The 4 Digital Currencies Before Bitcoin

by Avramis Despotis     Jul 16, 2019

Contrary to popular belief, Bitcoin is not the alpha and omega when it comes to cryptocurrency. While it’s considered the first generation cryptocurrency, it wasn’t really the first of its kind as there were other attempts in the past before Bitcoin became the real benchmark in the industry. Bitcoin came around in 2009, created by the legend of Satoshi Nakamoto. Satoshi Nakamoto is a pseudonym and could be an individual or group of people, which is a tale everyone gets told when they do their cryptocurrency trading 101 research.

Regardless, it’s Nakamoto’s work in 2008 and 2009 that kickstarted the development of cryptocurrencies and blockchain technology in modern times. Before Bitcoin became Bitcoin and had its rise to fame, other forms of digital currencies existed. Of course, Bitcoin is the first to make a real impact, but let’s have a look at what came before Bitcoin.

1) Gas Stations in the Netherlands

The first attempts at a form of digital cash or cryptocurrency came out of the Netherlands almost 2 decades ago. Late 90s and early 2000s Netherlands was experiencing a rise in nighttime crime in gas stations around the country, leading to loss of property and money as well as endangering nighttime workers.

A group of programmers tried to produce a system to allow nighttime customers to pump gas despite there being no staff physically present. Their attempt was to link money to smart cards which customers would carry instead of cash. The idea was that gas stations would not have cash lying around and make them unattractive for criminals. Today systems like that are available all over the world, but 20 years ago it was the first real attempt at creating electronic cash.

2) Blinded Cash

Another very early attempt at digital currency came from David Chaum. Chaum is a cryptographer from the United States and he ideated a digital token-based currency that could be sent and received between any parties with safety and privacy guaranteed. His attempt had a lot of parallels with how modern cryptocurrencies actually work.

Chaum developed what he called the “blinding formula” which was an algorithm used to encrypt the tokens passed between two parties. Once a token was “blinded” it was transferable between two parties without being able to be modified.

Chaum’s company went bankrupt in the late 90s but some of the work he did was the basis used for the creation of modern cryptocurrency, including some of his tools and formulas.

3) PayPal

A bunch of companies sprung up in the wake of Blinded Cash and its subsequent bankruptcy to try and succeed where David Chaum failed. The one company that came out on top and made unprecedented waves in the finance world is PayPal. It was the first successful iteration of using the internet to safely transfer money between individual parties.

PayPal’s success also gave rise to platforms such as Ebay and Amazon which relied heavily on its service to be able to give users the ability to pay merchants. Some of PayPal’s founders such as Elon Musk and Peter Thiel are now prominent entrepreneurs and businessmen, having used PayPal as their launching pad into success.

4) B-Money

B-Money was the brainchild of a developer by the name of Wei Dai in 1998. A lot of the core aspects of B-Money sound a lot like modern cryptocurrency. It was intended that B-Money used a decentralized network based on pseudonyms to create a private and secure online cash system. It also had the idea of using a type of broadcast channel that was intended to be both secure and synchronous, but this was never actualized. B-Money failed due to a lack of public attention and weak marketing.

B-Money’s concepts however, were even referenced by Nakamoto in his original Bitcoin whitepaper, showcasing how far ahead of his time Wei Dai was in 1998.

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