Digital Currency Decrypted

Time to let go of those purse strings… the way of the world is changing and cash is fast becoming a thing of the past. 

Keen to uncover the origins of digital currency? Find out how cryptocurrency originated – and how it’s fast impacting the way we live and work. Today, there is a whole plethora of new cryptocurrencies, including Australian players like Qoin, Entropy Token and IvyKoin.

How did digital currency originate?

Digital currency didn’t spring up overnight. It took almost 30 years.

We can trace its origins back to the 1970s when American Computer Scientist Ralph Merkle first invented Cryptographic Hashing.

Crypto what? Well, Cryptographic Hashing is an algorithm that takes an arbitrary amount of data input—a credential—and produces a fixed-size output of enciphered text called a ‘hash value’, or just ‘hash’. The enciphered text can then be stored instead of the password itself, and later used to verify the user. Through encryption, it provides greater security!

Merkle’s discovery was a vital component in the evolution of how we secure and manage digital currency.

Another key player in the birth of digital currency is American Computer Scientist and Cryptographer Dr David Chum. Chum is a pioneer in cryptography and privacy-preserving technologies, widely recognized as the inventor of digital cash. His 1982 dissertation “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups” proposed all but one element of the blockchain later detailed in the Bitcoin whitepaper.

It’s human nature not to trust strangers, so establishing trust was a hugely important component of successfully developing digital currency.  The pioneering work performed by Mr Merkle and Dr Chum established a bedrock for future developments in the digital currency realm that we no longer even think about, like the technology that secures our credit card.

The first digital shopping experience and the birth of cryptography

It’s hard to imagine a world without online shopping – but it’s actually only a recent development. The first time someone bought something online can be traced back to 1984. Now – the digital universe has millions upon millions of transactions occurring every day.

FinTech is constantly changing to guarantee the security of digital payments – ensuring that these payments are easier to use and secure for those paying online or via their phone. The evolution of digital currency and the continual growth of purchases, sales and trading is fast creating a new world order that governments have yet to supervise, and that continues to break with traditional banking and finance models.

We can trace the early pioneers of the digital process back to PayPal, which started as the idea of exchanging or paying for things by using a currency within a merchant ecosystem. PayPal has now become a flexible digital payment gateway that millions today use and trust across the world.

BD – Before Digital

Let’s call it BD- the time before Digital Payments. When cash was king. Another factor in the establishment of payment gateways and digital payments was when software started to be shipped from the U.S to worldwide users, and American software companies needed secure ways for consumers to pay.

These software companies couldn’t encrypt their user licenses properly, resulting in crypto-anarchists pirating the software sent all across the world. Limiting piracy led to the implementation of cryptography.

The Birth of Bitcoin

The idea of digital currency was solidified with the 2008 paper “Bitcoin: A Peer-to-Peer Electronic Cash System”  which sought to outline the conceptual and technical details of a digital payment system that would allow people to send and receive payments without involving intermediary financial institutions.

It’s no coincidence this paper arrived in 2008, the year of the big financial crash. People suddenly lost trust in the banks, and in January 2009 – hey presto – the very first blog on Bitcoin arrived. At the time, there was an atmosphere of distrust towards the banking system due to the corruption and unethical methods undertaken by banks and the stock exchange.

Digital currency is often praised because of its transparent nature. Everyone involved in a digital currency transaction can clearly track when the transaction occurred and trust that there is a unique encrypted detail required to validate transactions.

Every single set of transactions refers back to the previous – so if someone messes with one of them, they then would have to fiddle with all the rest. In short – there’s a very clear audit trail behind all transactions. Not something that can be traced easily in traditional finance systems.

Digital Currency Boom

Digital Currency is pushing the boundaries of cash. There’s been a considerable shift and active movement where more and more people are adopting this FinTech of the future. There are people who are interested in privacy, so privacy coins like Minera or Exact Cash have emerged. Some people want digital currency to remain completely stable, so that they can pay the same price they paid yesterday. Which has seen the emergence of stable coins that are attached to currency rates. Additionally, there are digital currencies that can pay transactions from machine to machine, with no human involvement at all required.

Benefits of Digital Currency

Digital currency began as an ideal of decentralised finance  – a dream where people could lend and borrow peer-to-peer and transact in ways they couldn’t before. Today – it’s a reality.  There are many uses for digital currency, as they can be programmed to do precisely what the user needs. Digital currencies continue to evolve with FinTech advancements and enhanced security, at a rate that is hard to keep up with.

Future Focused

The future of digital currency is bursting with FinTech advancements changing the way businesses do, well, business. Whether we like it or not – the way of the future is now connected to cryptocurrency  – where truly anything is possible.

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