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πŸ€” Were There Cryptocurrencies Before Bitcoin?

πŸ€” Were There Cryptocurrencies Before Bitcoin?

Before there was Bitcoin, there were a few attempts to create digital money. Warp News Md Motiur Rahman goes through the early days of digital currencies.

Md Motiur Rahman
Md Motiur Rahman

Before there was Bitcoin, there were a few attempts at creating digital money. From the likes of David Chaum, who originated the idea of using cryptography to create digital signatures in 1983 to electronic payment platforms of the 1990s, Bitcoin's current fame is built on the shoulders of its predecessors.

David Chaum's contribution: Blinded Cash

Chaum's idea, for instance, was to use cryptography to ensure that the money spent on digital platforms could remain anonymous while preventing it from being counterfeited by any third party.

Chaum used a concept called blind signatures to achieve this. Blind signatures are designed such that the identity of the person signing was never revealed. Therefore, the concept made it impossible for anyone to know who had signed a particular transaction or how much money someone held. This system is now widely used in e-commerce, as well – if you've ever shopped online with credit cards, chances are you've used a blind signature.

Chaum's system worked by using public and private keys (a concept that is now rampant in the Blockchain and crypto space).

David Chaum, Elixxir on Moneyconf Stage during day two of Web Summit 2018 at the Altice Arena in Lisbon, Portugal. Photo by Harry Murphy/Web Summit via Sportsfile

Digital Payment Systems

After Chaum's DigiCash company went bankrupt around 1998, a number of technologists took on the mantle, including companies such as PayPal that made attempts at electronic payments but from a centralized server. Perhaps one of the closest resemblances to a cryptocurrency right after Chaum's DigitalCash is e-Gold.

Launched by lawyer Barr Downey and oncologist Douglas Jackson in 1996, the system allowed users to buy and sell digital gold online in the form of tokens called e-Gold, whose value was backed by gold in deposit boxes. At its peak, e-Gold had a market capitalization of $2 billion.

However, e-Gold failed after their gold reserved were frozen. The government shut down the entire operation on charges of the founder allegedly being guilty of money laundering. Apart from e-Gold, Hashcash (a proof of work system created to prevent email spamming) is perhaps the closest to Bitcoin previous inventions got.

Distributed cryptocurrencies: Bitcoin is Born

Bitcoin is the first decentralized cryptocurrency that works on a Blockchain concept that allows systems to be run without any central server or authority. The first-ever instance of this was in 2009 with the launch of Bitcoin.

However, a few dicey instances almost led to the collapse of the cryptocurrency, including a hacking attack on Mt Gox ( then the largest cryptocurrency exchange) that led to what's now been called the biggest technological meltdown in history. Ripple also emerged in 2012 as a cryptocurrency that was interesting because it differed from Bitcoin primarily because it was not based on block mining but rather an emission strategy where tokens were already there at inception.

Conclusion: Moving forward

However, despite all these hiccups, cryptocurrencies still hold immense potential for revolutionizing the way we do business. And despite a few pitfalls, exchanges are steadily increasing, and it is estimated that digital tokens will become part of our everyday lives in this decade.

As they increase in popularity, more people come to the crypto and blockchain space, and more inventions are arriving. The DeFi landscape, for instance, is booming as NFTs take over the limelight in what is set to be the future of the internet with Web 3.0.