystem

In theory, a hacker could gain the position of the consensus protocol by a 51% attack. Here is how it would happen.

Assume there are twenty million processors on the Bitcoin interface. To attain a preponderance on the network, a hacker would need to control at least 10.5 million and one of those ASIC Mining processors. An attacker or accumulation of antagonists could hinder the method of recording new events. They could send a transaction and then reverse it, making it appear like they still had the coin they just spent. This vulnerability, known as double-spending, is the digital equivalent of a perfect counterfeit and would enable users to spend their crypto twice.

Such an initiative is complicated to execute on a blockchain of Bitcoin’s size, as it would require an attacker to gain control of millions of computers. It would have been much more manageable when Bitcoin was founded in 2009 and its users numbered in the dozens. This defining characteristic of blockchain has been flagged as a weakness for fledgling cryptocurrencies.

The fear of 51% attacks can limit monopolies from forming on the blockchain. In “Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money,” New York Times journalist Nathaniel Popper writes of how a group of users, called “Bitfury,” pooled thousands of high-powered computers together to gain a competitive edge on the blockchain. Their goal was to mine as many blocks as possible to earn Bitcoin, which were then approximately $700 each.

Harnessing Bitfury

By March 2014, however, Bitfury was poised to surpass 50% of the blockchain network’s computational capability. Instead of strengthening its hold over the network, the assemblage elected to self-regulate and declared never to go beyond 40%. Bitfury recognized that if they elected to continue expanding their authority across the network, Bitcoin’s value would decrease as users auctioned off their digital assets in anticipation of a 51% attack.

In other words, if users lose faith in the blockchain network, the information on that network runs the risk of becoming worthless. Blockchain users can then only increase their computational power to a point before they begin to lose money.

Blockchain’s Practical Application

Blocks on the blockchain store data about monetary transactions, as previously discussed, but it turns out that blockchain is a reliable way of storing data about other types of transactions. Blockchain technology can be utilized to store data about property exchanges, medical records, school grades, lineage records, stops in a supply chain, votes for a candidate, and more.

Deloitte, a professional services network, recently surveyed 1,000 companies across seven countries about integrating blockchain into their business operations. Their survey found that 34% already had a blockchain system in production today, while another 41% expected to deploy a blockchain application within 12 months. In addition, nearly 40% of the surveyed companies reported they would invest $5 million or more on blockchain in the coming year.

Here are some of the most popular applications of blockchain use cases now.

Bank Use

Perhaps no industry stands to benefit from integrating blockchain into its business operations more than banking. Financial institutions only operate during business hours, five days a week. That means if someone tries to deposit a check on Friday at 6 p.m., they will likely have to wait until Monday morning to see the money in their account.

Even if one makes deposits during business hours, the transaction can still take one to three days to verify due to the sheer volume of transactions banks need to settle. Blockchain, on the other hand, never sleeps.

By integrating blockchain into banks, consumers can see their transactions processed instantly in the time it takes to add a block to the blockchain.

Blockchain allows banks to exchange funds between institutions more rapidly and securely. In stock trading, the settlement and clearing process can take up to three days (or longer if banks are trading internationally), meaning the money and shares remain frozen for that time.

Given the size of the sums involved, even the few days that the money is in transit can carry high costs and risks for banks. Santander, a European bank, estimated a potential savings of $20 billion a year. Capgemini, a French consultancy, estimates that consumers could save up to $16 billion in banking and insurance fees each year through blockchain-based applications.

Blockchain Use in Cryptocurrency

Blockchain is the bedrock of cryptocurrencies like Bitcoin. As we explored earlier, currencies like the U.S. Dollar are regulated and verified by a central authority, usually a bank or government. Under the central authority system, a user’s data and currency are at the whim of their bank or government. If a user’s bank collapses or is located in a country with an unstable government, the value of their currency may be at risk, which are the solicitudes out of which Bitcoin was produced.

By spreading its operations across a network of computers, blockchain allows Bitcoin and other cryptocurrencies to operate without the need for a central authority. Decentralization abates risks and omits many of the processing and transaction fees central authority is heir to. It also provides nations with volatile currencies a more durable option, more applications, and a more extensive network of individuals and institutions they can do business with, domestically and internationally, when correctly implemented.

DeFi, or ‘Open Finance’

Satoshi Nakamoto constructed a dream to make impervious money and modern-day transactions feasible to all, wherever they may reside. Today’s cryptocurrency community placed that dream into action when they saw the potential in an advanced, modern-day economy.

The “DeFi” Decentralized Finance, also described as ‘Open Finance,’ evolution takes our dream into a tangible reality.

Envision a world of independent people logging into an open alternative to every financial service utilized today: not just payment transactions, but savings, trading, insurance, loans, data storage, and much more.

Blockchain projects, such as Ethereum, allow the “future of money” fantasy to breathe life into modern society with “Smart Contract” integration.

Blockgeeks.com states, “A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties.”

A smart contract program operating on a blockchain can execute transactions automatically when coded conditions are fulfilled. This system enables developers to construct far more sophisticated functionalities than simply receiving and sending digital assets. These programs are termed “DApps” or decentralized applications. DApps are applications built on decentralized technology rather than being constructed and regulated by a single, centralized entity or company.

Technologists and economists envision a future filled with decentralized applications operating effortlessly while utilizing these protocols; however, these ecosystems have been thriving since approximately 2018. One can witness automated loans negotiated directly between two foreign entities globally, without the necessity for a central banking system.

Some DeFi DApps exist to allow the creation of stablecoins.

What distinguishes these DeFi DApps from their conventional banking institution or Wall Street equivalents? 2020 U.S. presidential candidate Michael Bloomberg issued a financial reform plan that, among other things, advocates for more robust and secure financial practices. Part of the recommended reform also advocates the formulation of a regulatory sandbox for startups and “providing a clear regulatory framework for cryptocurrencies.” Wall Street still regards the cryptocurrency industry with a measure of skepticism. However, stablecoins frequently provide a more direct route to mass-market adoption.

Stablecoins have become a significant source of liquidity in the cryptocurrency market. They provide an on-ramp to enter the crypto markets and an off-ramp to exit. The rising popularity of stablecoins is a function of their inherent constancy relative to other cryptocurrencies.

This piece addresses stablecoins being free from the traditional volatility of cryptocurrencies and how they are emerging to offer diverse varieties of on-and off-ramp possibilities that will make cryptocurrencies more attractive to Wall Street.

Wall Street Testing

Wall Street may not be entirely on board, but numerous equities, ETFs, and classical instruments implement some level of publicity to the industry. For example, Nvidia Corporation (NASDAQ: NVDA) and Advanced Micro Devices, Inc. (NASDAQ: AMD) produced vital exposure to the crypto syndicate related to the effectiveness of their graphics processors in crypto mining procedures. Both Nvidia and Advanced Micro Systems have delivered 23% in the year-to-date period, as seen in the chart below.

Other stocks such as Grayscale Bitcoin Investment Trust (GBTC) provide a more direct level of exposure to the crypto industry as a publicly-traded Bitcoin fund. Overstock.com, Inc. (NASDAQ: OSTK) is one of the first established corporations to embrace crypto installments. It currently keeps about 50% of these subsidies, which ties its destiny to the fortunes and vicissitudes of the crypto market. Consequently, both Grayscale Bitcoin Trust and Overstock have produced 56% and 25% increases in the year-to-date period.

When compared to the rest of the U.S. market in the year-to-date period, Wall Street assets with exposure to the cryptocurrency market have delivered double-digit gains. In contrast, the S&P 500, NASDAQ Composite, and the Dow Jones Industrial Average have only managed to deliver single-digit gains in the same period.

There is rising popularity of stablecoins across different market segments.

Tether USDT is the most sizable stablecoin on the market; it has experienced a first-mover benefit since its launch in 2015. Tether exceeds 80% of the market interest for stablecoins. It has managed to maintain parity with the U.S. dollar, despite the recurrent panic episodes that accompany significant drops in the price of Bitcoin.

In 2019, the supply of USDT expanded from 2 billion tokens to 4.108 billion tokens to account for increasing adoption. Moreover, the token was relocated from the Omni-layer to the Ethereum network to expedite a quicker and more affordable transfer of value. Most strikingly, a Chainalysis summary shows that “for Chinese exchange users, Tether has replaced the yuan as the go-to fiat currency.” Data from exchanges showed that almost all fiat-crypto trades in Mainland China were amid Yuan and USDT.

Dollar Neutrino USDN is an algorithmically stable USD-pegged digital asset. USDN is collateralized amidst the WAVES blockchain platform.

WAVES is swiftly stimulating the adoption of DeFi commodities, and they are steadily maturing as a pilot in the business.

In addition to contributing stability, USDN grants token holders additional revenue streams through staking, similar to traditional dividend stocks providing profits.

Originating on January 28, 2020, within one month the token had more than $3.2 million staked, as it accouches a staking reward of roughly 8.9% per annum.

Facebook intended to launch its cryptocurrency Libra, now known as Diem in 2020 but it was shelved until 2022. This occurrence resulted when firms in the European Union and the United States queried if this would be worthwhile to society. Facebook, the largest social media platform in the world, has 2.4 billion users during this time.

While administration bodies globally struggle to comprehend blockchain, regulations and laws on stablecoins are not being implemented expeditiously enough, according to the Financial Stability Board (FSB), a watchdog in global banking.

In a February 2020 letter to finance ministers and central bank governors from the G-20 meeting in Riyadh, FSB Chair Randal Quarles voiced his concerns regarding how quickly digital currencies affect the global economy while regulatory action struggles to keep up.

“FSB members recognise the speed of innovation in the area of digital payments, including so-called ‘stablecoins.’ We are resolved to quicken the pace of developing the necessary regulatory and supervisory responses to these new instruments.”

As Wall Street and regulatory organizations continue to work on bridging the knowledge gap, sentiments like this accentuate the growing acknowledgment that these financial innovations are here to stay and will continue to expand as a bulwark for the future of the global economy.

Want to read more on the history of fiat, crypto, Stablecoins and the future of money? You can check out Stablecoin Evolution, #1 on Amazon Financial Education & Computer and Science.


Alyze Sam is a refreshing blockchain strategist, a novel educator, multi-award-winning author, serial co-founder, and a vehemently driven advocate. Sam wrote the first crypto dictionary and published the first books on stablecoins. Don Tapscott published her book ‘Stablecoin Economy’ at The Blockchain Research Institute in January 2021. Sam’s newest book, ‘Stablecoin Evolution’ is currently the number one new release on Amazon in Computers & Technology. The Bad Crypto Podcast developed a Blockchain Hero NFT inspired by her work: Mz. Stability. After nearly losing her life a few times, Sam is a retired nurse and owns Tech & Authors with her best friends and soulmates, where they spend their days being grateful as they joyfully produce unbiased poetic technical education.



Alyze Sam

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