The forerunner of cryptocurrencies was David Chaum, an American cryptographer, who developed an anonymous, cryptographic electronic money called ecash in 1983. He implemented it in 1995, making it available as electronic payments system. It required software that enabled the withdrawal of notes from the bank. The software was also necessary to receive encryption keys that ensured the transaction security.
In 1996, the cryptocurrency system was described in How to Make a Mint: the Cryptography of Anonymous Electronic Cash, published by the National Security Agency. It was published on the MIT mailing list and later in The American Law Review (1997).
In 1998, Wei Dai, founder of the Crypto ++ cryptography library developed the B-money currency which he described in a publication as an anonymous, distributed, electronic cash system. The B-money system assumed that the currency could be transferred over a decentralized network and had the means to enforce contracts within the network without the use of a third party services. It was an attempt to create an anonymous and secure electronic transaction system that ultimately failed. Wai can be said to have laid the foundations for Bitcoin, whereas its founder, Satoshi Nakamoto, himself referred to the B-money components in the Bitcoin Whitepaper – a document describing the foundations of the Bitcoin system published more than 10 years later.
At the same time, Nick Szabo developed another electronic currency system, Bit Gold, which should not be confused with a modern exchange with a similar name. It featured a proprietary system that was similar to the modern cryptocurrency mining process. Szabo wanted Bit Gold to reflect the properties of real gold without the need for intermediaries during transactions. Bit Gold was based on cryptography and was intended to function like a modern Blockchain but this project also went up in smoke. However, it became a huge inspiration for future developers who succeeded in bringing their cryptocurrencies to market.
In 2007-2008, there was a financial crunch that caused the so called Great Recession. It led to a drop in housing prices, a drastic increase in unemployment and the bankruptcy of some 2.5 million companies in the USA. These events were one of the reasons for Bitcoin development. In April 2011, Namecoin was developed as an attempt to set up a decentralized system that would make Internet censorship more difficult. This was soon followed by Litecoin in October 2011 which had the ambition to become a faster Bitcoin. With each consecutive year, more and more cryptocurrencies were created.
On 6 August 2014, the HM Treasury announced the commissioning of a study on cryptocurrencies and the role they could play in the British economy. The study was also to determine whether regulation was needed in this area. The final report was published in 2018 and HM Treasury carried out consultations concerning cryptocurrencies in January 2021.
In June 2021, El Salvador became a major center for cryptocurrencies by accepting Bitcoin as legal tender in the country. This happened after the Legislative Assembly passed a bill submitted by President Nayib Bukele with a vote count of 62-22. Cuba followed into the footsteps of El Salvador and adopted Resolution No. 215 in August 2021, which recognized cryptocurrencies such as Bitcoin and regulated their operation.
In September 2021, the Chinese government made all cryptocurrency transactions illegal. This was the culmination of the authorities’ years-long fight against cryptocurrencies which was preceded by a ban on intermediaries and cryptominers within China.
In turn, in the face of Russian invasion of Ukraine, President Volodymyr Zelensky signed a bill that legalized selected cryptocurrencies in Ukraine, making them legal tender in the country in March 2022. This decision was prompted by the fact that Ukraine has received more than $100 million in donations in the form of cryptocurrencies to help the country in its fight against the aggressor. In September last year, President Zelensky rejected a similar legislative proposal but in the face of war decided to join El Salvador in legalizing cryptocurrencies so as not to lose the donated funds denominated in cryptocurrencies.