Ask most people to define currency, and they will talk about two things – coins and banknotes. These are what most of us think of as currency and money, or they were until a new type of currency came along. It was the cryptocurrency, a digitally stored kind of currency that you couldn’t hold in your hand, that had the potential to change the world.
Cryptocurrency roots
The idea of virtual currencies dates to the 1980s when people started to experiment with the idea of what we now know as cryptocurrencies. American cryptographer, David Chaum, invented the first internet money called DigiCash in the Netherlands and Microsoft invested heavily in the concept, but it failed in 1998.
The 2008 economic crisis gave the boost to the concept of cryptocurrencies in a way no-one could have seen. The callous behaviour of global financiers was a shock to the world and saw the emergence of someone known as ‘Satoshi Nakamoto.’ The question of whether this is his real name or not remains a mystery. In his 2009 paper he discussed a concept, technology and source code for blockchain and introduced Bitcoin to the world – we had our first cryptocurrency.
Foundation technology
Nakamoto’s blockchain technology was described as not incremental or disruptive but a foundational technology that replaced central authority with peer to peer open source trust protocol.
People were quick to see the potential, and today there are 16 million Bitcoins in circulation with a total market capitalisation of around $50 billion. As well as fans of such tech, businesses and even banks are seeing the potential of it and it is accepted in more places than ever before.
More coins
Bitcoin may have been the first cryptocurrency, but it wasn’t the last, and there are now more coins or cryptocurrencies than ever. Also known as tokens, there are currently some 850 cryptocurrencies being sold and traded around the world. Renowned examples include Litecoin, Dash, Ripple, and Monero. Estimates in June 2017 put the combined total market capitalisation of all the cryptocurrencies at $100 billion.
One of the coins, that is now a leading contender for Bitcoin’s top position, is Ethereum (ETH). Ethereum was created in 2013 by Vitalik Buterin; the project went live two years later. It is an open source, blockchain-based computer platform with many highlights including programming languages to build blockchain apps.
Ups and downs
While the history of cryptocurrencies is still a short one, there has been no lack of ups and downs during that time. One of the big downs was the disappearance of Mt.Gox in 2014 along with 850,000 Bitcoins. At the time, it was the world’s largest Bitcoin exchange, and when it abruptly went offline, all the Bitcoins vanished – valued at over $450 million at the time, they would be worth nearer $4.4 billion at current rates.
It was one incident that led to more countries starting to create regulations for cryptocurrencies, and these pending changes are one of the factors causing the continued volatility in the market today. Other examples include that major internet companies have recently banned advertising for cryptocurrencies including Google and Facebook, while other countries attempt to gain some measure of control over them.
A bright future?
Despite the problems, most predict a bright future for cryptocurrencies with Bitcoin leading the way. Many people are choosing to trade with them rather than buy them due to the high volatility and unpredictable nature of the market. Approaches such as cryptocurrency CFD trading allow you to make the most of those sudden price swings without the same losses as when you own the currency.
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