Donald Trump is currently promoting a new crypto venture that started selling its tokens to investors on October 15. While on the campaign trail this year, he has become a vocal supporter of cryptocurrencies. This is a stark turn from only a few years ago when he called Bitcoin a scam and said, “I don’t like it because it’s another currency competing against the dollar.” Many publications have noted that “crypto voters” could have an impact on the upcoming election.
With cryptocurrency on the mind, let’s talk about the history of the oldest surviving cryptocurrency, Bitcoin, and how the appeal of a decentralized currency started the introduction of thousands more.
Where it began
Bitcoin was invented in 2008 with the publication of a paper by Satoshi Nakamoto – a pseudonym whose true identity has long remained a mystery. That paper, titled “Bitcoin: A Peer-to-Peer Electronic Cash System” has since been translated into dozens of languages and is considered a must-read by anyone interested in understanding how the cryptocurrency works.
The following year, Bitcoin became the very first truly decentralized cryptocurrency when its software was made available to the public for mining (more on what this means next week).
Centralized vs. decentralized
A centralized currency is typically issued by a country’s central bank, which is also responsible for regulating it. The average citizen, though, gets access to a centralized currency through a financial intermediary such as a commercial bank, which is happy to lend out currency as well as hold it for safekeeping. For example, every U.S. dollar is issued by the U.S. Federal Reserve Bank, even though most of us get our cash from our local bank’s ATM.
This makes doing business across the world more difficult as transactions have to be made in one currency or the other and be processed through a bank, usually resulting in conversion rates, fees, or delays. On the other hand, a decentralized currency does not have a central authority governing it and is instead controlled by the users, with no need for a bank as an intermediary.
The downside (or potential upside based on your point of view) of a decentralized currency is that it is only as valuable as someone is willing to pay for it and can therefore have huge fluctuations in its worth, making it extremely volatile. This means that a single bitcoin could be worth a thousand dollars one day and three dollars the next, and Bitcoin has a ledger of transactions all over the map.
A history of ups and downs
The very first recorded Bitcoin transaction was in 2010 when a user exchanged 10,000 bitcoins for two Papa Johns pizzas, valued at about $41 at the time, meaning a single bitcoin was worth about $0.0041. But since this was considered the first time that a virtual currency was used to make a purchase in the “real world,” it soon sparked a flurry of increasingly pricier transactions.
Although the currency has been extremely volatile over its history, prompting frequent speculation that it was a passing fad, by 2013 the first Bitcoin ATM was installed in Vancouver, Canada. This created momentum for the currency to expand outside its small niche of followers to the general population, with Forbes calling it the best investment of 2013. However, Bloomberg flipped that trajectory by calling Bitcoin 2014’s worst currency after it went from $1,000 in January to $318 in December that year.
A lot has changed in the last decade for Bitcoin, but with a current value of around $68,000 and thousands of other cryptocurrencies founded in its image, it’s safe to say that Bitcoin is more than a passing fad. Since it’s here to stay – for now – next week we’ll talk about the business aspect of Bitcoin, including how it works.
