- Some people are happy about its appearance, believing that this is a natural development of the financial system, given the place the Internet and digital technologies occupy in people’s lives;
- Others are against the use of virtual money in general and bitcoins in particular, believing that they have a negative impact on the established economic and financial environment;
- Still others prefer to ignore the fact of the existence of cryptographic money, adopting a position of neutrality.
In any case, digital money already exists, and it is developing, penetrating our lives. For now their use is limited, but this is gradually being corrected. Many countries recognize cryptographic coins on an equal basis with ordinary funds, and allow them to be used officially (in most cases this applies to Bitcoin). Others prefer to prohibit the use of bitcoins and more in every possible way.
The history of cryptocurrency is very interesting. Despite the fact that the first money of this format appeared only in 2009, already in 2013-14, many countries began to use it. And in 2017, this money moved from “online” to “offline” and began to be used in newly opened crypto-services, stores dedicated to virtual coins, and more. So very soon the time will come when digital money will be taken for granted.
Prerequisites for the emergence of cryptocurrencies
The idea of virtual finance for non-cash transactions originated in the 80s. XX century in the cryptography expert community.
Their goals were:
- maintaining confidentiality during transactions;
- increasing the reliability of operations;
- possibility of instant cross-border transfers;
- creation of a currency whose issue would not be controlled by the state.
The creation of a means of payment, devoid of the disadvantages of traditional money, aroused great interest in the “cypherpunk” community. Many of them feared the increasing control by authorities over the lives of citizens in the digital era. The number of enthusiasts was constantly growing. All this served as a powerful incentive for the practical implementation of the cryptocurrency development project.
The first electronic money
In order to eliminate these shortcomings, after some time, with the development of electronic technologies, electronic money was invented, the most famous of which are Yandex-Money, Web Money and others. But they corrected these shortcomings only partially, because they had a number of their own. The main disadvantage was the link to existing national currencies, mainly the American dollar and the Russian ruble. This system of development, emergence and distribution of alternative electronic money continued until the first truly independent currency was invented in 2009. Electronic cryptocurrency Bitcoin.
Who came up with the idea of creating digital money?
The American David Chaum was at the origins of digital currency. Back in 1982, he described in his article the principles of operation of an anonymous centralized payment system. In 1997, American cryptographer Adam Beck developed HashCash technology, which is resistant to DoS attacks and spam. Hal Finney improved it by creating an improved transaction control algorithm and introducing hash block chains.
In 1998, the concept of a digital currency called b-money was introduced by Wei Dei. At the same time, for the first time it was proposed to use a decentralized registry and the Proof-of-work concept.
Almost simultaneously, another cryptographer, Nick Szabo, published a paper outlining the principles of the digital currency bit-gold. He proposed the most important innovation - a public decentralized registry. Its use increased confidence in the system and made it possible for each user to obtain data about any transaction.
A few years later, these projects became the foundation for the launch of the first blockchain network and the creation of the cryptocurrency, Bitcoin.
When did Bitcoins appear?
The official date of the appearance of the BTC cryptocurrency is December 31, 2008 . It all started with the publication of an article. Its author is Satoshi Nakamoto. He outlined in detail the specifics and advantages of digital signature protection and direct payments without counterparties. This is a cryptocurrency bible with a description of Blockchain technology and the features of using coins.
Later it became clear that Satoshi Nakamoto is a pseudonym. To this day there are fierce debates about who is hiding under this nickname. The anonymous developer not only presented theoretical developments, but also put them into practice by launching the first genesis block. On January 12, the first transaction in history was carried out: developer Hal Finney received 10 BTC coins from Satoshi. In October, the cryptocurrency exchange rate was fixed at $1 = 1309.03 BTC.
How the first cryptocurrency developed and what happened to it
The most important milestone in the history of the creation of cryptocurrency was the launch of the blockchain network and Bitcoin version 0.1. The author of the technology was a person who used the pseudonym Satoshi Nakamoto. It is still not reliably clear who was hiding behind this name. Some analysts believe that it was not one person, but a group of individuals.
In 2007, Nakamoto began work on the principles of the functioning of a distributed network. A year later, a file that described the technology of a new means of payment, bitcoin, became famous on the Internet. In 2009, the first cryptocurrency was released. The process of debugging the technology and improving system stability has begun.
The main stages in the history of bitcoin were the following events:
- January 3, 2009 - the beginning of cryptocurrency mining, the first ever block of the Genesis 0 network was generated, 50 bitcoins were received, and after some time the first transaction took place;
- September 2009 - the first ever exchange of cryptocurrency for fiat money, Marty Malmi purchased 5050 BTC for $5.02;
- November 2009 - the bitcoin.org portal was created, which became the main platform for communication between crypto enthusiasts;
- December 2009 - Bitcoin 0.2 is released, introducing a number of improvements, including support for Linux OS;
- May 2010 - an American named Laszlo buys 2 pizzas for 10,000 BTC;
- summer 2010 - Bitcoin 0.3 was released, the complexity of mining increased, the number of users of the blockchain network increased;
- August 2010 - fraudsters carried out an attack on the network, which was eliminated without visible consequences;
- November 2010 - creation of the first mining pool.
By that time, the difficulty of coin mining had increased, so the power of one computer was no longer enough for effective mining. Satoshi Nakamoto himself was able to mine 1 million BTC on low difficulty. In mid-2010, the creator of the first cryptocurrency stopped participating in the project and disappeared.
No less important events followed:
- 2012 - the crypto industry began to rapidly gain popularity, the first exchanges appeared, special applications were released - cryptocurrency wallets designed to store digital assets on the user’s computer;
- May 2013 - a bitcoin ATM was opened in California, in April of the same year the first altcoin, NameCoin, was released, and after some time other digital coins began to appear;
- June 2022 - introduction of SegWit2x technology, which made it possible to increase transaction throughput and increase a single block to 2 MB;
- August 2022 - a hard fork that divided the blockchain into two chains - bitcoin and bitcoin cash.
From mid-2022, the value of bitcoin begins to grow rapidly. For a short time, its price reaches $20 thousand. At the beginning of 2018, a correction occurred that lasted almost a year and a half. The price of BTC dropped to $4,500 at times. Since the beginning of 2022, there has been a market recovery and an increase in the price of digital currency.
Despite growing competition, Bitcoin retains an overwhelming advantage in terms of capitalization and popularity. For most people around the world, this currency is the most recognizable brand in the crypto industry.
Pizza worth 10,000 BTC, famous throughout the world
Bitcoins are a popular cryptocurrency.
But this was not always the case. Previously, they were not taken seriously, not expecting that this financial unit could ever compete with fiat money. For example, when bitcoins first appeared, a small number of people knew about them, and the rate of the cryptocurrency was negligible. Few people thought that these funds would gain such popularity and their rate would literally rise to the skies. In 2010, it was easy to get money; the amount of money miners had was off the charts. But they couldn’t figure out where to spend it, especially since there were simply no options for real investment. Then one of the users on a special forum dedicated to bitcoins said that he would like pizza and offered the one who ordered it 10,000 bitcoins. This starving man's name was Laszlo.
More precisely, he asked for two pizzas, considering that, apparently, the money he was offering was not enough for one treat. Considering the exchange rate at that time, the number of coins he offered was worth approximately 40 to 50 dollars. For this money he received his treat: with onions, sausages, mushrooms, tomatoes. In general, ordinary pizza.
The pizza was purchased for $40 by user jercos, who responded to such a generous offer from his friend. After which I received 10 thousand BTC into my account. The deal was fair.
It seems crazy now, but these two pizzas are worth over $166 million. They went down in history as the most expensive pizzas in the world and became famous as Bitcoin Pizza. But Laszlo was probably very upset, because the next year those pizzas cost him 100 thousand dollars, in 2013 - 9 million, and we have already indicated the current cost of this food.
The notorious Laszlo has already become a real legend online, as have his gastronomic preferences. There are even sites that specifically monitor the so-called “pizza rate,” showing how much a failed miner-millionaire’s lunch now costs. And jokes about him will continue to circulate among people for a long time, especially considering how rapidly the Bitcoin exchange rate is growing.
And from this whole situation we can draw conclusions:
- Save bitcoins rather than spend them, so as not to feel like a complete ignoramus the next day;
- Speculate on the price of coins, but do not buy anything with them. This will allow you to accumulate fiat money while keeping the collected bitcoins, the price of which can rise to a million dollars, or even higher.
In general, don’t be like Laszlo, about whose fate, by the way, nothing is known. Including how he survived (and whether he survived at all) his complete failure. The times of a dismissive and frivolous attitude towards cryptocurrency are over. Now everyone understands that this phenomenon is not temporary.
What currencies exist today?
As of mid-2022, there are more than 2 thousand varieties of cryptocurrencies.
The first ten places in terms of capitalization are occupied by the following:
- Bitcoin BTC.
- Ethereum ETH.
- Ripple XRP.
- Litecoin LTC.
- Bitcoin Cash BTH.
- Binance Coin BNB.
- Tether USDT.
- EOS EOS.
- Bitcoin SV BSV.
- Steller XLM.
The strongest positions are occupied by the currencies Bitcoin, Etherium and Ripple. The rest of the digital assets may move up and down several positions in the Coinmarketcap rating at once due to market instability and strong volatility.
Principle of operation
Cryptocurrency is a virtual currency that exists only on the Internet and is a program code on the blockchain - a completely decentralized system consisting of blocks of information. Blockchain is not managed by any monetary authority (bank) or government. A peer-to-peer computer network system consisting of user computers (“nodes”). Approximately the same principle is known to many from torrent networks.
Blockchain is a kind of digital database that operates on a distributed basis and is supported using cryptographic methods. The security of cryptocurrency is ensured by the mining process - checking and confirming each operation mathematically, according to the code originally embedded in a specific digital coin. The blockchain network verifies each new entry in the transaction list and also does not allow changes to information that has already been added.
The blockchain network is pseudo-anonymous. The global transaction ledger does not display user names or other data, but the transactions and addresses themselves are visible so they can be tracked and matched to a specific user or company if necessary.
Services for viewing the state of the blockchain are called blockchain browsers. For example:
- Bitcoin Explorer – https://blockchair.com/bitcoin/
- Ethereum Browser – https://etherscan.io/
- Cardano Explorer – https://cardanoexplorer.com/
- Ripple Explorer – https://xrpcharts.ripple.com/
- Binance Coin Explorer – https://bscscan.com/
By the way, Ripple is one of the few cryptocurrencies that do not operate on a classic blockchain. It is based on consensus ledger technology, in which transactions are confirmed by trusted nodes rather than mining; The system used in Ripple is a private blockchain as opposed to a public, less anonymous one.
New technologies
The emergence and active spread of digital money was the result of not only artificially inflated hype. When creating cryptocurrencies, technologies arose that had no analogues before.
Among the most important innovations:
- blockchain is the most important technology on which almost all cryptocurrencies are based;
- smart contracts - a protocol that allows the parties to prescribe the terms of execution of the contract in digital form and clearly control the obligations of the parties;
- ICO is a form of investment that allows you to raise funds for the implementation of a startup, and project participants to receive cryptocurrency tokens in return.
In addition to the crypto industry, the created technologies can be used in other areas of activity: financial, logistics, and educational.
Using open source
An important reason for the popularity of cryptocurrencies is the use of open source code. Any company or group of individuals can freely use blockchain technology to create new projects.
By 2011, this had led to the formation of an active developer community. Specialized publications began to appear, including Bitcoin Magazine. Soon, startups began to emerge offering innovative technological solutions. The release of new altcoins has become a common occurrence, and the total number of cryptocurrencies has begun to grow rapidly.
Ethereum development
An important milestone in the history of the development of the crypto industry was the launch of the Ethereum blockchain in 2015. To implement the project, an ICO was held, the participants of which received ETH tokens.
The cryptocurrency, developed by a group of programmers led by Vitalik Buterin, quickly took second place after BTC in popularity and capitalization.
Ethereum has advanced functionality compared to Bitcoin. This is a second generation cryptocurrency with a number of valuable features. The developers managed to increase the speed of transactions, improve stability, and also implement a system of smart contracts. The project attracted the close attention of such giants as IBM and Microsoft.
Using the technological solutions embedded in Ethereum, you can create decentralized applications for various fields of activity. The implementation of smart contracts inherent in the Ethereum concept allows it to be used to conclude transactions between counterparties without involving a third party. At the same time, control over compliance with the terms of the contract is carried out automatically according to pre-defined algorithms. Records of the transaction are entered into the distributed Ethirium blockchain, which guarantees the immutability of the original data.
ICO
The term Initial coin offering (ICO) refers to a method of attracting investors, which involves the sale of a certain number of initial coins of a new cryptocurrency. Often, instead of coins, tokens or coupons are offered, which can later be exchanged for crypto coins.
In colloquial speech, the word “crowdsale” is often used to refer to ICOs - one of the forms of crowdfunding for the collective collection of funds.
Numerous ICOs appear every year around the world. More than half of new cryptocurrencies turn out to be fraudulent schemes disguised as a good cause.
Only a few of the launched cryptocurrencies successfully “survive” the ICO stage and remain afloat. However, the method remains effective for both startups and investors.
What benefits does the popularization of cryptocurrency bring?
Digital money has gone beyond specialized Internet platforms where only enthusiasts gathered. The latest news about the world of cryptocurrencies is published in all media, and even citizens far from the Internet have heard the word “bitcoin”.
There are more and more ways to use cryptocurrencies.
With digital finance you can:
- pay for advertising;
- place bets in online casinos;
- pay in hotels and restaurants.
Government authorities are actively developing regulations to regulate the virtual money market. The adoption of such legislation will streamline the industry and attract large institutional investors.
Who is currently developing Bitcoin?
The main cryptocurrency does not have a single public leader. The identity of Satoshi Nakamoto is still unknown. The development of the network is carried out by the community. Each user takes part in voting, influencing important processes. Naturally, key coin holders have more weight. First of all, this concerns international mining pools, as well as the Bitmain company, which develops ASIC devices.
The abnormal growth of cryptocurrency in 2022 is due to the enormous support from institutional investors. Hedge funds, banks and financial companies invest in BTC coins, thereby supporting the network. Naturally, such support also contributes to the development of the network and the popularization of the crypto industry as a whole.
Should we place high hopes on trading?
Trading on a cryptocurrency exchange involves high risks. Sharp exchange rate fluctuations occur regularly. The rise of the end of 2022, when the price of BTC reached $20 thousand, gave way to a rapid decline. Under these conditions, the chances of losing funds as a result of careless transactions on the stock exchange increase. Only a few market players are able to accurately grasp the moment when it is worth selling a currency.
The strategy of investing part of the assets in cryptocurrency on a long-term basis seems justified. Most experts agree that, despite long periods of decline and stagnation, the value of Bitcoin will rise. Therefore, cryptocurrency savings can bring significant profits to their owners.
Altcoins. Crypto market dynamics
In the wake of the popularity of cryptocurrencies, many altcoins began to appear in 2022, which is why in the same year, for the first time in history, the share of BTC in the total capitalization of the crypto market fell below 50%. This showed that altcoins account for more than half of all digital asset transactions.
The dynamics of development of the crypto industry continues to grow, despite the fall in the BTC rate, as representatives of the real sector of the economy saw in cryptocurrencies an opportunity to safely transfer their business to the digital sphere.
Therefore, in 2022 there was a boom in ICO - initial placement of tokens, and in 2022 they began to be replaced by security tokens (STO), which are equal in legal status to securities. Based on this, experts have no doubt that the global trend for cryptocurrencies remains upward, so the fall in the value of digital assets should be used to invest in them.
The future of virtual money
The prospects for the cryptocurrency industry are not easy to predict.
In the foreseeable future, its development is associated with a number of important processes:
- Legalization of cryptocurrency by government regulators. The success of this process will largely determine the fate of digital assets.
- Introduction of digital money into everyday life. Although Bitcoin ATMs are still exotic, work on the spread of payment systems is actively underway in different countries. The success of this process is largely due to the recognition of cryptocurrency by states.
- Optimization of the number of cryptocurrencies. It can be assumed that the chaotic avalanche-like growth in the number of altcoins will stop in the future. Only projects that offer in-demand technological solutions should remain on the market.
Cryptocurrency has experienced ups and downs more than once. There are many versions of what the enthusiasts’ idea of an independent anonymous means of payment will lead to. At the same time, the cryptocurrency was able to prove its viability and right to exist.
Mining and miners: specifics of the process and participants
All cryptosystems, when working with information, use computer power, and it is simply huge, so a logical question arises - where to get it, which contributed to the emergence of such a term as mining (extraction of cryptocurrencies).
Why cryptocurrency has value. What is the value of cryptocurrency and what does its value depend on 5.6K
What it is? Mining coins through resource-intensive calculations. This is a task available to many users who devote part of their computer power to solving those tasks related to earning cryptocurrency. There are several ways to make money from mining:
- Through a PC, special software is downloaded, which allows you to direct part of the power to the process of calculating cryptocurrencies. There is no need for any capital investment here, but you can earn a little money this way.
- You can mine through special equipment (special-purpose integrated circuit), creating a “farm” that is actively working and generating a stable income. Popularly it is better known as ASIC - a special-purpose integrated circuit, that is, a circuit that is focused on solving one specific problem, in our case - earning cryptocurrency, for example, Bitcoins. In this case, take special care to purchase high-quality and powerful equipment, since further earnings on an industrial scale will directly depend on this. The farm consists of many computers that are capable of performing calculations at the proper level, working around the clock without breaks for lunch. To effectively mine cryptocurrency, you will need appropriate powerful video cards and power supplies. Forming a farm is always a significant expense that is directly related to the purchase of equipment and payment for electricity.
- Miners often decide to rent such capacity. This is “cloud mining”. This model is characterized by the use of cloud services, as the name suggests. Groups of miners gather into certain structures, and their priority goal is to obtain good profits, which are much higher than with individual mining. The scheme is as follows: the company purchases modern and powerful equipment, sets it up and leases it to miners, and takes on all issues regarding the service, payment of utility bills and other aspects (see services for working with cloud mining).
- If you do not want to invest large sums, but stable and small profits are a priority, you can consider the option of joining pools. This is a node that integrates a certain number of miners (they all have different computing power). All participants have one goal - to find the correct block. For the first correct block, the reward will be received by the pool that distributes profits between participants, taking into account the contribution of each and them, pursuing the principle of fairness.
It’s interesting that the term “mining” itself is translated from English as “mining,” but neither a pick nor a shovel will be useful here, since it is enough to have a powerful computing system on hand for it to help the process of recording a block of transactions in the blockchain .
