Despite the massive waves brought by the new digital currencies that have revolutionised the market, a single cryptocurrency has remained and gained the public’s attention. That is no other than Bitcoin. Many investors or even crypto enthusiasts consider Bitcoin as the first digital currency. At the same time, there is no doubt that this cryptocurrency has had a significant influence on the crypto world. But is it the first digital currency? Bitcoin Revolution has the answer for you.
Early Aims in the Netherlands
According to a report in Bitcoin Magazine, one of the earlier attempts at generating a cryptocurrency generally happened earlier than bitcoin’s creation by about 20 years. The Petrol Stations in the Netherlands were encountering nighttime thefts. Instead of assigning security guards and risking their safety, a group or developers tried to link money to newly created smartcards. Drivers who needed to enter the stations would bring these cards instead of cash, so the stations would not have any traditional paper money lying around. This may have been the earliest manifestation of electronic cash which has evolved to digital currencies as we know them today.
David Chaum, an American cryptographer, experimented with a distinct form of electronic cash. He envisioned a token currency that could be carried between individuals privately and safely. Chaum created a “blinding formula” to be applied to encrypt data passed between individuals. Therefore, “blinded cash” could be securely transferred, carrying a signature of validity and the capacity to be altered without traceability. Years later, he founded DigiCash to execute his concept.
Wei Dai came up with an anonymous distributed electronic cash system known as “B-money” in 1998. He recommended two varied protocols, including one which needed a synchronous broadcast channel. But, B-money wasn’t successful, and it was entirely different from bitcoin.
Yet, it was also an attempt at an anonymous and secure electronic cash system. In the case of B-money, digital code names or known as pseudonyms would be utilised to transfer currency through a decentralised network. The process even added a means for contract implementation in-network without a third party’s existence. Even though Wei proposed a white paper, it did not gain enough attention for an effective launch.
Bit Gold is another digital currency system that existed way back to the same period as B-money. Nick Szabo proposed this currency. Bit Gold happened through its proof-of-work system that, in some ways, is reflected by today’s bitcoin mining process. Through this process, solutions were put together cryptographically and then published for the general public in a similar way a modern blockchain would operate. This is perhaps the most innovative aspect of the Bit Gold idea, but it influenced its movement away from centralised status.
In contrast, Bit Gold aimed to avert dependence on centralised currency distributors and authorities. Nick’s aim was for the system to manifest the features of real gold, thus allowing users to eradicate the middleman. Bit gold was also unsuccessful, but it was also an inspiration for many digital currencies that would go in the market more than a decade after its launching.
Hashcash was created for some reasons, including reducing email spam and preventing it.
Denial of Service Attack (DoS). This pre-bitcoin currency opened up an extensive array of possibilities that could only be conveyed nearly two decades later. Hashcash used an algorithm called proof-of-work to support the generation and distribution of new coins, much like several modern cryptocurrencies. This currency also encounters the same problems as digital currencies today. Hashcash eventually became ineffective in 1997 as it needed increased processing power. Several of the features of the Hashcash system worked accordingly into bitcoin’s development as well.
When the digital currency Bitcoin was created in 2009, it started a new generation of currencies. Bitcoin is different from its antecedents as it is decentralised and operated by blockchain technology. But, it is still hard to grasp the creation of Bitcoin and the other currencies that are still about to launch without the earlier attempts of electronic cash and cryptocurrencies before Bitcoin started. Get updated on what’s happening in the crypto world.