The History of Cryptocurrency

The story of cryptocurrencies began in 2008, when a programmer or group using the pseudonym Satoshi Nakamoto published the Bitcoin whitepaper. It introduced a peer-to-peer system for transferring value without the need for a central authority. To make this possible, Satoshi designed a cryptographic system in which users verify each other’s transactions in exchange for rewards. This system is called Proof-of-Work, where participants invest their computing power to “mine” new coins. This process powers the network and keeps it secure.
(Want to learn more about Proof-of-Work and Bitcoin mining? Check out our Bitcoin page.)

Bitcoin (BTC) became the first cryptocurrency and set the foundation for thousands of new coins that followed—many building on Satoshi’s concept. Some of these so-called “altcoins” aim to improve on Bitcoin, while others focus on specific niches within the financial world.

Unlike traditional fiat currencies like the dollar or euro, cryptocurrencies have no physical form. While fiat money exists as bills and coins, cryptocurrencies are entirely digital. After thousands of years of using tangible money, cryptocurrencies now allow transactions to be completed entirely online. One of the biggest differences from traditional financial systems is the blockchain—a revolutionary technology that enables secure and trustworthy transactions without a central authority. But how exactly does it work? Let’s break it down.

What Is a Blockchain?

A blockchain is a digital system in which blocks of transaction data are added to a continuous “chain.” Each block extends and updates the chain. Rather than relying on centralized servers or authorities, a blockchain uses the computing power of a global network of users to validate data. This decentralized setup allows the blockchain to run on thousands of machines across the world. As a result, no one can shut it down or alter its transaction records.

Once a transaction is approved, it’s completed and permanently recorded in a public digital ledger. In crypto, this ledger is widely known by its English term: the “ledger”. It stores every transaction ever made using the blockchain. Simply put, the blockchain is a constantly growing list of transactions for a digital currency.

Criticisms of Cryptocurrencies

While blockchain and cryptocurrencies offer promising technology for many industries, they’ve also faced criticism—especially Bitcoin.

As mentioned, cryptocurrencies are fundamentally different from fiat money. They’re not issued by a central bank, and they don’t require banks to verify transactions. For some, this raises concern. Traditional banks are seen as essential to the global economy, and without their oversight, critics worry it could open the door to crime and fraud.

This skepticism was amplified by one of Bitcoin’s earliest and most controversial use cases: the Silk Road marketplace. In Bitcoin’s early years, it was widely used on this illegal online platform to buy drugs and other banned goods. Bitcoin’s anonymity made it ideal for these transactions. When the FBI shut down Silk Road in 2013 and arrested its founder, over 50,000 BTC were seized.

The platform’s founder, Ross William Ulbricht, operated under the alias “Dread Pirate Roberts.” He was sentenced to life in prison for running the massive digital black market. Silk Road’s story attracted heavy media attention, especially the role of Bitcoin. People began asking: What is this anonymous currency people use to buy drugs online? Why didn’t authorities catch it sooner?

As a result, Bitcoin gained a reputation for being “a criminal’s dream.” But this viewpoint is somewhat flawed: the vast majority of illegal transactions worldwide still use cash. A paper bill is often just as anonymous—if not more so—than a Bitcoin wallet.