Although several cryptographers had been toying with the idea of electronic money or digital money, with the primary objective of making “cash” totally safe, the first cryptocurrency was introduced in the Netherlands, in 1989. The use of cryptocurrency began as an attempt to combat the menace of gas stations being raided for cash. Many of the gas stations were in remote locations and open all night, mainly to serve truckers. Despite being guarded, these were raided frequently, with many guards being severely injured and some losing their lives. With the introduction of the first cryptocurrency, drivers could use this new electronic cash, which could not be stolen.
The Blinding Formula
A company named DigiCash was incorporated in the Netherlands. DigiCash produced the currency units and controlled the currency. The proprietor David Chaum invented the so-called blinding formula, which is similar to the encryption technologies being used by payment gateways today. While regular currency always has a unique number through which it can be traced, the blinding formula enabled a person to change the number of the cryptocurrency, removing traceability and making the bank “blind” to the transaction.
The company was in operation for about a decade before it faced significant pressure from banks and the government to terminate the supply of its electronic cash.
In the late 1990s, another cryptocurrency called Bit Gold was released, which used blockchain technology, which supports most cryptocurrencies today. Bit Gold didn’t gain much traction and was soon phased out, but the technology remained and kept being refined.
Bitcoin was released in 2009 as a means of online exchange. It gained popularity owing to its features of decentralized control, user anonymity and scarcity value. The first Bitcoin exchange was established in 2010 and was supported by some cryptocurrency enthusiasts. It was not until 2012 that Bitcoin got a major fillip when WordPress began accepting payment in this currency. Subsequently, other companies like Microsoft and Expedia started accepting Bitcoins as payment. Soon a plethora of retailers followed suit.
Bitcoin today is the most widely accepted and popular cryptocurrency. It is actively traded, which fuels its availability and liquidity.