25 Nov

History of Digital Currency – 1983 to Present

The History of Crypto: Four decades of digital currencies in the making.

The History of Crypto: Four Decades of Digital Currencies in the MakingAnyone with basic knowledge of the cryptocurrency market will tell you the first digital currency was Bitcoin, and that it dates back to somewhere around the late 2000s. The second half of that statement is true, but you may be surprised to learn “crypto” roots go much deeper, back to the first concept of digital payments, appearing in the early 1980s. The history of digital currency is, in reality, almost three times older than the first Bitcoin, issued in 2009.

The History of Crypto – A Fascinating Timeline

The following is a historical timeline of cryptocurrency, including all of the most important events that evolved into Bitcoin, and the thousands of “altcoins” produced since. Click on any item in the timeline list to jump to that section, or scroll along to enjoy the history in its entirety.

  • 1983 – David Chaum conceives first electronic money, “eCash”
  • 1989 – Chaum launches DigiCash w/ eCash trademark
  • 1995 – Missouri bank tests eCash micro-payments
  • 1996 – NSA publishes paper describing Cryptocurrency
  • 1998 – Dai’s “B-Money” and Szabo’s “Bit Gold”
  • 2008 – Satoshi Nakamoto published Bitcoin white paper
  • 2009 – The first decentralized cryptocurrency, Bitcoin, is launched
  • 2011 – SwitchPoker first to accept Bitcoin for online gambling
  • 2012 – Satoshi Dice launches world’s first Bitcoin casino game
  • 2014 – Mt. Gox closes to crypto exchange due to theft scandal
  • 2016 – Digital currency exchanges seek jurisdictional protection
  • 2018 – Lansky establishes definitive guidelines for Cryptocurrency
1983 – David Chaum conceives first electronic money, “eCash”

In 1983, an American cryptographer by the name of David Chaum wrote a paper conceptualizing a new form of anonymous, electronic money he called eCash. His idea was to use eCash software to store money in a digital format, which would be cryptographically assigned to a central bank. eCash was meant to give users the ability to shop at any retailer where eCash was accepted, without the need to open an account or transmit credit card details.

1989 – Chaum launches DigiCash w/ eCash trademark

It took Chaum six years to put his written concept into action with the launch of his own company, DigiCash, using eCash as its trademark. Still, it was only a concept, and not one that was well received. Let’s remember, the internet did not exist yet. There was no eBay or Amazon to shop at. Thus, it took eight years for DigiCash to raise $10 million dollars and sign on their very first client.

1995 – Missouri bank tests eCash micro-payments

The Mark Twain Bank in St. Louis, MO agreed to implement the eCash system, testing its abilities as a micro-payment system, for a three-year trial period. The bank processed eCash payments similar to the way credit cards were processed. It was free for consumers, while merchants paid a small fee per transaction. Over the course of the trial, only 5,000 customers signed up to use eCash. Three years later, despite the fact that the internet was quickly making its way into every household, the company dissolved.

1996 – NSA publishes paper describing Cryptocurrency

The National Security Agency published a paper in an MIT mailing list called How to Make a Mint: The Cryptography of Anonymous Electronic Cash. Although the exact name was not used in that paper, it detailed the full spectrum of what we know now as a “cryptocurrency” system. The following year, the NSA paper was published in The American Law Review.

1998 – Dai’s “B-Money” and Szabo’s “Bit Gold”

Another year – another round of papers. The first was written by computer engineer Wei Dai, detailing a system for the anonymous distribution of electronic cash. He called it “b-money”. Shortly thereafter, Nick Szabo published a similar document detailing the same concept for what he termed “bit gold” (not to be confused with the later launch of gold-exchange brand, BitGold).

2008 – Satoshi Nakamoto published Bitcoin white paper

The name Satoshi Nakamoto went viral in 2008 when it was signed to the author line of the original white paper on Bitcoin. Satoshi Nakamoto, however, is not a real person. It is a pseudonym. Nothing is known of the person – or more likely, people – behind the name.

2009 – The first decentralized cryptocurrency, Bitcoin, is launched

On January 3, 2009, Satoshi Nakamoto mined the Genesis Block – the very first block in the Bitcoin Blockchain. With it, Nakamoto launched the open-source software for facilitating anonymous transactions on the peer-to-peer Bitcoin network.

2011 – SwitchPoker first to accept Bitcoin for online gambling

The very first instance of online gambling with Bitcoins happened in August 2011 when SwitchPoker made the monumental move to accept Bitcoins as a method of payment on its online poker platform.

2012 – Satoshi Dice launches world’s first Bitcoin casino game

In April 2012, Erik Voorhees, one of the earliest adopters of Bitcoin and blockchain technology, launched the first Bitcoin casino, Satoshi Dice. There were no slot machines, no blackjack tables – nothing that you would expect to find at a land-based or online gambling hall. It was just a quick, dice-rolling gambling game, and a provably fair one at that. Within a few short months time, it was discovered that Satoshi Dice was responsible for more than half of the world’s Bitcoin transactions. The internet immediately exploded with more Bitcoin casinos, featuring similar, non-traditional, and provably fair gambling games.  

2014 – Mt. Gox closes to crypto exchange due to theft scandal

With Bitcoin and subsequent altcoins experiencing streamlined success, numerous virtual exchange platforms began operating in the digital coin market. The largest crypto exchange at the time, Mt. Gox, uncovered a three-year strain of Bitcoin theft, direct from its hot wallet. It was enough to destroy the operation. In February 2014, Mt. Gox suspended services, shut down its website and filed for bankruptcy. Two months later, the company went into liquidation.

2016 – Digital currency exchanges seek jurisdictional protection

The decentralized nature of cryptocurrency continues to wreak havoc on the exchange market. With no regulatory oversight, exchanges have no protection from illegal activity. In 2016, numerous exchanges sought licenses from the EU Payment Services Directive and EU Electronic Money Directive. The European Council and European Parliament agreed to regulate the industry, scripting strict rules for licensed platforms.

Two years later, the U.S. Securities and Exchange Commission (SEC) announced mandatory registration, stating any “platform [that] offers trading of digital assets that are securities and operates as an “exchange”…must register with the SEC as a national securities exchange…”

The end results of crypto exchange regulations are 1) a safer trading environment for business and consumers, and 2) frustratingly high exchange rates and fees passed on to customers, and 3) the need for crypto casino gamblers to open separate digital wallets; a public one for exchanging, and a private one for casino transactions. 

2018 – Lansky establishes definitive guidelines for Cryptocurrency
As thousands of digital coins hit the market hoping to capitalize on the profound success of Bitcoin, Jan Lansky, Ph.D., a software engineer socializing in cryptocurrencies and databases, published a paper called Possible State Approaches to Cryptocurrencies. His paper would go on to establish a formal set of rules to define cryptocurrency, as follows:

Cryptocurrency is a system that meets all of the following 6 conditions:

  1. The system does not require a central authority, distributed achieve consensus on its state.
  2. The system keeps an overview of cryptocurrency units and their ownership.
  3. The system defines whether new cryptocurrency units can be created. If new cryptocurrency units can be created, the system defines the circumstances of their origin and how to determine the ownership of these new units.
  4. Ownership of cryptocurrency units can be proved exclusively cryptographically.
  5. The system allows transactions to be performed in which ownership of the cryptographic units is changed. A transaction statement can only be issued by an entity proving the current ownership of these units.
  6. If two different instructions for changing the ownership of the same cryptographic units are simultaneously entered, the system performs at most one of them

Following the publication of Lansky’s manuscript, the world “cryptocurrency” was officially added to the Merriam-Webster Dictionary.

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