Where Do Cryptocurrencies Come from Anyway? 13 8636

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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There’s an Inflatable ‘Bitcoin Rat’ Staring Down the Fed 95 13025

Someone has put a giant inflatable rat outside the Federal Reserve Bank in New York.

It’s covered in Bitcoin code, printed in rainbow colors, and is apparently a piece of installation art aimed at subverting the federal institution that controls the US dollar. Or is it pale, puffed-up pariah a commentary on Bitcoin bros themselves? Or does it have something to do with Warren Buffett, who earlier this year called Bitcoin “rat poison squared”? According to CoinDesk, who first reported on the inflatable rat, the meaning is intentionally ambiguous.

The artist behind the puzzling prank is Nelson Saiers. He describes his own work as “mystifying” and “singularly original”, notwithstanding the long history of rats being inflated as protests or used as economic and political icons in art and entertainment around the world.

“It’s art, so I hope they’re entertained by it,” he said, apparently implying that art is entertainment. “It’s informative, I hope people will learn [and] I’m hoping it’ll at least help people understand bitcoin better and be kind of faithful to what Satoshi would have wanted,” he added, citing the mysterious pseudonym of Bitcoin’s founder with a touch of reverence.

A $50 Million Artist

Saiers, a phD in theoretical mathematics, was a hedge fund manager who did that thing where you give up all the money to chase your dream of being an artist.

His financial experience includes a stint as managing director at Deutsche Bank’s prop trading desk, before becoming CIO of Saiers Capital, the hedge fund that bears his name. His creative career gives credence to the theory that working as an artist is more and more a privilege of the very wealthy.

CNBC estimated Saiers’s wealth to be around $50 million at the time of he departed from the financial industry to pick up his paintbrushes.

The Rat Joins a Tradition of Sculpture-as-Commentary in FiDi

The Bitcoin rat, which stands on Maiden Lane, isn’t the first pop up sculpture to grace Manhattan’s financial district. Last year, Kristen Visbal’s 50 inch bronze ‘Fearless Girl’ statue made waves by staring down the famous ‘Charging Bull’, to the outrage of ‘Charging Bull’ sculptor Arturo Di Modica. The 3.5 ton ‘Charging Bull’ itself was left on Wall Street in the middle of the night when Di Modica originally created it, obstructing traffic and drawing the curiosity of passers by.

When Saiers placed the Bitcoin rat, he initially set it up on private property and was promptly ushered off by security guards, who he says were good natured about the situation. He expects the sculpture to be more temporary than the aforementioned Wall Street bronzes, and will probably only be around for a few days.

A Critique of the 2008 Bailouts

The placement of the rat on Maiden Lane seems to be no accident, but rather a reference to the Maiden Lane Transactions, more commonly known as that time when the Fed bailed out the big banks after they all caused the 2008 market crash. The Bitcoin crowd’s antipathy towards the Fed and the big banks is palpable in Sairs’s rat sculpture, and while a more specific meaning eludes, perhaps the success of the piece depends upon its ability to start conversations about the state of finance.

We’ll leave it to the viewers to decide who’s the rat—the Federal Reserve, or Bitcoin itself—and what that means for the future of currencies.

Chinese Crypto Leader Li Xiaolai Suddenly Retires 8 1646

One of China’s most prominent Bitcoin investors has announced his retirement from the crypto world. Billionaire Li Xiaolai is the founder of BitFund, a crypto venture capital firm that has fostered a slew of Bitcoin-related startups.

Li’s announcement of his decision to withdraw from cryptospace—and investing otherwise—came unexpectedly via his page on Chinese social media site Weibo.

“From this day on,” his post reads, according to TechNode’s translation, “I, Li Xiaolai, will personally not invest in any projects (whether it is blockchain or early stage). So, if you see ‘Li Xiaolai’ associated with any project (I have been associated with countless projects without my knowledge, 99% is not an exaggeration), just ignore it.”

Li is a former school teacher, and claims to be the first person in China to openly trade Bitcoins, rather than hiding behind its famous anonymity. Now, retired from both teaching and investing, he says he’s not sure where to go next. “I plan to spend several years to contemplate on my career change. As for what I’m doing next, I’m not sure just yet.”

Li closed his post by expressing that he still maintains a long term optimism about the blockchain.

Li’s Ventures Grew Crypto Capital, Controversey

Through BitFund, Li has incubated a number of blockchain related startups, including an off-chain wallet called Bitfoo, the crypto exchange YUNBI, and HashRatio, a miner manufacturing company. Li organized 2014’s Global Bitcoin Summit in Beijing, back when you could get a BTC for as little as $440, and years before China instated its full ban on cryptocurrencies.

Earlier this year, Li also acted as managing partner of Hangzhou Xiong’An Blockchain Fund, a billion dollar fund backed by the Hangzhou government. Li stepped down after fellow venture capitalist Chen Weizing introduced a series of accusations against him.

Included in the eleven accusations, which Chen broke on social media and messaging platform WeChat, were a supposed debt of 30,000 BTC that Chen says Li failed to pay on time. Li published a point-by-point response to Chen’s accusations, addressing the 30,000 BTC debt by saying “it’s not true… Chen is just muddying the water.”

Though Li called them “defamations,” and Chen did not offer supporting evidence for his allegations, Li said Chen’s antics “brought material and negative impacts on the reputation of Xiong’An Blockchain Fund” and that his resignation would “let the Hangzhou government continue its push for blockchain development.”

Li was the subject of controversy on another occasion when, in a candid conversation he did not know was being recorded, he outed several influential organizations as scams and said that the best way to succeed in blockchain, even if your project is worthless, is to get famous and build consensus.

The State of Crypto in the People’s Republic

All crypto and blockchain related websites are blocked by the Chinese government, and citizens are forbidden from engaging in crypto transactions. The People’s Bank of China released a statement on August 24th warning against ICOs, which they consider to be “illegal fundraising, pyramid schemes, and fraud.”

But the rules have been difficult to enforce, and crypto still enjoys an active user base in China. Beijing Sci-Tech Report, China’s oldest technology publication, is now the first Chinese publication to accept BTC as payment from its subscribers. Chinese crypto channel cnLedger announced in a tweet on September 25th that Ethereum Hotel, China’s first hotel to accept ETH as payment, is open for business in Sichuan Province.

A Crypto Landscape Without a Leader

The sudden exit of Li Xiaolai from the Chinese crypto scene could have caveats, or greater implications. Weibo users expressed their support and gratitude following his announcement, but some also speculated that his choice of words leaves room for Li to continue investing in crypto indirectly, perhaps through funds or corporate entities. Whether that will be the case or not, for many, his resignation marks the loss of a public blockchain leader.

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