The global financial system is under an increasing amount of pressure to get with the times and evolve to the needs of its customers. Crises like the 2008 housing bubble’s collapse, and failing currencies in places like Venezuela and Zimbabwe saw people looking for alternatives to traditional banking and financial systems.
Many people turned to Bitcoin as a solution, liking its ability to be used as an international payment system without involving third parties or governments.
Although Bitcoin has gained momentum primarily in the last three years, due to mass media and public attention, it’s been around for over a decade.
Back in 2010 – 2014 cryptocurrencies were not well known and their primary reported use was as a tool for buying guns and drugs on the dark web.
Soon, innovators and techies saw the potential in cryptocurrency not just as a tool for the tax evader and shady buyer, but also as one which could benefit users with fast, stable transference of value.
The general public realized there was nothing to fear from Bitcoin, and people from all walks of life, fed up with the system, as well as with banks and high fees, started doing their own research. Once individuals started taking an interest, cryptocurrencies were on the rise.
It was the massive spike in interest and public awareness that forced banks, governments, and companies on the scale of IBM, Microsoft and Amazon to look into digital currencies and their underlying technology. These last three years have laid a fascinating foundation for what could be the future of money.
Piquing Mainstream Interest
Around three years ago news about early miners and investors seeing their thousands of accumulated Bitcoins turning into millions of dollars started cropping up as the price grew steadily.
Overnight millionaires were popping up everywhere as the price of Bitcoin rose to $1,000. Suddenly, Bitcoin was being bought by amateurs, and by investors seeing a chance at achieving the getting-rich-quick dream.
Bitcoin
was easy to get, easy to trade, and seemed like a good option to make
money as the interest in the digital coin was making the price bubble
upwards. It took Bitcoin less than a year to 20x its value through 2017 – which should have been a warning sign to any cautious investor.
With all the hype, initial coin offerings
(IPOs with cryptocurrency) started popping up everywhere. Blockchain
companies would create a token for their business and then put it to
market for investors to buy up in the hopes of making massive returns on
their investment.
On the one hand, ICOs disrupted the venture capital model in a way not seen before, with companies able to fund their venture within minutes, hours and days beyond their expectations and without all the regulation traditional companies experienced. They had the opportunity to self-fund with thousands of investors around the world, eager to invest in the cryptocurrency gold rush.
On the other hand, however, the space became packed with scammers and amateurs eager to grab at the opportunity for funds in the unregulated space, often with no intention of paying back their investors in any way. People were throwing money at the flimsiest of projects, not doing their due diligence and with little knowledge of the company’s model for success. In the past few years many ICOs, some of which raised millions in capital have failed, taking the money with them while others were purpose-built scams. OneCoin is a prime example of an ICO scam as it took the cryptocurrency excitement and used that to mask a clear and obvious Ponzi scheme. The financial harm estimated in this scam allegedly topped $4 billion.
The predominance of blockchain
The hype caused a bubble that quickly popped and, from $20,000 Bitcoin dropped to lows of $3,000 in 2018 kicking off a long bear market, and burning many speculative investors.
The bear market made many newcomers back off, some leaving the market altogether and some holding on to a few Bitcoins in the hope it would turn. The bear market was bad for many of those who invested, but was on the whole a good thing for cryptocurrency as it caused people to stop using Bitcoin as the speculative asset it was never intended to be.
With fewer people crowding the space, enterprises and regulators were able to enter and focus on what they found to be most important about the cryptocurrency, it’s underlying technology, blockchain.
Suddenly, IBM, Microsoft, Amazon, and others were building blockchain divisions. Banks, who once laughed at the ecosystem, were now hiring blockchain engineers, adding incredible legitimacy to the space.
Regulators now saw that blockchain, and digital tokens had a lot of value and could be separated from the scams and hacks often seen in the ICO markets. Regulators wanted to work with the technology and businesses wanted to leverage it for their systems.
The second coming
Having
taken a massive hit through 2018, the cryptocurrency market started
relying on the legitimacy that its technology – blockchain – had gained.
Suddenly, after mostly losing gains, a few cryptocurrencies began
gaining momentum in early 2019.
Soon, positive news about the cryptocurrency market saw the public’s interest return – only this time, the interest was based on more than speculation, it was backed by big institutionalized money.
The media started labeling the first quarter of 2019 as the ‘Cryptocurrency Spring’
which excited investors as well as businesses. People had predicted
that an institutional buy-in would propel the space once again, and it
looks like 2019 is becoming the year for enterprises exploration of
cryptocurrencies.
Eyal Hertzog, Co-founder and Product Architect of Bancor and long time cryptocurrency enthusiast talks about his predictions for the future of cryptocurrencies:
“Cryptocurrencies as we know them today are only the tip of the iceberg. In the future, we’ll see tokens for everything from artists and artwork, to neighborhoods, charities, startups and more, creating new network models and embedding localized incentive structures into online and offline communities across the globe,”.
“Right now, the Libra project represents a watershed moment as Facebook, one of the largest corporations in the world, has entered the fray along with giants like eBay, PayPal and Visa.”
Bitcoin has now passed the $12000 mark and is showing no signs of slowing down in its return to the good graces of the public.
Hopefully, with regulation on the way and legitimate establishments at the helm this time around, the crypto market will become a steadier, more reliable space for real companies and new technologies to flourish, bringing transactions into the 22nd century and changing the financial systems we use for the better.
Read more at: https://bigthink.com/technology-innovation/review-of-cryptocurrency-history?rebelltitem=4#rebelltitem4
