This year has proven to be significant for many reasons. One of them being the COVID-19 pandemic that is supposed to have originated in a market in Wuhan, China. By March 11, the virus already spread to more than 100 countries and was declared a pandemic by the World Health Organization (WHO). At the time of writing this, 3 months later, the outbreak is being managed but the disease is still at large in many countries. In the United States, for example, there are currently more than a million people infected. The daily case rate has spiked in several states possibly due to nationwide protests against police brutality and racial profiling. The initial relaxing of the quarantine measures can also lead to an uptick in transmissions. Other countries have not fully recovered either, with more than 100,000 new daily cases confirmed.
Economy of the Year 2020
These events are affecting all economies in the world, rich and poor countries alike. In February, at the beginning of the pandemic, oil prices collapsed and the stock market crashed. Due to lockdowns and self-isolation measures, many businesses and individuals are experiencing losses of income. A large number of people in the nations greatly affected by the virus have been left unemployed or on unpaid leave. Companies in industries such as hospitality and tourism have been forced to file for bankruptcy and shut their doors. This economic recession is not only showing us how health crises have huge effects on the financial well being of a population but also reforming many industries as we know them.
The blockchain industry is also changing in the face of the worldwide health crisis. Unable to leave their homes due to the self-isolation measures, people have turned to technology to continue functioning in society. Now seeing a doctor, shopping and managing monetary assets is done online. Still, the drop in the traditional stock market caused a correlational drop in the value of crypto. When crypto rose to popularity, it was considered a safe haven for many investors. The events of this year caused that notion to be reevaluated when in less than a week after the first reports of coronavirus cases in China, the cryptocurrency market collapsed by almost 50%. However, to understand how current circumstances are shaping the crypto and blockchain industry, it’s important to look back at how it all began.
First Crypto Coin
The history of cryptocurrency officially began on January 3rd, 2009 when the first Bitcoin was mined. The technology was previously explored with currencies such as B-Money and Bit Gold, which were proposed but never fully developed. For Bitcoin, the first step was the publication of a paper by the pseudonymous Satoshi Nakomoto in 2008. Titled “Bitcoin: A Peer-to-Peer Electronic Cash System”, the paper explored the possibility of creating a payment system that would not rely on any centralized financial institution. The first Bitcoin mined was named the Genesis Block and was supposedly created by mysterious Satoshi himself. He also placed a secret message within this block’s data: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” which comes from a 2009 headline in The Times about the British government’s failure to stimulate the economy following the 2007–08 financial crisis. This message is in tune with Bitcoin’s mission as a decentralized payment system that operates independently of any government.
Supply and Demand
In 2010 Bitcoin was used as a means of payment for the first time when Laszlo Hanyecz from Jacksonville paid 10,000 BTC for a pizza. The day it happened, May 22, is now celebrated as a Bitcoin Pizza Day. With the current exchange rate, that amount of BTC is worth more than $90 million, likely making Laszlo’s pizza the most expensive dinner in the entire history of humanity.
In the following years, the industry grew rapidly, attracting traditional institutional investors and freshly converted Bitcoin evangelists to the table. The mining difficulty kept rising, requiring more powerful equipment until ASICs, application-specific integrated circuits, began to appear. They were designed specifically for Bitcoin mining and caused the difficulty rate to surge rapidly.
Industry Expansion and Rival Projects
As the idea of decentralized encrypted currencies started gaining popularity, rival projects emerged. Alternatives to Bitcoin, altcoins are usually intended to improve the original Bitcoin protocol and offer their users additional features such as anonymity, enhanced security or other things lacking in BTC.
The first altcoins were Namecoin and Litecoin created in 2011. By early 2020, data suggests that there are more than 5,000 altcoins that account for over 34% of the market. Even though Bitcoin still holds a majority of the market capital, altcoins are used for many purposes besides simple payment transactions. There are many different kinds of altcoins now: mining-based cryptocurrencies which work similarly to Bitcoin, stablecoins that are designed to reduce volatility and price fluctuations, security tokens which resemble traditional stock and usually begin with an Initial Coin Offering (ICO), and utility tokens which are linked to a particular service.
Pioneer Cryptocurrency Exchanges
Cryptocurrency exchanges emerged when Bitcoin was first used as a means of payment back in 2010. The first exchange is considered to be BitcoinMarket.com, which was initially proposed on the Bitcointalk forum. At the time 1 BTC was trading for $0.003. The exchange operated on a fiat-to-crypto basis using PayPal. The security measures that are in place today had not been developed yet and the early problems that the exchange had resulted in PayPal halting its operations with the exchange. As a result, the first ever crypto exchange was soon defunct.
BitcoinMarket’s successor, Mt.Gox, was originally launched as a platform for trading Magic: The Gathering cards. Seeing the rise in popularity of Bitcoin, the platform was redesigned to handle crypto transactions, and, by 2014, it was handling 70% of all global Bitcoin trades. However, after a series of alleged hacks and withdrawal issues, the exchange was completely shut down. In a statement, Mt.Gox’s owner, Mark Karpelès, promised to rectify the situation and refund users but that never happened. It’s estimated that over 740,000 BTC were stolen from users before the exchange filed for bankruptcy.
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The next wave of exchanges to pop up, included some exchanges that are still active today, such as Bitstamp (2011), Coinbase (2012) and HitBTC (2013). The latter was launched with just 4 trading pairs: BTC/USD, BTC/EUR, BTC/LTC USD/EUR. Now, in 2020, this exchange has an industry best of over 800 trading pairs consisting of 500+ tokens and coins. It’s been a long process of improving the platform’s security, customer service and user interface. However, unlike many other exchanges, HitBTC has managed to keep its users’ funds safe throughout the entire journey and still ranks among the most popular cryptocurrency exchanges in the industry.
A Decade of Development
This is the basic history of crypto’s origins which is important to look back upon in order to understand how we got to where we are today. Other important milestones include the creation of Ethereum and emergence of ICOs in 2016 and BTC’s price reaching the $10,000 level for the first time in 2017. Many jumped ship during the great crypto crash in 2018, when the BTC price declined by about 65%. However, BTC went on to rebound by 87% reaching, $12,000 by the end of 2019.
An entire decade of history is difficult to describe in one article. However, it took just a decade to get us where we are standing now with the crypto industry. In 2020, during the COVID-19 pandemic and economic recession, it may seem that cryptocurrencies were designed for the entirely new world that we are witnessing now. Cashless touch-free payments, decentralized entities that are able to continue working remotely, and currencies that are not tied to traditional assets like oil — they all provide a stable environment for financial investors as well as regular folks.
Even though the crypto market also experienced a drop along with the traditional stock market, it quickly recovered. According to research by the deVere Group, Europe experienced a 72% surge in fintech application usage due to the coronavirus lockdowns. Blockchain technology also proved useful for tasks such as vaccination development and medical supply delivery. Some governments are already in the early stages of developing their own digital currencies, such as China with their Digital Yuan. These measures can also help economies in different ways such as lowering the impact of the U.S.-imposed sanctions and strengthening national currencies.
What to Expect in the Future
There are several developments that can be expected to gain popularity and even change the way the world operates. The new phase of internet evolution, or web 3.0, can prove useful for crypto adoption with its new generation of browsers like Opera, which implements support for major crypto coins like Bitcoin and Ethereum. This can also make crypto wallets more accessible to regular users who are not tech-savvy, thereby, expanding the crypto community.
Decentralized Finance (DeFi) is also already changing the way crypto assets function. In the beginning of this year, the DeFi market crossed the $1-billion mark, demonstrating that people have a need for easy access to financial services and full control over their financial assets. Most of the code used by these Decentralized Applications (DApps) are in Ethereum smart contracts, which are accessible to virtually any person with an internet connection. The basic idea is to connect lenders and borrowers so people can earn interest on their funds without all the extra steps that are typical for traditional banking systems.
Even space exploration can benefit from the use of the blockchain system. Using the technology for supply chain management, the entire process of manufacturing and rolling out rockets and distributing spacesuits can be accelerated. NASA researchers have already embraced Bitcoin-like technology and started using it to improve the “cognitive networking and computing infrastructure” of space missions, which could someday lead to the creation of autonomous spacecrafts.
This shows that at this stage even the sky is not the limit for crypto and blockchain industries. It seems like soon the global population will be able adopt and advance the use of peer-to-peer payment systems, self-executing smart-contracts, and digital assets on a scale we haven’t seen before. The future is open and the progress we make has all the possibility of changing the way we live for the better. Our task is to embrace these changes and spread awareness of how this technology and movement can improve our lives.
Amy Day is an independent researcher