Some people believe that Bitcoin was the first cryptocurrency, but digital money existed before. DigiCash created the first real cryptocurrency, eCash, in 1990, using cryptographer David Chaum’s idea, which was conceived in 1983 in his paper Blind Signatures for Untraceable Payments.
New digital currency ideas emerged over the next 20 years, and the most famous is Bitcoin. Launched in 2009, it became the first cryptocurrency to change the future forever.
Key Takeaways
- In 1990, David Chaum invented eCash, the first cryptocurrency made.
- There have been many attempts to make digital money before Bitcoin.
- The Bitcoin idea was inspired by previous ideas such as B-money, eCash, Bit Gold, and Hashcash.
eCash—The First Cryptocurrency
American cryptographer David Chaum first imagined electronic cash that could be sent safely and privately in 1983, nearly the same as contemporary cryptocurrencies.
Transactions were protected by a special encryption method called the ‘blinding formula.’ This method allowed “Blinded Cash” to be securely transferred while remaining authentic and undisturbed.
This idea was brought to life by creating DigiCash and implementing eCash (also known as the first digital currency designed with the help of cryptographic technology). DigiCash eventually went bankrupt in 1998, but its ideas and the encryption methods it developed contributed to how digital currencies evolved, including Bitcoin.
E-Gold
In 1996, Barry Downey and Dr. Douglas Jackson started with a digital currency Pegged to gold’s price. It enabled people to send and receive money online through gold. Then, criminals began to use it for illegal activities such as money laundering since transactions were private, which caused concern for abuse.
Bit Gold
Developed by Nick Szabo, the father of digital currency, Bit Gold is a concept that heavily contributed to the development of Bitcoin. Bit Gold uses a safe digital ledger, encryption, and blockchain mining to protect transactions.
Bit Gold was one of the major innovations in the decentralization of digital currency. However, like traditional money, it was not stored by banks or governments. We aimed to create digital currency equivalent to real gold, whether for trading or bypassing an intermediary.
Bit Gold also influenced later digital currencies, though it was never fully launched. Most of its features were later used in classic Bitcoin and other cryptocurrencies.
B-Money
In 1998, a developer, Wei Dai, released a concept for a digital currency called B-money that would allow users to send money privately to other users without the involvement of banks or the state. It wanted to develop an anonymous, secure online payment system without a paper trail. B-money proposed two network operations, the first of which was a special network that couldn’t be blocked or controlled.
Digital nicknames were planned for use instead of real identities to receive or send money, as planned for B-money. There was also a way to make and enforce contracts without a third party involved. B-money never went through; it had innovative ideas but couldn’t get much support. However, its concept influenced later cryptocurrencies such as Bitcoin.
Hashcash
Hashcash was created in the mid-1990s,” before Bitcoin, which has become one of the most important digital currencies.” Online systems were supposed to become more secure, originally based on helping reduce email spam or DDoS attacks.
Powerful ideas introduced by this system later became essential to cryptocurrency. Hashcash was a proof-of-work system where computers solved complex puzzles and then created and verified digital coins. Today, many cryptocurrencies, for example, use the same process as Bitcoin.
By 1997, Hashcash was getting frustrated—computers were becoming increasingly powerful at processing transactions. Thus, the system was difficult to use and disappeared.
Though Hashcash wasn’t the enduring cryptocurrency, it did play a big role. Much of the language used in Bitcoin, proof of work mining, and so on, is directly derived from Bitgold’s white paper.
The Bottom Line
Before Bitcoin, attempts at creating digital currency influenced the cryptocurrency movement. Although early projects like eCash, B-money, Bit Gold, and Hashcash introduced cryptography and some of the basic concepts like cryptographic security, decentralization, and peer-to-peer transactions, those that have developed after the invention of Bitcoin have further developed and established all the important concepts of the fundamental architecture of cryptographic P2P network.
These innovations were the springboard for the development of Bitcoin, which was officially introduced in 2008 through a whitepaper.
Introducing Bitcoin was a game changer that solved the problems the previous digital currencies faced: double spending and dependency on central authority. With this breakthrough, Bitcoin was the first true decentralized cryptocurrency, ending the financial scene as we knew it and ushering in the thousands of digital currencies that would come after.
FAQs
What Is the Oldest Crypto?
Although unsuccessful, the first attempt was digital money, launched in 2008 in a Bitcoin whitepaper. It is the oldest running cryptocurrency. Projects such as eCash, Hashcash, and Bit Gold helped create the foundation of what would eventually become based on cryptocurrency when Bitcoin was released.
Who Invented Crypto?
eCash was the first attempt to create a cryptocurrency in the 1980s. David Chaum conceived of it wrote the first whitepaper, and started a company called DigiCash to bring it to the world.
Although cryptocurrency was not created in a day, today’s digital currency was. It was developed over years of research, new ideas, and input from many people until it became what it is today.
What Was the First Thing Bought With Crypto?
In 2010, the first recorded use of a cryptocurrency was when 10,000 Bitcoin (BTC) was used to buy two pizzas. The money went to the buyer and the person who ordered and delivered the pizzas. It was the first real-world transaction with Bitcoin and proved that digital money could be used for off-the-shelf purchases.
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