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Crypto 101: The History of Bitcoin and Cryptocurrency

This article is the first in a six-part series about the basics of crypto from Paxos. Stay tuned for more lessons on the world of blockchain and crypto markets.


Bitcoin was first introduced as a concept with the 2008 publication of a groundbreaking whitepaper titled, ““Bitcoin: A Peer-to-Peer Electronic Cash System,” by Satoshi Nakamoto. It wasn’t the first time that the concept of digital currencies had been introduced—but it was the first time that such a concept gained widespread popularity.

The paper outlined a new, electronic payment system that would eliminate the need for a central authority while ensuring secure, verifiable transactions. This is where the idea of “trustless” transactions originated from; with Bitcoin, users who didn’t know or trust each other would be able to exchange money and confirm transactions using public key encryption. 

Satoshi Nakamoto is a pseudonym, and the identity of the whitepaper’s author is a mystery to this day. Bitcoin enthusiasts believe that not knowing Satoshi’s true identity is one of the cryptocurrency’s greatest strengths. There is no founder or leader, just technology and code that speak for themselves—aligning with the ethos of a trustless, decentralized currency. 

After the publication of the whitepaper, Bitcoin began to proliferate in a niche ecosystem of technologists, cryptographers and cryptocurrency enthusiasts following the release of open-source software in January 2009. Crypto exchanges opened in increasing numbers between 2011 and 2017, enabling retail investors (e.g., individual consumers) to buy and sell crypto. Early crypto exchanges included Paxos (which launched itBit, the first regulated crypto exchange, in 2012), as well as Coinbase, Gemini, Bitfinex, Kraken and Bitstamp. Two of the world’s largest crypto exchanges were founded in just the past 3 years, Binance in 2017 and FTX in 2019. Meanwhile, new types of cryptocurrencies were created, such as Ethereum, Litecoin and Solana. 

The prominence of Bitcoin has made the crypto market more known and accessible, which, in turn, has prompted mainstream financial services companies to enter the space. Robinhood and Square’s Cash App launched Bitcoin buy and sell capabilities in 2018, and numerous other firms—from Facebook to J.P. Morgan to Mastercard—announced crypto initiatives. PayPal and Venmo launched crypto services in 2020 and 2021 respectively, bringing cryptocurrencies to their combined 350M active users. Most recently, Interactive Brokers launched crypto for its hundreds of thousand U.S. customers. 

The crypto market has seen incredible growth in recent years, growing 300% year over year in 2020, according to CoinmarketCap. Total trading volume for crypto spiked to $2.2 trillion in May 2021, though it came back down to $1.1 trillion in August, according to The Block.  

Clearly, there is still volatility in the market. But with more and more financial services firms offering crypto capabilities to users and companies like Tesla, MicroStrategy and Square adding Bitcoin to their balance sheets, Bitcoin and other cryptocurrencies have evolved from a niche market to an asset class with mainstream adoption.

 


Mike Dudas is the Vice President of Business Development and Ventures at Paxos. Connect with him!

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