Even though a lot of people seem to think Bitcoin was the first cryptocurrency of its kind, this is not entirely true. Bitcoin is by far the most successful project in the modern era, but the concept of decentralized digital money was not an invention by Satoshi Nakamoto. Four different currencies were well ahead of Bitcoin, each of which deserves a mention.
Very few people will recall the days of B-Money, as this type of cryptocurrency was first introduced in 1998, predating bitcoin by more than ten years. However, B-Money is very different from Bitcoin, even though developer, Wei Dai, focused on anonymity and a distributed way of issuing coins.
A whitepaper was released to accommodate the introduction of B-money, which has the same basic principles of modern cryptocurrencies. Digital pseudonyms can send and receive currency on a decentralized network, and even enforce contracts among themselves without third-party involvement. Unfortunately, B-Money never got off the ground past the whitepaper.
#3 Bit Gold
Shortly after the B-Money whitepaper was released publicly, Nick Szabo launched a very similar project known as Bit Gold. This electronic currency system had its very own proof of work system, not all that different from how Bitcoin is minted today. All solutions were cryptographically put together and published for the public, mimicking a modern blockchain.
More importantly, Bit Gold was the first concept to move away from relying on centralized authorities to avoid double spending of the currency. Instead, Szabo wanted to recreate the characteristics of gold by cutting out the middleman altogether. One could say that Bit Gold and Bitcoin are not all that different, despite being created more than ten years apart.
Not to be confused with DigitalCash (currently known as DASH), Digicash was created back in 1990, meaning that it even predates both B-Money and Bit Gold. Designed by David Chaum, it was the first type of electronic money that offered anonymity due to its usage of cryptographic protocols. At the time of development, Digicash was a revolutionary concept and one of the earliest forms of electronic money.
By using public and private key cryptography, it also allowed anyone to become his or her own bank and control their funds without third-party oversight. Issued payments would be untraceable for banks and governments. Unfortunately, the company behind Digicash filed for bankruptcy in 1998, and sold in 2002. It is evident that Digicash was a great concept, but well ahead of its time.
One cannot talk about cryptocurrencies without paying respect to the Hashcash project first. Although this currency was designed to be used for different purposes (limiting email spam and preventing DDoS attacks), it made quite a name for itself back in 1997. Using a proof of work algorithm for the generation and distribution of new coins, a lot of Hashcash’s features ended up in the Bitcoin protocol developed by Satoshi Nakamoto.
As more emails were sent through the system, Hashcash required growing numbers of computation resources. Back in 1997, that seemed far more unmanagable than it is today. Low-end systems would eventually have limited accessibility to verify email headers, thus reducing the effectiveness of the system. It was a rudimentary project with a lot of advantages, but also with some flaws that needed to be ironed out. Eventually, most of the Hashcash features became part of the Bitcoin protocol, current spam filter protection, and several email clients.
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