Crypto 101: The History of Bitcoin and Cryptocurrency

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This article is the first in a six-part series on Paxos Cryptography Basics. Stay tuned for more lessons on the world of blockchain and crypto markets.

Bitcoin was first introduced as a concept with the publication in 2008 of a groundbreaking white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System, by Satoshi Nakamoto. It was not the first time that the concept of digital currencies was introduced, but it was the first time that such a concept gained popularity.

The document describes a new electronic payment system that would eliminate the need for a central authority while ensuring secure and verifiable transactions. This is where the idea of ​​transactions without trust arose; with Bitcoin, users who don’t know or trust each other could exchange money and confirm transactions using public key encryption.

Satoshi Nakamoto is a pseudonym, and the identity of the author of the white papers remains a mystery to this day. Bitcoin enthusiasts believe that not knowing Satoshis’ true identity is one of cryptocurrency’s greatest strengths. There is no founder or leader, just technology and code that speaks for itself, aligning with the ethics of a decentralized and trustless currency.

After the publication of the white paper, Bitcoin began to proliferate in a niche ecosystem of technologists, cryptographers and cryptocurrency enthusiasts following the release of open source software in January 2009. Crypto exchanges opened up. in increasing numbers between 2011 and 2017, allowing retail investors (e.g., individual consumers) to buy and sell crypto. Early crypto exchanges included Paxos (which launched itBit, the first regulated crypto exchange, in 2012), as well as Coinbase, Gemini, Bitfinex, Kraken, and Bitstamp. Two of the largest crypto exchanges in the world have been founded in the past 3 years, Binance in 2017 and FTX in 2019. During this time, new types of cryptocurrencies have been created, such as Ethereum, Litecoin and Solana.

The importance of Bitcoin has made the crypto market more well-known and accessible, which, in turn, has prompted major financial services companies to enter the space. Robinhood and Squares Cash App launched Bitcoin buying and selling capabilities in 2018, and many other companies, from Facebook to JP Morgan to Mastercard, have announced crypto initiatives. PayPal and Venmo launched crypto services in 2020 and 2021 respectively, bringing cryptocurrencies to their combined 350 million active users. More recently, Interactive Brokers launched crypto for its hundreds of thousands of US clients.

The crypto market has seen incredible growth in recent years, growing 300% year over year in 2020, according to CoinmarketCap. Total crypto trading volume reached $ 2.2 trillion in May 2021, although it fell back to $ 1.1 trillion in August, according to The Block.

Obviously, there is always volatility in the market. But with more and more financial services companies offering crypto capabilities to users, and companies like Tesla, MicroStrategy, and Square adding Bitcoin to their balance sheets, Bitcoin and other cryptocurrencies have grown from a market of niche to an asset class with widespread adoption.

Mike Dudas is the Vice President of Business and Enterprise Development at Paxos. Connect with him!

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