Cryptos existed before Bitcoin, although they weren’t widely known until after its launch in 2009. The first Crypto was eCash, which was launched in 1990 by the company DigiCash. David Chaum, a cryptographer, developed the idea and founded the company. He released a paper titled “Blind Signatures for Untraceable Payments” in 1983.
Several other projects ultimately preceded the birth of Bitcoin, but it took more than 20 years for it to develop into the well-known Crypto it is today.
Interesting, isn’t it? In this blog, let’s find out more about this.
Before moving ahead, let’s see what Crypto is.
A digital asset called Crypto is created and traded through the use of cryptography. It differs from fiat currency like metal coins or paper currency since it is made using complex computer codes.
- Unlike traditional money, it is basically intangible and cannot literally be handled or stored.
- It’s a virtual currency, and a different type of payment system is developed with an encryption algorithm.
- It is governed by a decentralized network of data ledgers and blockchains rather than a single body.
To learn more about the advantages and disadvantages of Crypto and its two sides, click here.
Now, let’s talk about our 1st Crypto, e-Cash.
eCash – The OG of Crypto
In 1983, David Chaum, an American cryptographer, proposed a secure and confidential way to transfer electronic cash. His idea was to use a token currency that could be exchanged between individuals with utmost privacy, which shares similarities with modern-day Cryptos.
To encrypt information transferred between people, Chaum developed a technique called the “blinding formula.” This formula enabled the safe transfer of “Blinded Cash” between individuals, with a unique signature of authenticity and the ability to modify the currency without any traceability.
Years later, Chaum founded DigiCash to bring his concept into reality. The company developed the first-ever cryptographic electronic currency, known as eCash. Although DigiCash went bankrupt in 1998, the company’s ideas, formulas, and encryption tools played a vital role in the development of digital currencies that followed.
Other known Cryptos
Dr. Douglas Jackson and Barry Downey developed a digital currency in 1996 that was linked to the ownership of gold. The users of a website could use this electronic money to transfer gold ownership between one another. However, the currency unintentionally became a tool for money launderers and others who wished to remain anonymous in their illicit activities.
Nick Szabo is known as one of the pioneers of Crypto and is credited with creating the concepts that eventually led to the development of Bitcoin. His concept, called Bit Gold, employed many of the same blockchain techniques, such as peer-to-peer networking, mining, ledger or registry, and cryptography.
Bit Gold’s most groundbreaking aspect was its shift from centralized control. Szabo’s objective was to create a currency that did not rely on centralized authorities and currency distributors. Bit Gold aimed to mimic the properties of physical gold, enabling users to eliminate intermediaries. Though unsuccessful, the Bit Gold concept inspired the creation of digital currencies that emerged a decade or more after its inception.
Wei Dai, a developer, proposed a distributed electronic cash system in 1998 called B-money, which aimed to provide anonymity. Dai presented two protocols, one of which required a synchronous and unjammable broadcast channel. However, B-money was not successful and had several differences compared to Bitcoin. Nevertheless, it was an attempt at developing an anonymous, private, and secure electronic cash system.
In the B-money system, users would transfer currency through a decentralized network using digital pseudonyms. The system also included a method of in-network contract enforcement without the involvement of a third party. Despite the fact that Wei Dai published a whitepaper on B-money, the system failed to gain enough attention for a successful launch.
Hashcash was a successful digital currency developed in the mid-1990s, before the advent of Bitcoin. It had multiple uses, including reducing email spam and preventing DDoS attacks.
Hashcash’s proof-of-work algorithm helped generate and distribute new coins, similar to many modern-day Cryptos. Hashcash encountered many of the same issues that contemporary Cryptos do today, such as the need for increased processing power. As a result, it gradually became less effective.
Despite its decline, Hashcash garnered considerable interest during its peak. Many of the features of the Hashcash system were eventually incorporated into the development of Bitcoin.
Gradually, the rise and failure of the Cryptos mentioned above led to the launch of Bitcoin. Bitcoin may not be the 1st Crypto to be launched, but it is definitely the oldest surviving Crypto.
Bitcoin addresses various problems that traditional currencies face. It enables peer-to-peer (P2P) transactions without the need for a trusted third party. Moreover, Bitcoin tackles several problems by utilizing a Proof-of-Work mechanism and storing its data on a decentralized ledger, allowing all network members to agree on a single ledger state.
To have an in-depth knowledge of Bitcoin, click here.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.