FAQ 8 – What is a cryptocurrency?
The history of cryptocurrency
Crypto-currency is not a new idea…
In 1995, electronic cash was born in the United States with the invention of Cyber Bucks by David Chaum. This kind of virtual dollar is an electronic currency based on cryptographic protocols.
In 1998, Nick Szabo designed the “Bit gold”, a decentralized digital currency mechanism, it’s considered to be the “precursor to the Bitcoin architecture”.
… it first appeared in 2008
The publication of the white paper “Bitcoin – A Peer to Peer Electronic Cash System” on 18th August 2008 by Satoshi Nakamoto (an anonymous person or group of people), describing the functionality of the Bitcoin blockchain network, marked the beginning of Bitcoin and cryptocurrencies.
Satoshi Nakamoto mined the first block of the Bitcoin network on 3rd January 2009 and the first real-world transactions began in 2010 with the “Bitcoin Pizza Day”. On 22nd May 2010, Lazlo did the first Bitcoin transaction by buying 2 pizzas in cryptocurrency.
The principle of the cryptocurrency
Cryptocurrency, a peer-to-peer currency…
This digital, independent and decentralized currency allows exchanges from one person to another without an intermediary. In fact, cryptocurrency does not require the intervention of a trusted third party, i.e. a banking or financial institution. It is not backed by a central bank or a state.
Therefore, there is no legal tender, the cryptocurrency varies according to supply and demand. Each cryptocurrency can define its number of available units. For example, Satoshi Nakamoto defined in his white paper that there will be no more than 21 million BTC in circulation.
… which works thanks to blockchain technology…
The blockchain is the body that lists all transactions made. This register is a transparent, secure database without a central control body in which transactions are secured by encryption. In this system, all participants have access to the transactions, without knowing who is making them.
Thus, data is shared in real time over a peer-to-peer network and stored cryptographically, which means that no one can alter the data in the database.
There are thousands of crypto-currencies
According to CoinMarketCap, as of May 31, 2022, there are an estimated 19,650 crypto-currencies, worth €1,264 billion.
The best known are:
Bitcoin : the first and most commonly traded cryptocurrency.