Wednesday, June 7, 2023

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Digital Currencies, Where It All Started

Have you ever thought to yourself what a digital currency is? Or who came up with Bitcoin? Where did it all start? Well in this article we will be having a look on what digital currencies are, the different types of digital currencies and a brief history on how it all started.

What is a Digital Currency?

A digital currency is any form of money or money-type resource which is essentially traded, stored and managed on a computer mainly over the internet.

There are 3 different types of digital currency:

  1. Cryptocurrency: Cryptocurrency started around the 1980s and Bitcoin the most popular one was introduced in 2008.
  2. Stable coin: In mid 2010s the Stable coin was developed based like fiat currencies, which are government issued. However, they can be used beyond the borders. This type of currency was designed to ensure stability, for example the price of USDT price (قیمت تتر) is about one dollar.
  3. Central Bank Digital Currency (CBDC): These types of currencies started developing in the late 2010s by the central bank to its citizens. Fundamentally they are cash that only exist in a digital shape.

How digital currencies started? 

In 1983 David Chaum published a paper on digital money called “Blind Signatures for Untraceable Payments”. Then in 1989 he founded the first digital currency company named “DigiCash” and the first e-cash was developed by this company. 

Now we will look at a few digital currencies before and leading up to Bitcoin.

  • E-gold: In 1996 a private digital currency, e-gold, was founded by James Douglas. This digital currency grew very popular and was even used by merchants. But after its rise it also became very popular with cybercriminals which led to the down fall of e-gold.  
  • WebMoney: The financial crisis that happened in the late 1990s is initially what got WebMoney started. This company is based in Russia and was founded in 1998. Unlike e-gold the company made changes to its security to prevent illegal transactions from taking place. GBP, USD, Russian Rubles and Bitcoin are all supported by WebMoney. Other than the fact that it is centralized, it is a digital currency for every purpose.
  • Liberty Reserve: Liberty Reserve was a company that was launched in 2006 and ultimately came to an end in 2013. The company’s digital currency was LRs and could be changed into U.S dollars and Euros. Consumers could make secure payment transactions without their identities being revealed. However, the reason it was shut down is that, they discovered it was a multi-billion-dollar money laundering company.
  • Perfect Money: After Liberty Reserve’s collapse its users flooded Perfect Money, which is also a digital currency working with USD, EUR, GBP, BTC and etc. Perfect Money services are not available in the US or for US citizens anywhere in the world.
  • Bitcoin: And finally, Bitcoin, although it is not the first form of digital currencies, it is the oldest one since it was introduced to the public in 2008. And the major difference it has to its predecessors is that it has the advantage of being decentralized. It is an open-source which prevents one person from owning and using it in a manipulative way for their own benefit. It is also worth mentioning that Bitcoin has acted as an outline for all other crypto currencies that have now been launched, and will come to existence in the future.   Learn more about what is bitcoin (بیت کوین چیست)

Fun Fact about Bitcoin

The year 2010 the first item was bought with cryptocurrency and it was two pizzas. Which cost 10,000 BTC or the equivalent to $222 million now in 2022. Check bitcoin price today ( قیمت بیت کوین امروز)

In conclusion

Digital currencies all started from a paper published in 1983, and have kept growing since then. First in the form of centralized currencies such as e-gold, WebMoney and etc. and now more in the form of cryptocurrencies, stable coins and CBDCs. 

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