Cryptocurrency burst onto the American lexicon in the late 2000s as an alternative to central bank-regulated fiat currencies. More than a decade later, the nascent digital currency is establishing itself as a mainstream asset watched and traded by investors around the world.
Americans’ online search for Bitcoin, the first cryptocurrency, apparently peaked in late 2017, according to google trends research data. Interest rose again in early 2021 as young retail investors sent shares of video game retailer GameStop skyrocketing and plowed their government stimulus is trickling down to the markets. It was in this context last year that public attention was drawn to other alternative assets like crypto and the emerging world of non-fungible tokens (NFTs).
But despite the recent speculative boom, the crypto has been around since 2009, when Bitcoin first burst onto the post-2008 crash scene. The identity or identities of its creator – or possibly creators – who introduced the first digital currency under the pseudonym Satoshi Nakamoto is one of the greatest mysteries of the Internet age.
Unlike the greenback or other banknotes, crypto is a fully virtual currency. It doesn’t exist in any tangible form except as numbers on a computer or server somewhere. Each denomination of a cryptocurrency – or each “coin” – is stored on a permanent ledger called the blockchain. Blockchain is a new form of database that creates a secure database and, in the case of Bitcoin, a publicly transparent digital recording of transactions; however, there are other forms of cryptocurrency that promise more privacy than Bitcoin, such as Monero (XMR).
NFTs also use blockchain technology to create a truly unique identifier for a digital product like an image or video that can be traded and owned. This has opened up new online revenue streams for digitally authenticated sports collectibles and athlete-approved memorabilia.
For better or worse, blockchain technology has introduced a level of scarcity to the internet. In the past, the Internet was presented as a frontier where everything was free and reproducible. Now, blockchain technology enables ownership of digital things by essentially saying, “There’s only one authentic version of this thing, and that’s the version attached to the unique ID that I purchased.” The introduction of scarcity via NFT blockchains has been a game-changer for modern artists, especially digital animators. NFTs exploded in popularity in 2021, with a total investment of $30 billion over the year, according to a May report from a blockchain research firm On-chain analysis.
Somewhat similar to an asset like gold, Bitcoin has become a favorite store of value for many investors today. It is estimated that there are thousands of other cryptocurrencies using blockchain technology, but Bitcoin has remained the most widespread and popular.
Bitcoin itself has had a volatile history over the past decade, rising from $1 per coin in 2011 to over US$1,200 around 2013 before falling back below $100 in 2014. Today, only one bitcoin is trading for over $20,000.
The crypto market is currently experiencing a downturn; or, as crypto champion and billionaire owner of the Dallas Mavericks, Mark Cuban recently suggestedcryptocurrencies have moved too close to the Sun, propelled by the “easy money” and low interest rates of the past two years – and now the market is finding a more reasonable price.
More importantly, the crypto could get closer to its original goal, as outlined in the Bitcoin whitepaper published anonymously on October 31, 2008— serving as a trustless and privacy-enhancing medium of exchange rather than a speculative instrument. Lack of confidence essentially means that, unlike a regular bank transfer or a deposited check, no third party is supposed to be able to block the funds transferred between the two parties.