CHAPTER 4

The Rise and Rise of Cryptocurrencies

The rise and popularity of social media platforms have paralleled the rise and popularity of the Internet itself. The platforms have played a huge role in transforming a decentralized network of computer networks into a small conglomeration of power brokers who profit from content produced by others while using their power to deplatform and demonetize their own users—sometimes for petty reasons.

Social media is not an entitlement. The platforms do not owe anyone a soap box or a means of monetization. On the other hand, to offer these benefits then withdraw them arbitrarily is inconsistent with their own stated values.

Cryptocurrencies have a history of their own. That history is shorter, but, in many ways, it mirrors the development of the Internet itself. At the very least, blockchain technology—and cryptocurrencies by association—were founded on the same principles as the Internet itself. These include decentralization, peer-to-peer interaction, freedom of speech, and ownership control over one’s own content and identity including the ability to remain anonymous and conduct transactions with privacy.

To understand how cryptocurrencies can empower social media users and inspire content producers and consumers toward greater freedom and self-monetization, it’s important to understand their development and history. Why have they become so popular so fast?

Why Bitcoin Is Important

Without bitcoin there’d be no blockchains, and there’d be no other cryptocurrencies. But bitcoin didn’t just pop out of a vacuum hose either.

Like many technologies, bitcoin is an amalgamation of several developments rolled into one. It’s not the result of one individual tinkering in a garage somewhere and making a discovery while trying to create a new toy for junior. It’s really the brainchild of several profound thinkers, each of whom contributed to something bigger than themselves, and which has subsequently taken on a life of its own.

Let’s discuss these previous developments before we get into the brilliance that is bitcoin.

Digital Currency Precursors to Bitcoin

There were several attempts to create a digital currency before bitcoin. Among them include DigiCash, e-gold, Hashcash, b-money, and Bit gold.

Each of these primitive digital currencies had a brilliant mind behind them, but they all fell short in some way that prevented them from catching on. Let’s discuss their strengths and weaknesses so we can see how each development contributed to the making of bitcoin.

DigiCash

The first attempt to create a digital cash system was in 1989. The World Wide Web was still in the womb of its creator, British computer scientist Tim Berners-Lee, and wouldn’t come to fruition until 1990.

On the other side of the Atlantic, an American computer scientist named David Chaum was working on a security protocol based on a public–private key system intended to keep private communications from public view. He created what was called Blind Signature Technology and set up a company called DigiCash to allow individuals to send and receive electronic payments using his technology. At the time, of course, anyone who had large amounts of money kept it in a bank. Chaum was only able to get one U.S. bank and one bank in Germany, Deutsche Bank, to adopt his technology.¹

Chaum was unable to grow DigiCash and the company filed Chapter 11 bankruptcy in 1998.²

E-Gold

While DigiCash didn’t get far, e-gold made great strides. Launched in 1996 by a company set up in Saint Kitts and Nevis, its U.S. operations were headquartered in Florida. By 2004, the company had a million accounts,³ and by 2006, the online company was processing more than $2 billion per year.⁴

There were several key components that helped e-gold establish early success. First, it received some great press. Both Barron’s and Wired wrote positively about the service. The Financial Times described it as “the only electronic currency that has achieved critical mass on the web.⁵” They also provided a means for e-commerce transactions to build on top of it using an application programming interface, the first noncredit card payment service to do so.

Many different types of businesses supported e-gold, including the Libertarian Party in California, the Electronic Frontier Foundation, and the Mozilla Foundation.

E-gold was backed by real gold coins held in a bank deposit box in Florida. But because of its early success and its ability to store value, it quickly became a target for all sorts of financial scams. The service is notorious for inspiring the first known phishing attack against a financial service online, in June 2001.⁶

Another problem e-gold faced was hackers. Many users thought the service allowed for anonymous transactions, however, even though users could create accounts with fake names, hackers could data mine login attempts and reverse engineer account ownership. In fact, law enforcement agencies used these techniques to catch criminals using the service.⁷

There were other issues too. Fraud was rampant. Because the banking system at the time was not set up for digital transactions over the Internet, there was a high degree of identity theft and check fraud overall. E-gold was not immune. Plus, cybercrime in general was increasing. E-gold came to be associated with the payment system of choice for financial criminals, child pornographers, and terrorists.⁸

In 2006, the U.S. Treasury Department redefined what constitutes a money transmitter service, and the U.S. Department of Justice indicted the founders of e-gold. Two years later, the founders settled with the DOJ and closed shop.⁹

Hashcash

Adam Back wanted a stronger encryption protocol for e-mail. In 1997, like most people, he was annoyed with the volume of e-mail spam flooding his inbox, so he sought a solution. That solution turned out to be hashcash.

In a nutshell, the sender of an e-mail message could use some of their computing power to solve a mathematical computation, which would in turn create a header line in the e-mail consisting of some code that would require the recipient of the e-mail to verify. Back theorized that spending the small amount of computing energy to send an e-mail would be counterproductive since spammers tend to send many e-mails at once. The cost of each hash process adding up incrementally would deter the effort.¹⁰

Hashcash never caught on for fighting e-mail spam, but it did become the basis for bitcoin mining.

B-Money

I’ve found no evidence that b-money was ever implemented, but its proposer, a computer engineer by the name of Wei Dai, offered two proposals for a digital currency based on creating money by solving a computational problem. The year was 1998.

Dai’s proposed system would rely on three primary values:

1. Two people, both of whom would agree on the cost of the computing power used to solve the computational problem;

2. The ability to enforce the contract between them through an arbitrator;

3. And the ability for the two parties to operate and transact anonymously.¹¹

While Dai never implemented the protocols he proposed, his proposal was referenced in the bitcoin whitepaper published by bitcoin’s mysterious creator.

Bit Gold

Another development in 1998 that led to the creation of bitcoin is a proposal by computer scientist Nick Szabo. Like b-money, Bit gold was never implemented, but its central idea was adopted by Satoshi Nakamoto for the implementation of bitcoin.

Szabo wanted to mimic the decentralized nature of gold as an asset with security and trust characteristics.¹²

Gold is a natural resource. As such, it isn’t controlled by any central authority. Gold investors can buy, sell, and trade gold between themselves with no intermediary. What’s more, gold can store and hold value. Szabo reasoned that if these qualities could be duplicated with a digital currency, then anyone could buy, sell, or trade freely without an intermediary.

Szabo’s Bit gold would use a similar proof-of-work system as Back’s hashcash. The problem Szabo couldn’t solve was the double-spend problem. How would users prevent transactions from going through twice, or being hijacked by a third party and duplicated with the second transaction going to an unknown wallet address with no traceability? Nakamoto solved the problem when he introduced bitcoin ten years later.

The Mystery of Satoshi Nakamoto

The anonymous inventor of bitcoin may have been a member of an activist group of cryptographers known as cypherpunks. Like many other technological innovations, including the Internet, cryptography started with the U.S. government. During the Cold War, cryptography was used to prevent America’s secrets from being stolen by its enemies and was used to de-encrypt enemy messages. Somehow, in the 1970s, that changed¹³ and cryptography entered the private sector.

In the early 1980s, Chaum earned a PhD in computer science, writing his dissertation on cryptography. He subsequently wrote an essay titled “Security without Identification: Card Computers to make Big Brother Obsolete,¹⁴” which essentially launched the cypherpunk movement. Chaum later founded several cryptographic organizations to promote cryptographic research.

The cypherpunks emerged in the early 1990s. The loose organization started as a mailing list where members discussed privacy and anonymity issues, and political action. In 1993, one of its members wrote a cypherpunk manifesto. Its opening paragraph read:

Privacy is necessary for an open society in the electronic age. Privacy is not secrecy. A private matter is something one doesn’t want the whole world to know, but a secret matter is something one doesn’t want anybody to know. Privacy is the power to selectively reveal oneself to the world.¹⁵

That same year, the cypherpunks attracted mass media attention with a Wired magazine article. Author Steven Levy wrote that such privacy is necessary, however,

The obstacles are political—some of the most powerful forces in government are devoted to the control of these tools. In short, there is a war going on between those who would liberate crypto and those who would suppress it. The seemingly innocuous bunch strewn around this conference room represents the vanguard of the pro-crypto forces. Though the battleground seems remote, the stakes are not: The outcome of this struggle may determine the amount of freedom our society will grant us in the 21st century. To the Cypherpunks, freedom is an issue worth some risk.¹⁶

The only way the cypherpunk vision would be realized, Levy opined, is with “widespread use of cryptography.”

Many members of this group were radical activists. They have advocated for civil disobedience in matters of privacy, have sued the government to protect privacy and source code, and used technology to thwart government surveillance.

Until late last year, most people in crypto circles considered Satoshi Nakamoto a member of the cypherpunks, but a documentary published by Reason magazine sparked a debate over that on Twitter.¹⁷ Whether he was or wasn’t, he published his whitepaper introducing bitcoin in October 2008 and quoted several cypherpunks including Dai and Back.¹⁸ Even more interesting, he sent the first bitcoin to cypherpunk member Hal Finney, who later died of complications with Amyotrophic Lateral Sclerosis, also called Lou Gehrig’s Disease. In 2011, he mysteriously disappeared and passed the baton to one of the cypherpunks.

Whether he had any interest in the cypherpunks until he published his whitepaper is largely irrelevant. He was clearly familiar with the developments that made cryptocurrency possible. Speculation has surrounded Nakamoto’s identity since then. Some have accused Dai, Back, Szabo, and Finney of being Nakamoto. All of them have denied it. There have also been rumors that Nobel Prize winner John Forbes Nash could be Nakamoto.¹⁹ He’s been silent on the question, but he died in 2015.

By the same token, others have stepped forward claiming to be Nakamoto. Australian entrepreneur Craig Wright is the most prominent.²⁰

For whatever reason, Nakamoto wanted to be anonymous. So did Deep Throat, the anonymous source of information for journalists who blew the cover on Watergate, but we now know that it was W. Mark Felt, assistant FBI director in 1973 when Nixon was implicated in the scandal.²¹ So it’s possible that we may someday know the real identity of Satoshi Nakamoto. Since his disappearance, there has been endless speculation about who is behind the invention of fiat currency’s biggest threat, and some prognosticators have suggested it was a group of people in cooperation. That isn’t likely considering Benjamin Franklin’s brilliant observation that “three can keep a secret if two of them are dead.”

Whoever Nakamoto is, he isn’t likely to reveal his identity, and it’s not likely that anyone else will guess who it is. And I must question if it matters. What does matter is that he has left us with bitcoin, and bitcoin has spawned children. Those children have given birth to grandchildren who are now sparking a social media revolution.

Satoshi’s 12 Apostles

Naming Satoshi’s 12 apostles isn’t easy. For one thing, some of the contenders are among his predecessors. On the other hand, there are hundreds of cryptocurrency pioneers doing amazing things. So how does one define what an apostle is?

The word comes from Classical Greek and literally means “one who is sent” or “one who is commissioned with a message.” In a word, an apostle is an emissary, or envoy. A representative.

More than one major religion uses the word to signify important people in the history of that religion. In Christianity, the 12 apostles were commissioned by Christ himself to carry out his message after he was crucified and buried. In Islam, various prophets throughout history are referred to as messengers, or “apostles.” In one sense of the word, it also signifies “laying the groundwork.” That is, an apostle could be a foundation layer.

If we get too literal with the use of the word, it might not mean much at all in the case of cryptocurrency. As far I know, there is only one individual who might have been appointed or specially commissioned to carry on Satoshi’s work. Others took it upon themselves to evangelize for Satoshi’s vision. In any case, each of the following individuals are significant to the development and growth of cryptocurrency’s early days.

I tried to narrow the list down to individuals with a direct relationship to Satoshi Nakamoto and who made at least one significant contribution to bitcoin’s growth or development before Nakamoto’s disappearance in 2011, made multiple significant contributions to crypto development between 2011 and 2014, or made one huge contribution to the cryptocurrency ecosystem between 2011 and 2014.

Hal Finney

Hal Finney made two significant contributions to bitcoin’s early development. He was the first recipient of a bitcoin transaction, sent by Nakamoto to Finney to test the new technology.²² Finney received 10 bitcoin.²³

He also helped Nakamoto clean up and polish the code to make the Bitcoin blockchain ready for public consumption. This happened a few days after that first transaction.²⁴

Not long after that final event, Finney announced that he’d been diagnosed with Lou Gehrig’s disease. He died from complications five years later.

Adam Back

Adam Back is significant to bitcoin’s development in a couple of ways. First, as inventor of the proof-of-work system on which bitcoin is based, Back is one of the few pioneers in cryptocurrency to be cited in Nakamoto’s whitepaper. Here’s what he had to say about Back on page three of the nine-page paper:

To implement a distributed timestamp server on a peer-to-peer basis, we will need to use a proof-of-work system similar to Adam Back’s Hashcash [6], rather than newspaper or Usenet posts. The proof-of-work involves scanning for a value that when hashed, such as with SHA-256, the hash begins with a number of zero bits. The average work required is exponential in the number of zero bits required and can be verified by executing a single hash.²⁵

When prognosticators try to solve the mystery of Satoshi Nakamoto’s identity, Back is one of the people mentioned as most likely to be the inventor of bitcoin, though he has denied that he is. Nevertheless, Nakamoto contacted Back before publishing the whitepaper to let him know that he was going to be mentioned. In fact, Back is only one of two people to receive an e-mail from Nakamoto early on.²⁶

Back supported bitcoin development from the beginning. In 2014, believing that development wasn’t happening fast enough, he created Blockstream, a company focused on building the blockchain technology of the future.

Gavin Andresen

If anyone stands out as an appointed heir to Satoshi Nakamoto, it’s Gavin Andresen. In 2010, he became one of the principal Bitcoin developers. He also is known for starting the first bitcoin faucet, which is a reward system designed to distribute free bitcoin to its users. In the same year, he created an escrow service named ClearCoin, which shut down in 2011.

Another event that happened in 2011 is the disappearance of Nakamoto. His final e-mail was sent to Andresen.²⁷ It read:

I wish you wouldn’t keep talking about me as a mysterious shadowy figure, the press just turns that into a pirate currency angle. Maybe instead make it about the open source project and give more credit to your dev contributors; it helps motivate them.

When Andresen replied that he’d been invited to speak at a conference, Nakamoto never responded.

In 2012, Andresen started the Bitcoin Foundation, a nonprofit organization whose mission was to promote bitcoin development. After a series of controversies, Andresen stepped down from his position as lead developer of Bitcoin Core. That was 2014. Three years later, he expressed support for competing cryptocurrency Bitcoin Cash.²⁸

Laszlo Hanvecz

Two years after Nakamoto published his famed whitepaper, Laszlo Hanvecz made the first commercial transaction with bitcoin. He bought two pizzas for 10,000 BTC.

Jed McCaleb

Another event that took place in 2010 is the founding of the Mt. Gox bitcoin exchange. It was not the first bitcoin exchange. That distinction goes to Bitcoin Market. Founded in January 2010, it went live in March.²⁹ Mt. Gox launched three months later.

Jed McCaleb launched this exchange that controlled 70 percent of the worldwide bitcoin trading volume by 2013.

McCaleb was not responsible for all that growth. He had sold Mt. Gox in 2011. Two months after its purchase, the site was hacked resulting in thousands of dollars in losses to traders.³⁰ That was the beginning of the exchange’s troubles. The site went on to face legal issues, lawsuits, a fraud investigation, and ultimately, bankruptcy. It shut down in 2014.

Meanwhile, McCaleb went on to cofound competing blockchain company Ripple, whose cryptocurrency XRP has enjoyed the third highest market capitalization for most of its life. In 2013, he left that project and cofounded another cryptocurrency called Stellar.

McCaleb’s technical programming skills are what made him one of the most successful and richest cryptocurrency entrepreneurs on the planet. And his connection to Satoshi Nakamoto is almost direct. In 2018, the New York Times named him one of the top 10 people leading the blockchain revolution.³¹

Charlie Lee

Charlie Lee’s contribution to the cryptocurrency ecosystem is so formidable his Twitter handle is @Satoshilite. In 2011, he was a computer scientist employed by Google and took an interest in bitcoin. He immediately began work on a new cryptocurrency called Litecoin and released it a few months later. By 2017, it was the fourth largest cryptocurrency by market cap.³² That year, Lee also sold all his Litecoin citing a perceived conflict of interest.

Lee left Google in 2013 and went to work for Coinbase, the largest U.S. cryptocurrency exchange at the time. Since 2018, he’s worked on Litecoin full time.³³

Vitalik Buterin

If there is anyone in the crypto world with the power and authority of Apostle Paul, considered the “Apostle to the Gentiles” by Christians and author of most of the New Testament, it’s Vitalik Buterin.

Buterin cofounded Bitcoin Magazine in 2011 and launched Ethereum, the second largest cryptocurrency by market cap, in 2013. These two developments alone are enough to solidify his place in history for two centuries.

Born in Russia to a computer scientist, Buterin and his family moved to Canada when he was a child. He was educated in Toronto. He learned about bitcoin from his father and took an interest immediately. Then he dropped out of college to start Ethereum with a $100,000 grant from Thiel Fellowship, founded by tech investor Peter Thiel.³⁴ His brilliance is unmatched in the crypto world.

Roger Ver

Few people in the crypto world have done more to promote bitcoin than Roger Ver. That’s why he’s earned the nickname Bitcoin Jesus.³⁵

Ver has an interesting history. In 2002, he pleaded guilty to selling illegal explosives on eBay.³⁶ He made his first bitcoin investment in 2011. After supporting BitInstant, he began to back other cryptocurrency projects including Ripple, Blockchain.info, BitPay, and Kraken. He also owned a company in 2011 called Memorydealers that became the first company to accept bitcoin payments. Ver went on to organize Meetups around bitcoin and cofounded the Bitcoin Foundation.³⁷

One of the most colorful characters in the bitcoin drama, Ver renounced his U.S. citizenship and moved to Saint Kitts and Nevis³⁸ in 2014. In 2017, he supported a Bitcoin fork and started evangelizing Bitcoin Cash.³⁹ He also served as CEO of Bitcoin.com until 2019.

Ross Ulbricht

Other than Nakamoto himself, few people connected to bitcoin are as controversial as Ross Ulbricht and very few draw as much ire. Best known as the creator of the darknet Silk Road, Ulbricht may be the man most responsible for associating bitcoin with criminal activity in the minds of some people.

Ulbricht was born in 1984 in Austin, Texas. A boy scout, he attained to the rank of Eagle Scout and attended the University of Texas at Dallas before seeking a master’s degree from Pennsylvania State University. That’s when he took an interest in libertarian economic theories. After graduation, he returned to Austin and started a video game company.

Ulbricht began working on Silk Road in 2010. In a private journal, he wrote, “I am creating a year of prosperity and power beyond what I have ever experienced before. Silk Road is going to become a phenomenon and at least one person will tell me about it, unknowing that I was its creator.⁴⁰” Everything fell apart for Ulbricht in 2013 when he was arrested for running an illegal drug operation.⁴¹

Ulbricht wasn’t dealing drugs, but he profited from drug trafficking.⁴² Silk Road was an underground Internet community that utilized Tor technology in connection with bitcoin that allowed drug dealers and other seedy criminals to conduct their illegal business transactions with anonymity. It was that way by design, but it was naivete and Ulbricht’s diehard commitment to libertarianism that did him in. He was offered a plea deal, but he rejected it.⁴³ He received two life sentences plus 40 years without parole.⁴⁴

In December 2020, Ulbricht’s name came up again when The Daily Beast reported that then-President Donald Trump was considering a pardon for him.⁴⁵

Charlie Shrem

If it seems like 2011 is a magical year for bitcoin, that’s because it is. It’s the year Satoshi Nakamoto disappeared without a trace leaving Gavin Andresen in charge of development. It’s also the year Jed McCaleb sold Mt. Gox. It’s the year Charlie Lee and Roger Ver took an interest in bitcoin. It’s the year Ross Ulbricht launched Silk Road and when Vitalik Buterin cofounded Bitcoin Magazine and launched Ethereum. That same year, Charlie Shrem was a senior in college and started his bitcoin journey.

After facing some challenges with buying and selling bitcoin through existing services, Shrem found a partner and launched BitInstant.⁴⁶

To launch the bitcoin exchange service, he borrowed $10,000 from his parents. The company grew quickly and attracted investments from others, including Ver and the Winklevoss twins. By 2013, BitInstant was processing 30 percent of all bitcoin transactions.⁴⁷ The future looked bright. Then Shrem was arrested.⁴⁸

When the Bitcoin Foundation was founded in 2012, Shrem was one of its five cofounders. He resigned as vice chair after his arrest.

While on trial, Shrem was out promoting bitcoin. He was convicted in 2014 on charges of indirectly facilitating $1 million in digital currency transfers through Silk Road.⁴⁹ Shrem served his prison time from March 2015 to June 2016. After his release, he’s been very active in promoting bitcoin by appearing in documentaries, founding crypto companies, acting as executives in others, and he became an active supporter of upstart cryptocurrency Dash in 2017. Two years later, he launched a bitcoin podcast called Untold Stories.⁵⁰ He was also the target of a lawsuit by the Winklevoss twins, no strangers to suing technology mavens, but that was later dropped.⁵¹

Shrem is evidence that sometimes what a revolution needs most is a martyr.

Andreas Antonopoulos

Born in London, Andreas Antonopoulos took an interest in bitcoin in 2012. In wild abandon, he quit a freelance consultancy he had as a computer scientist and started a public speaking career to promote bitcoin. He has written several popular books on cryptocurrencies since then.

In 2014, Antonopoulos led a fundraiser for Dorian Nakamoto, who had been incorrectly identified as Satoshi Nakamoto by journalists whose reporting tactics became controversial. The event disrupted Dorian Nakamoto’s life, but the bitcoin community raised $23,000 in bitcoin for him.⁵²

Antonopoulos has also appeared before governments to answer questions about bitcoin for regulatory consideration.

Dan Larimer

Daniel Larimer is the late bloomer of the bunch. In 2020, he started a blog titled More Equal Animals, a reference to George Orwell’s famous literary classic Animal Farm, in which he consolidated all his blogs from the previous six years.⁵³ On his About page, he tells how he stumbled upon bitcoin while working on creating a digital currency in 2009. He even had an encounter with Satoshi Nakamoto in the popular bitcoin forum where the latter famously responded to Larimer, posting as Bytemaster, with a terse, “If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry.”

While Larimer discovered bitcoin in 2009, he didn’t make any significant contributions to blockchain development until much later.

In 2014, Larimer cofounded decentralized cryptocurrency exchange Bitshares with Charles Hoskinson, who went on to create the cryptocurrency Cardano. In doing so, Larimer invented the delegated proof-of-stake consensus mechanism, which works considerably different than Bitcoin’s consensus mechanism. Larimer went on to cofound Steem and Block One, both blockchain companies, and launched Steemit, the first blockchain-based social media platform to launch with a native cryptocurrency. He also cofounded blockchain-as-a-service company EOSIO and Voice, another social media platform based on blockchain technology. Additionally, Larimer was the first person in blockchain circles to talk about decentralized autonomous organizations. In 2021, he announced a new project called Clarion OS.

Unlike some crypto pioneers, Larimer has stayed out of legal trouble and has a string of successful projects behind him. He has a strong development background and bases much of his blockchain philosophy on his own political ideals.

Larimer is different than many of the others on this list in that he does not seek the limelight. He is not often front and center on the projects he takes on, preferring instead to sit in the background. But his mark is evident in every project he pours himself into.

Other Contenders

There are many brilliant minds working in blockchain development. The aforementioned list represents a few early pioneers who captured the spirit and essence of bitcoin and became its chief evangelists from 2011 to 2014. The only one I’m not confident about is Larimer. He’s included in the list because he is the only one of the 12 that is a direct link between bitcoin and cryptosocial development. The 12th apostle could easily have been any of the following early crypto adopters.

Brian Armstrong founded Coinbase, the largest cryptocurrency exchange in the United States, in 2012. By 2014, Coinbase had 1 million users. While Armstrong is a proponent of decentralization, Coinbase is a centralized exchange.

Cameron and Tyler Winklevoss invested in bitcoin early. In 2013, they claimed to own almost 1 percent of all bitcoins at the time. They also invested in early bitcoin startups such as BitInstant and went on to launch a centralized cryptocurrency exchange called Gemini.

Mark “Slush” Palatinus created the first bitcoin mining pool, called Slushpool, in 2010.⁵⁴

Charles Hoskinson cofounded Ethereum and Bitshares. He is also the founder and chief developer of Cardano.

Figure 4.1 CoinMarketCap.com, one of the leading sources of information on cryptocurrency values and market capitalization, started with seven cryptocurrencies but has since grown into a list of thousands

Credit: Screenshot of CoinMarketCap

Da Hongfei is the Chinese creator of OnChain, the company behind the NEO blockchain, which launched in 2014⁵⁵.

Stephen Pair, a former IBM engineer who cofounded BitPay in 2011 and serves as its CEO.

Brandon Chez, founder of market tracker CoinMarketCap.

The Cryptocurrency Explosion

CoinMarketCap launched in 2013 and has become one of the most trusted sources of information on cryptocurrencies, crypto exchanges, and the value of crypto assets. At launch, the site listed seven cryptocurrencies:⁵⁶ Bitcoin, Litecoin, Peercoin, Namecoin, Terracoin, Devcoin, and Novacoin (Figure 4.1).

Since Bitcoin’s code has been open source right from the start, anyone could take it and create their own cryptocurrency. Many people did.

One of the first of these was Namecoin, created early in 2011. The most prominent is Litecoin, which saw the light of day later in 2011. Its creator claims Litecoin was not intended to compete with bitcoin. Rather, he saw it as a way to make smaller payments. Such cryptocurrencies are called altcoins, a reference to any cryptocurrency that isn’t bitcoin.

It didn’t take long for the crypto craze to catch on. In February 2014, there were 86 cryptocurrencies on CoinMarketCap’s radar.⁵⁷ Top of the list were Bitcoin, Litecoin, XRP, Peercoin, Nxt, Dogecoin, Omni, Namecoin, Quark, and Bitshares PTS.

By March 2015, the top 10 list had bitcoin still on top, but XRP had overtaken Litecoin for No. 2 and Litecoin fell to No. 3. Newcomers to the top 10 were Dash, another bitcoin spinoff, MadeSafeCoin, PayCoin, and Stellar.

Many cryptocurrencies are created for a special purpose. Monero allows private money transfers. Dogecoin was a joke that took on a life of its own.

Ethereum launched in July 2015 and by August 23 had the fourth largest market cap of almost 600 cryptocurrencies listed on CoinMarket-Cap at the time.⁵⁸ (Figure 4.2) By February 2016, it had risen to the No. 3 spot. Bitcoin and XRP were at No. 1 and No. 2, respectively. Litecoin had fallen to No. 4.

The following year proved to be a banner year for all cryptocurrencies. On New Year’s Day, bitcoin was just under $1,000. In December, it topped out at nearly $20,000 and dragged the entire market up with it. Bitcoin, Ethereum, XRP, and Litecoin were the top four cryptocurrencies by market cap in February. Monero joined them at No. 5. Ethereum had forked and its daughter, Ethereum Classic, had the sixth largest market cap. MadeSafeCoin, NEM, and Augur rounded out the top 10. Both NEM, launched in 2015, and Augur, sprouted in 2014 but launched in 2018, were new starts to the crypto scene at that time.

Figure 4.2 Ethereum rose to prominence quickly, partly based on the reputation of its creator Vitalik Buterin

Credit: Screenshot of CoinMarketCap

There was something else significant about the 2017 crypto market. Minds, the first blockchain-based social media platform, had launched in 2015 and Steemit, the most popular social media website on a blockchain to date, had launched in 2016. Both pay users in cryptocurrency for creating content on their platforms. Minds didn’t launch its native cryptocurrency until 2018, so there’s no ranking for it in 2017.⁵⁹ Steemit, on the other hand, launched its cryptocurrencies out of the gate. In December 2017, STEEM was ranked 37 in market cap.⁶⁰ SBD, or Steem Dollars, was 188.

If 2017 was a banner year for cryptocurrencies, 2018 was the bear. In January, the market plummeted. On January 28, bitcoin was at $11,786.35. By March 18, it was down to $8,223.68. By July, bitcoin had fallen to $6,385.32. It ended the year at $3,865.95. Every altcoin followed suit.

STEEM followed a similar trajectory. On January 14, STEEM’s price was at $5.91. On March 25, it had fallen to $2.02. During August, it fell below $1.00 and closed out the year at less than 30 cents. Its market cap rank was 53 out of more than 2,000 cryptocurrencies. (Figure 4.3)

Figure 4.3 STEEM, the native cryptocurrency of the Steem blockchain on which Steemit, the first cryptosocial media platform to launch with a cryptocurrency, rose to within the top 10 of all cryptocurrencies by market cap. In December 2017, it was ranked No. 37

Credit: Screenshot of CoinMarketCap

We could call the period from 2014 to 2020 the “wild west days of cryptocurrencies.” That’s another way of saying the market was immature. I would also refer to it as the second phase of crypto, the first phase being from the date of bitcoin’s launch through 2013.

At the end of 2018, the top 10 cryptocurrencies were Bitcoin, XRP, Ethereum, Bitcoin Cash (forked off Bitcoin in 2017), EOS (launched in 2017 by Larimer after leaving Steem), Stellar, Litecoin, Tether (a stablecoin launched in 2014), Bitcoin SV (forked off Bitcoin Cash in November 2018), and TRON (founded in 2017).

On October 20, 2019, the top 10 cryptocurrencies by market cap were Bitcoin, Ethereum, XRP, Tether, Bitcoin Cash, Litecoin, Binance Coin (launched in July 2017), EOS, Bitcoin SV, and Stellar. For the first time, while new cryptocurrencies were created daily, we were beginning to see some stability in the rankings. One year later, XRP and Tether had switched places and new entrants to the top 10 included Chainlink (raised $32 million in 2017 through an initial coin offering, or ICO) and Polkadot (launched in 2019).

Two days before Christmas 2020, the rankings weren’t much different than two months before. Bitcoin lead the pack; Ethereum and XRP followed; Tether fought hard to maintain No. 4; Litecoin, Bitcoin Cash, and Chainlink held tight in the middle of the pack; Cardano followed close behind; and Binance Coin and Polkadot ran neck and neck at the end of the top 10 train.

The year of the coronavirus ended with more than 3,000 cryptocurrencies fighting to prove themselves. Most of them were worthless. A few new upstarts had promising futures. STEEM was ranked 135 and had a value of just over 18 cents when bitcoin reached an all-time high of more than $20,000. Hive, which forked off Steemit in March, was at 153 and valued at less than 14 cents. CoinMarketCap now has more than 7,000 coins and tokens listed.⁶¹

The crypto ecosystem has come a long way since 2008 when the bitcoin whitepaper was published. Still in the preteen stage today, we can expect a lot of mood swings and hormone imbalances. The major players in the bitcoin camp continue fighting over Satoshi’s vision (nobody agrees on what that vision was, and Satoshi Nakamoto doesn’t seem interested in helping).

The announcement of Facebook’s Libra in 2019 created a huge stir. The fact that the largest social network in the world is interested in cryptocurrencies is significant. It means the race is on to create the world’s crypto-based social network. Will it be Facebook or one of the up-and-coming efforts to return the World Wide Web back to its decentralized roots?

Summary

The mysterious Satoshi Nakamoto gets the credit for inventing bitcoin, but he did not do it alone. A few radical pioneers developed the technologies wrapped up in the first blockchain’s essential nature. Since then, many others have taken it upon themselves to evangelize on behalf of the benefits that bitcoin and its children and grandchildren offer.

Decentralization is a freight train that has left the depot and is almost up to full speed. It will not be stopped without a cataclysmic event such as running headlong into the face of a mountain.

What is far more likely is that cryptocurrencies will reach a point of mass adoption. Some of bitcoin’s most vocal critics have become its advocates. A few decentralized social media platforms have proven that users can monetize their own content, achieve more freedom and control over their identities, and increase their own power rather than that of exploitive centralized figures whose chief aim is to increase their own profits at everyone else’s expense.

The future belongs to cryptocurrencies, and we are just beginning to see their many practical uses.

 

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⁴ Ibid.

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