In under two decades, cryptocurrency – led by Bitcoin – has moved from an obscure concept created by an anonymous computer programmer to a global conversation about trust and digital ownership in finance. Wondering how we reached this strange and influential moment? Read on.
What is Cryptocurrency?
Cryptocurrency is a digital currency that operates outside of central authorities like banks, running on a decentralized encrypted database called blockchain. Multiple computers verify every transaction on the public ledger, helping ensure security and transparency and thus negating a need for financial intermediaries.
The blockchain security system is made up of keys. A public key acts like a bank account number and can be shared with others to receive funds. You also have a private key that gives you control over the assets in the public key, used to authorize transactions. Storing your private key securely is essential to maintaining control of your funds.
Bitcoin is the first widely successful cryptocurrency. It launched in 2009 and is the oldest still in use today. It wasn’t the first to be envisioned, and unknown developer Satoshi Nakamoto was influenced by early concepts like eCash.
The first Bitcoin purchase was two pizzas for 10,000 BTC, made in May 2010 by developer Laszlo Hanyecz. Today, one bitcoin is valued at over $85,000.
As Bitcoin gathered interest, exchanges and services developed so you could buy and hold it more easily. The first crypto ATM allowed users to trade cash for coins without navigating complex online systems. Today you can get crypto debit cards, backed by reputable partners like Mastercard and Visa.
After a few years of continued growth, governments began taking the concept more seriously, establishing clear rules around trading. Whenever access improved, adoption increased because people trusted what they could understand and use.
Retailer and consumer acceptance of Bitcoin grew rapidly in the first few years, and in 2017 the currency’s value jumped as institutional investors entered the market. Digital currency exchange Coinbase launched in 2012, and was valued at $85.8 billion after Coinbase’s debut on the Nasdaq less than a decade later.
Designed to be used for everyday purchases, you can now buy a wide range of things using bitcoin, including luxury goods like designers watches and cars. Major payment processors now let businesses accept Bitcoin, and some publicly traded companies hold it as a reserve asset. These developments give traders choices. You can keep value in Bitcoin as a hedge against inflation or simply use it when it offers lower fees than your bank.
16 years on from Bitcoin’s entrance into the financial market, and we continue to see debates about its reliability as well as wider divisive factors like energy use, regulation, and long-term value.
Developers are working to improve transaction speed and reduce environmental impact, building on the innovative Lightning Network launched in 2017 to help solve glitches in and scale up the blockchain system. Bitcoin’s volatility, however, remains a challenge, with major financial regulators warning that this and the lack of regulation makes it a high-risk investment.
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