Digital cash was dreamed up a quarter century before bitcoin arrived
In 1983, long before bitcoin, cryptographer David Chaum conceived of ecash, a form of encrypted electronic money that third parties could not trace. He launched it through a company called Digicash in 1995. Bitcoin itself only appeared in January 2009, built on ideas that had been circulating for years.
Others kept refining the idea. In 1996 the US National Security Agency published a paper called How to Make a Mint, outlining an anonymous electronic cash system. Two years later Wei Dai described b-money, and Nick Szabo followed with bit gold, in which users would create money by solving proof-of-work puzzles whose answers were chained together cryptographically, the same basic idea bitcoin later used.
Bitcoin's pseudonymous creator, Satoshi Nakamoto, used the SHA-256 hash function for its proof of work. Imitators came quickly: Namecoin in April 2011 tried to build a decentralised web address system, Litecoin in October 2011 swapped in a different hash function and aimed for a block every 2.5 minutes rather than 10, and Peercoin in August 2012 mixed proof of work with proof of stake. By early 2020 there were more than 5,000 cryptocurrencies.
Under the hood, each coin's ownership is logged in a shared database secured by a consensus method, which also controls how new coins appear. Legally they sit awkwardly, treated in different places as commodities, securities or currencies. In September 2022 Ethereum, then the second-largest, switched from proof of work to proof of stake, which its founder said would cut its energy use by 99.9%.
The ride has been rough, with bubbles and crashes around 2011, 2017–2018 and 2021–2023. The exchange FTX, once valued at $18 billion, filed for bankruptcy on 11 November 2022, and a Pew survey in October 2024 found 63% of US adults had little or no confidence that crypto was safe. The word itself entered the Oxford English Dictionary in September 2018, its earliest recorded use traced to Twitter in September 2009.
Source: Cryptocurrency
