When and how did Cryptocurrency begin?

Cryptocurrencies are becoming more and more common today. Many stores and services are beginning to use them as payment, and soon we will also start accepting cryptocurrencies as something commonplace. 

But only fifteen years ago the concept of cryptocurrency did not exist in the world, and bitcoin, which revolutionized digital payments, was also unknown.

First mention

It all started on October 31, 2008, when Satoshi Nakamoto published a white paper on the cryptography mailing list at metzdowd.com describing a digital cryptocurrency, titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. In it, he announced that he was working on a new electronic money system in which transactions are made directly between participants without involving a third trusted party.

It is still unknown who is hiding under this pseudonym. It is also unknown whether one person or a group of people was involved in the development of bitcoin. Several attempts have been made to identify the creator of the cryptocurrency, but none of them have been successful.

In his report, Nakamoto suggested a new technology for the decentralized circulation of digital money, which consisted of two components.

Closeup Five Bitcoins mockup with reflection on black color back

One component of Bitcoin was the innovative blockchain technology, a chain of financial transaction blocks in which each successive block was cryptographically linked to the previous one. Therefore, it was impossible to edit any information about a transaction that had already been entered. This ensured the immutability of all transactions in the registry and increased confidence in this system.

The second component was a cryptographic algorithm for bitcoin mining, which defined a mechanism to reward network participants for committing computing power to keep the blockchain running at a constant rate (approximately 1 block in 10 minutes).

First criticism

However, readers of Nakamoto’s white paper were skeptical of the new technology and some even criticized it. The first wrote that the electricity needed to mine bitcoin would cost more than the value of the new cryptocurrency. Others pointed out that the governments of the world’s leading countries would not allow bitcoin to function on a large scale. Thirds stated that the idea of monetary circulation without banks is utopian, because attempts to implement it have been made many times before, and all of them were unsuccessful.

Also negative was the fact that no one knows who Nakamoto was. It should be noted here that the subscribers to the email list where Nakamoto’s report was made public were members of the cryptocurrency community. They placed a high value on anonymity, but they understood what kind of specialist was hiding behind a nickname.

In online communities, as in the real world, each member’s reputation depends on the extent of his or her involvement in common activities. However, until October 2008, no one had heard of Satoshi Nakamoto – he appeared out of the blue.

The first bitcoin that was mined

Anyway, the bitcoin promotion had to start somewhere, and Nakamoto became its first user. On January 3, 2009, he launched a bitcoin mining program he had written.

The first block of 50 bitcoin coins was mined at 18:15:05 GMT and was named Genesis.

The first bitcoin address to receive the first 50 BTC as a reward for the first block was an address:

1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa

Now there are about 68.52148519 BTC at this address. 

This is how bitcoin was born as a distributed, decentralized network of monetary settlements. It has had many ups and downs, but one cannot dispute the fact that the creation of cryptocurrency was an important step in the development of electronic payments and a new era of digital money development.