Where Do Cryptocurrencies Come from Anyway? 0 7406

So you’ve gotten your head around the idea of digital money. You know the difference between Bitcoin and the blockchain. And maybe you even have some credit in your virtual wallet. But have you ever found yourself asking the question – where do cryptocurrencies come from anyway? Here’s a little crash course:

Bitcoin came out in 2009, but the technology was around many years before that. As the first cryptocurrency, Bitcoin was released as an open source project, right around the time of the financial crisis. The identity of Bitcoin’s creator is still not completely certain, although it’s generally believed to be Satoshi Nakamoto, the author of a 2008 white paper describing the cryptocurrency.

Whether or not Nakamoto was the true creator of Bitcoin is somewhat a moot point. For a system to be truly decentralized, with no owners, the creator’s idea was to let the technology evolve and be open to all.

At a time when the financial institutions could no longer be trusted or even accessed, the purpose of cryptocurrency was to bring about a transparent economy. Every individual could manage their own wealth outright. They also had the freedom to make transactions globally, without the intervention or permission of any central authority.

The History of Cryptocurrencies

2009 may have been the year that Bitcoin launched, but the theoretical construct of cryptocurrencies existed long before that. The ideology was the same–that math and computer science could solve problems associated with our traditional fiat currencies.

Few people know this, but it was American cryptographer, David Chaum, who invented the “blinding” algorithm in the 1980s. This is the central algorithm to modern web-based encryption today. It’s thanks to this invention that data can be exchanged between parties securely and without being altered. This paved the way for digital currency exchanges (blinded money).

By the late 1980s, Chaum had mustered a team of supporters for his invention, and founded DigiCash, a for-profit company that mined units of currency based on Chaum’s blinding algorithm. Unlike the decentralized Bitcoin, Chaum had the monopoly on digital cash, making it to all intents and purposes, the same as with financial institutions and fiat currency.

While DigiCash started out dealing direct with individuals, rather than institutions, the Netherland’s Central Bank (where Chaum was now located) banned the idea, forcing DigiCash to sell to licensed banks only.

In what could have been the partnership of the century, Microsoft wanted to team up with DigiCash to allow Windows users in the early days to make digital purchases. The terms were never agreed upon, though, and in the late 1990s, DigiCash went bust.

Cryptocurrencies After DigiCash

There wasn’t a lot of movement in cryptocurrencies after DigiCash. The main focus shifted to electronic financial transactions that were more conventional, but still a breakthrough in convenience and speed. Pioneers, such as PayPal and other similar Alternative Payment Methods (APMs) took up most of the resources and investment.

There were a few DigiCash imitators, such as Russia’s WebMoney, but nothing that really stuck until the late 1990s, when e-gold came out. e-gold wasn’t like DigiCash, in the sense that it was owned by a company that bought gold online. Users sent their old trinkets and jewelry to the e-gold warehouse and received digital currency back. This could be changed for actual gold or US dollars.

e-gold reached millions of active accounts, processing billions of dollars annually. But the company had lax security protocols and was subject to frequent hacking and phishing scams, leaving its users out of pocket. Moreover, the company’s transaction activity fell into the legal spotlight, as its laidback policies made it a tool for money launderers and Ponzi schemes. They finally ceased operations in 2009, by which time, Bitcoin was on the market.

Opening to the public in 2009, supporters quickly began to exchange and mine the currency. By the next year, altcoins began to appear on the market, most notably, Litecoin, and the first public Bitcoin exchanges started to appear as well. By 2012, major merchants began accepting Bitcoin as a legitimate method of payment, including WordPress, Expedia and Microsoft.

Flash forward to 2018, and it’s hard to say if Nakamoto or anyone could have predicted Bitcoin’s meteoric rise. But it would take the powers of Nostradamus to say what place cryptocurrencies will have in our lives in the future.

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Christina is a technology and business communicator who has worked with high profile ICOs and blockchain influencers to break industry news.

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Cryptocurrency Volatility Doesn’t Bother UK Financial Professionals 0 86

Cryptocurrency volatility is a constant concern. After news of the Google advertising ban on cryptocurrency and related products, Bitcoin tanked to a new low. In fact, over $60 billion was wiped off the value of cryptocurrency in the space of 24 hours.

Large selling from a trustee of Mt.Gox, the failed cryptocurrency exchange, was also partially to blame for the slide. Yet, despite the doom and gloom, UK financial professionals remain optimistic about the future of cryptocurrency.

A survey by Citigate Dewe Rogerson found that more than half of all financial professionals who invested in Britain are planning to buy more cryptocurrency this year. Despite the tumultuous landscape, impending regulation and rampant volatility, just 8 percent of those interviewed planned on selling their crypto.

Cryptocurrency Volatility is Passing

According to the survey, the majority of financial professionals in the UK believe that crypto value will rise again later in the year. In addition, retail investors are quietly optimistic. Many of them are seeking to increase their exposure, with 54 percent expecting prices to rise. 56 percent are planning on buying more.

The survey was conducted by the Consumer Intelligence unit of the research and communications company, and took place at the end of February.

But, of course, a lot has happened since then. In just two weeks, cryptos have been delivered blow after blow, with SEC involvement and ICO funding theft.

However, Jennifer McEntire of LexisNexis Risk Solutions believes the volatility is no worse than our traditional markets. “The volatility… I would liken and compare to our traditional markets,” she says.

A Light on the Horizon

Not only are financial professionals undeterred by cryptocurrency volatility, but 32 percent of them expect a dramatic increase in the next couple of years. Others are not so certain, but less than a third of all surveyed believed that valuation will continue to fall.

It’s certainly a gamble, and no one may have the answers in this entirely new landscape.

“Many cryptocurrencies have seen a huge increase in valuations, but also exceptional levels of volatility”, stated Executive Director at Citigate Dewe Rogerson, Phil Anderson. “Cryptocurrency millionaires have been created, but many other investors have lost money. Despite the significant levels of volatility and price fluctuations, our research reveals many financial professionals remain optimistic about the future for cryptocurrencies.”

Despite the cryptocurrency volatility, most financial professionals (59 percent) expect the overall market to reach over $1 trillian by 2021. Less than 20 percent of participants expect the market to shrink to less than $800 billion.

Will Regulation be a Blessing or a Curse?

While many ICOs are nervous about impending regulation, financial professionals seem to welcome it. If crypto transactions are regulated and there are more guidelines and tighter control, investors can invest with greater confidence and ICO scam teams can be eradicated. Moreover, crypto’s usage for instant transactions and removing conversion fees will be more widely adopted by the finance industry.

But beyond Bitcoin and investor buying and selling, the majority of those surveyed believe that the blockchain will have a bigger lasting impact. 44 percent of financial professionals expect to see a major increase in blockchain adoption by corporations, using smart contracts and other blockchain applications in the near future.

Bitcoin Value Tanks Again After SEC Involvement 1 98

Bitcoin value has tanked again to less than $10,000 after the Securities and Exchange Commission (SEC) involvement on Wednesday. The latest market scare to rock the crypto world saw over $1,000 shaved off its price almost instantly, amid fears of greater regulation.

In a statement on Wednesday, the SEC declared that any online platform considered a security that trades in digital assets, must register with the agency.

In a reinforcement to their previous statements, the SEC is trying to separate what they consider to be securities from non-securities. They have yet to name any companies, but that has not stopped FUD from gripping the market. Curiously, Bitcoin is probably the least likely of all cryptos to be deemed a security, but that has not stopped the dive in Bitcoin value.

Fear of Regulation

This involvement by the SEC serves to fan the flames of fear that engulf the crypto community about regulation making trading more difficult. Regulation is such a key issue in cryptocurrency that it reduced Bitcoin value by 10 percent almost immediately after the statement was released.

According to the SEC public statement yesterday, March 7th, “If a platform offers trading of digital assets that are securities and operates as an “exchange,” as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.”

Moreover, they say that, “The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.  Many platforms refer to themselves as “exchanges,” which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.”

This latest SEC statement comes just a few weeks after the issuing of subpoenas and the SEC’s promises to investigate more ICOs. They want to gain some control over platforms that are trading and exchanging in digital currency. While the SEC is still trying to make a clear distinction between securities and non-securities, since no company has been named yet, the whole community is fearful.    

Bitcoin Value Should Recover

Bitcoin value should recover once the extent of SEC involvement is known. For example, it’s much more likely that the crackdown will be focused on altcoins, rather than Bitcoin. (Just in case you need a catch up, “altcoins” refer to any other digital currency that isn’t Bitcoin, since they are cryptocurrencies that were derived as an alternative to the original).

One of the most uncertain and complicated issues is that of whether securities laws really apply to cryptocurrency. In such an uncharted territory, it’s difficult for even so called industry experts and attorneys to provide a solid answer.

Currently, the “Howey Test” is used to determine whether or not an asset is a security. The ruling states that a security involves monetary investment in a common enterprise, with the investors expecting profits at a later date.

Does that sound familiar to you?

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