History of Digital Currencies & Bitcoin



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Money has changed significantly in the last 60 years. Credit cards first came in the late 1950’s, but they would not see widespread use for decades. “Available now at Bank of America…American Express” etc. Bank checks were still the most popular form of payment besides cash. “You can use checks, to buy things” Increasing use of checks in the 70’s let to the development of an electronic payment network to replace the ever-growing burden of maintaining paper records of payments. This network would be called the Automated Clearing House, or ACH. This is what allows your paycheck to be directly deposited into your bank account. The 20th century saw a rapid growth in technology across the western world. This growth was so drastically fast there are multiple labels for this era. The communication revolution, the information revolution, and the computer revolution… but we will call this the digital revolution. Our representation of money used to be cash: paper bills and metal coins. The digital revolution has made money ever increasingly become more virtual, and less physical.

In fact, today only 8 percent of the world’s currency exists in a physical cash form. Paper money used to be just a representation of the historical money that is gold, because gold has high intrinsic value. This was called the gold standard and was ended for the United States Dollar in 1971. With the invention of the internet came some attempts to return to gold-backed currency by representing Gold digitally; two of such attempts were called E-gold and GoldMoney. Though money had become ‘more’ digital in the late 1900’s, there still was not a strictly digital-only currency until the DigiCash company was started by David Chaum in 1990. The new currency was rightly named ‘ecash’. eCash, however, did not gain much use. Only one bank in the United States implemented the currency, and just a handful worldwide and Mr. Chaum’s company went bankrupt by 1998.

By this time the internet had spread to over a quarter of U.S. homes. Multiple digital currencies came and went. Government regulation caused currencies like E-gold, GoldMoney, and Liberty Reserve to cease progress. No digital currency created yet was safe from censorship. Tom Carper (US Senator): “During the course of this inquiry, we’ve examined the issues and potential risks and threats that virtual currencies pose…” Then came 2009 when an open source software for a digital currency was introduced. Bitcoin is the first virtual currency to not have a central point of failure. Most importantly, it is resistant to government force. “Bitcoins protect your privacy.” Its entire system is distributed and thus impossible to pinpoint and shut down.

Jerry Brito: “If the United States wants to block money from going to WikiLeaks, where do they go?” “They go to the PayPal’s, Visa, MasterCard’s of the world and put pressure on them there” “With Bitcoin, there’s none of that. There’s no one in the middle to go after.” It is able to achieve this feat through cryptography which is basically a fancy word for secure communication. The software, of course, takes place via the internet. As it was designed, a distributed network of voluntary users provides the service to maintain the bitcoin software system. This currency allows you to send a payment to anyone in the world online; without using any bank, company, country, government, or otherwise trusted the third party.

Sending bitcoin basically works like an email, except that a bitcoin’s unit of value cannot be duplicated. Only a specified number of bitcoin units will ever be in existence; much unlike the U.S. dollar money supply which is determined by the Federal Reserve central bank. America’s money supply has basically doubled in just the past decade; causing prices of goods and services to do the same. After it was released, the first bitcoins had near zero value because, at this time, almost all the users were simply cryptography enthusiasts; computer nerds playing around with some new and ‘cool’ piece of software.

By May 2010 bitcoin was beginning to trade in the real world. James D’Angelo: “It is likely the first transactions ever made with the fledgling currency which began in 2009.” “This Papa John’s pizza might look like an ordinary delivery, but it seems likely to go down in history as the most expensive food of all time.” In May 2010 a member pleaded to the community for someone to provide him with two pizzas delivered to his residence for his payment of 10,000 bitcoins. This simple dinner, and perhaps, little leftovers, cost the equivalent in bitcoins of what would come to be worth over $10 Million by December 2013. This is how fast bitcoin has increased in value or rather, how fast the increase in its number of users and recognition has been. “My Fuhrer, [German language clip from Downfall (2004 film)]” Online exchanges have been providing the trade of bitcoins and dollars for years, though many have closed from site security issues and lack of complying with government regulations. Adam Kokesh: “Bitcoin pirate scandal, SEC steps in among allegations that the whole thing was a Ponzi Scheme.” Mass adoption, however, will more easily happen from a recent trend that is growing fast.

Newscast: “Now if you haven’t heard of bitcoin yet, it is making international headlines and changing the way we exchange money.” “It is the first of its kind in the world and today, the Bitcoin ATM was unveiled right here in San Diego.” Bitcoin ATM’s are deploying worldwide allowing the sale of bitcoins for cash, and cash into bitcoins at physical locations. Newscast: “This machine changes it all by allowing users to get cash out or make deposits to their accounts.” There are already such machines in Boston Massachusettes, Austin Texas, Mountain View California, Vancouver Canada and Tijuana Mexico. Bitcoin is like the internet in 1994. Few people used it, and even fewer knew how it worked, but it would go on to revolutionize nearly every industry in the world. Digital currencies are set to revolutionize money. Bitcoin is such a versatile software that hundreds of copycat spinoffs have already been created, including litecoin, Dogecoin (dough-j, silent ‘e’), and even auroracoin; the cryptocurrency introduced and distributed equally to all citizens of Iceland. It appears that 2014 is the year of bitcoin and digital currency.

Steve Stockman: “The future. I really think digital currency is more about freedom. If you had your own wealth and control of your own wealth it’s about freedom, it’s not about anything other than that really.” We’d like to give you a free report on bitcoin and digital currencies. Go signup at CrushTheStreet.com/bitcoin to download this report. This report will give you more on the history, how to use it, and why you should use bitcoin to have more control over your wealth…

 

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