On 9th January 2009, the cryptocurrency revolution officially began, and whilst there have been monumental developments technologically and culturally since the original release of Bitcoin, it is still in many respects a young technology.
The Bitcoin White Paper, as much a manifesto for economic revolution as an explanation of the technical functionality of the original cryptocurrency, was the first part of a movement that is solidifying into the foundations of a new economy.
The crypto space has never really stopped moving quickly and crypto conversion platforms have evolved at the same breakneck pace in order to keep up, but it is remarkable how much has been done so quickly.
However, many of the principles described by the enigmatic Satoshi Nakamoto and the blockchain that followed in its wake could have existed nearly two decades before its ultimate arrival.
There were no less than four attempts at a digital currency before Bitcoin, and whilst the story of crypto often understandably starts with its inception and development in 2008, this retelling misses a lot of context.
The biggest missing piece is that all but the most controversial part of Bitcoin was designed and implemented 34 years beforehand.
The Origins Of Ecash
The earliest cryptocurrency, and indeed the earliest digital currency of any kind was eCash, proposed and conceived as early as 1983 by cryptography pioneer David Lee Chaum.
David Chaum’s dissertation essay for the University of California, Berkeley, proposed much of the framework for what would become the blockchain, in what was described as a trustless vault system, complete with blocks chained together immutable timestamps and even a consensus protocol.
Whilst he had many different uses in mind for the technology, the notion of a distributed ledger immediately lent itself to a digital currency, and the eCash principle was developed.
To come close to explaining how early this was, eCash was proposed and started development six years before the World Wide Web, the framework of the internet that is used today.
In fact, the same year that Tim Berners-Lee was revolutionising the world as we know it today, Mr Chaum started DigiCash, a commercial implementation of eCash.
As with Satoshi Nakamoto’s stated motivations for Bitcoin, Mr Chaum was very focused on security, developing the blind signature system that is at the forefront of cryptocurrency today.
He was extremely concerned with the lack of security of the internet as it existed at that point, and the potential risks that the personal information (including banking information) of online users could be easily taken and used by bad actors.
Mr Chaum wanted a secure internet before a commercial one, and his solution was DigiCash, an anonymous (or at least pseudonymous) digital cryptocurrency and electronic payment system, that used secure keys instead of cheques, signatures and money orders to send money online.
It should be noted that DigiCash, whilst decentralised in terms of technology, was not intended to run directly in opposition to existing banking technology, but instead was focused more on the security side and making sure that major institutions could not trace online payments.
In practice, it worked more similarly to a system like traveller’s cheques than to an online bank account, or at least that was set to be the theory.
There was a lot of interest in places such as Wired Magazine, and DigiCash managed to get some working agreements with companies such as the Mark Twain Bank of St Louis, as well as Deutsche Bank and a few more international partners.
However, DigiCash never managed to take off, for a lot of different reasons.
The first was timing; 1994 was the first huge influx of online users in a phenomenon known as Eternal September, but it was still incredibly early.
It was not until 11th August 1994 before the very first true online purchase was made and it would be another four years before payment processors such as PayPal served to help normalise online shopping, through a very different method to DigiCash.
Crypto enthusiasts often talk about being early, but launching an online currency right at the start of the Internet as most people know it is inevitably going to limit how many businesses will support it, and by extension how many customers will try it. Mark Twain Bank had only onboarded 5,000 users and 300 merchants in four years.
The market very quickly became saturated, and ultimately none of the technologies at the time would truly thrive in the market for what was then known as micropayments.
DigiCash themselves did not help their case either; there was a potential deal on the table for eCash to be incorporated into Windows 95, and no less a figure than Bill Gates himself was keen on the technology.
Unfortunately, the asking price of $2 per copy proved to be too much for Microsoft and the deal fell through, as did the vast majority of potentially world-changing deals.
The Other Contenders
There were a lot of digital currencies developed in the wake of DigiCash’s bankruptcy, some of which were directly inspired by eCash and the cypherpunk ideology Mr Chaum himself espoused at the time, whilst other currencies tried a similar approach but with more backing.
The most successful pre-Bitcoin digital currency was e-gold, operated by Gold & Silver Reserve, which was a digital currency backed by literal gold coins in a miniaturised form of the gold standard.
It actually managed to reach a critical mass of users, with over a million accounts by 2004, although it would come crashing down in 2007 when the company was indicted and shut down in 2008.
This lack of security and thus the potential for financial censorship were two of the many inspirations for Bitcoin, which was decentralised, backed purely by itself, speculation and the proof-of-work mechanism, had no tangible assets and no central server.
This white paper was the dawn of a new history for digital currencies and cryptocurrency and paved the way for a generation of decentralised finance, one that is continuing to develop, evolve and mature to this very day.
In some respects, we could have had cryptocurrency early, but it took the failure of these early attempts to show just how important decentralisation truly was to digital finance.