How It Started: Decentralized Currency’s Beginnings
The concept of decentralized currency, which laid the foundation for cryptocurrencies, can be traced back to the 1980s. The idea emerged as a response to the limitations and shortcomings of traditional centralized financial systems.
Here are some key milestones in the development of decentralized currency and cryptocurrencies. With decentralized banking at the heart of crypto’s conception, knowing the history of its success is a good idea.
Cypherpunk Movement (1980s-1990s)
The cypherpunk movement was a group of individuals who advocated for the widespread use of strong cryptography to protect privacy and promote individual freedom. They discussed the idea of digital cash and the need for a decentralized form of currency to achieve financial autonomy.
Hashcash, proposed by computer scientist Adam Back, was one of the first cryptographic protocols to combat email spam and denial-of-service attacks. It used the concept of “proof-of-work” to require computational effort to solve a cryptographic puzzle, deterring hackers from spamming and attacks by making it economically expensive.
Computer scientist Nick Szabo developed the concept of BitGold, which is considered one of the earliest precursors to Bitcoin. BitGold was a decentralized digital currency that utilized a proof-of-work system and cryptographic puzzles.
Bitcoin’s Whitepaper (2008)
In 2008, an anonymous person or group using the pseudonym Satoshi Nakamoto published the Bitcoin whitepaper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” This groundbreaking paper described the first practical implementation of a decentralized cryptocurrency based on blockchain technology and proof-of-work consensus.
Bitcoin Genesis Block (2009)
On January 3, 2009, Nakamoto mined the first-ever block on the Bitcoin network, known as the Genesis Block (or Block 0). This marked the official launch of Bitcoin and the birth of the first cryptocurrency.
Early Adoption and Growth (2009-2010)
In its early days, Bitcoin gained traction among a niche community of tech enthusiasts, cryptographers, and finance geeks. It was mainly used for experimental purposes and small transactions.
Bitcoin Pizza Day (May 22, 2010)
On this day, a Bitcoin enthusiast named Laszlo Hanyecz made history by completing the first real-world transaction using Bitcoin to purchase two pizzas. This event is celebrated annually as Bitcoin Pizza Day.
Altcoins and Expansion
Following the success of Bitcoin, alternative cryptocurrencies (altcoins) started to emerge. Developers began creating their own decentralized digital currencies, each with its unique features and use cases. Litecoin, launched in 2011, was one of the earliest altcoins.
Cryptocurrency Boom (2017)
The year 2017 witnessed a significant surge in the value and popularity of cryptocurrencies. Bitcoin and other cryptocurrencies experienced a massive price boost, attracting widespread attention from investors and the mainstream media.
Since the inception of Bitcoin, the cryptocurrency space has continued to grow and evolve. Numerous cryptocurrencies have been created, each with its distinct properties, consensus mechanisms, and goals. The concept of decentralized currency introduced by Bitcoin has paved the way for the development of a diverse ecosystem of digital assets and decentralized financial applications.
Types of Exchanges
Many cryptos like Bitcoin originated from the idea of decentralization, or giving the ownership of currency completely to the people and moving away from a central bank as the monetary authority. However, as crypto has grown in popularity over the years, centralized exchanges began growing as a popular choice to buy and sell cryptocurrencies. These exchanges became increasingly more centralized as more regulation was put in place, and as a result, have higher levels of control of their customers’ crypto.
From a customer perspective, exchanges can be difficult to use and funds can be endangered if the company’s finances aren’t secure, as we’ve seen in the past. Let’s go over how Centralized and Decentralized Exchanges work, and how RockItCoin does things differently to make the customer’s crypto purchasing experience as seamless and secure as possible.
Centralized Exchanges (CEXs)
In simple terms, a centralized exchange in the world of cryptocurrency is like a digital marketplace where people can buy, sell, and trade various cryptocurrencies. These exchanges operate under the control of a single company or entity that acts as the middleman, facilitating transactions between users.
Centralized exchanges allow users to convert fiat currency (usually from a bank account) to cryptocurrency. However, they are generally custodial, which means the exchange holds the private keys to the user’s exchange wallet, until the customer moves it off into a wallet they own and control.
How Transactions Work On Centralized Exchanges
Users can browse the available cryptocurrencies listed on the exchange and place orders to buy or sell them at specific prices. They can choose between market orders (which is an option to instantly buy or sell at the current market price) or limit orders (which is the option to buy or sell at a specific price). The exchange’s software matches buy orders with sell orders based on the specified prices and then executes the transactions. If a buyer’s price matches a seller’s price, a trade occurs, and the ownership of the cryptocurrencies is transferred.
The exchange charges a small fee for facilitating each trade, which may vary based on the exchange and the size of the transaction. Security and custody are important factors when deciding where to store funds and initiate transactions and centralized exchanges are responsible for holding users’ funds on their platforms. You should know that central exchanges employ various security measures, such as encryption and multi-factor authentication, to protect users’ accounts and funds. Once a user decides to withdraw their cryptocurrencies or fiat currency, they can do so from their exchange account to their personal wallet or bank account.
As the crypto winter continues, the industry has seen multiple large centralized crypto exchanges close or file for bankruptcy, cutting off customers’ access to their funds. Additionally, exchanges usually have waiting periods that restrict you from immediately moving crypto off of the exchange into another wallet address.
Decentralized Exchanges (DEXs)
Decentralized exchanges exist on a blockchain network (like Ethereum) and allow users to trade cryptocurrencies and tokens in a peer-to-peer exchange. This can be problematic for new users, since you need cryptocurrency already to trade for others. DEXs are non-custodial, which means that the user does own the cryptocurrency that they swap for. However, with the combination of possible security issues and low levels of user-friendliness, it may not be the easiest choice.
How Transactions Work On Decentralized Exchanges
In a DEX, users can directly trade cryptocurrencies with each other. When someone wants to buy a cryptocurrency, they place an order on the DEX, stating the price and amount they’re willing to pay. On the other side, a user who wants to sell at that price can match the order and complete the trade.
DEXs use smart contracts, which are self-executing programs running on the blockchain. These contracts automatically handle the trades, and make sure that both parties meet the terms of the transaction before the exchange is completed. Unlike centralized exchanges, where the exchange holds users’ funds, in a DEX the users retain control of their cryptocurrencies throughout the trading process. How? Funds are locked in a secure smart contract until the trade is completed, reducing the risk of theft or hacks.
DEXs often have lower fees compared to centralized exchanges because there is no need for middlemen or intermediaries. Users only pay minimal blockchain transaction fees.
The advent of decentralized currency marks a pivotal moment in the history of finance. From the early discussions of cypherpunks advocating for digital cash to the creation of Bitcoin and the subsequent explosion of cryptocurrencies, the concept of decentralization has transformed the way we perceive and interact with money. Decentralized exchanges have offered a peer-to-peer alternative and traditional centralized platforms, further empowering users to take control of their financial future. As the crypto space continues to evolve, the principles of decentralization remain at its core, driving innovation and reshaping the financial landscape for generations to come.
How is RockItCoin Different?RockItCoin provides multiple channels for our customers to purchase cryptocurrency, whether it be through our Bitcoin ATMs, our website, or our app. We also believe in the importance of non-custodial wallets and getting our customers their crypto as quickly as possible. With our nationwide network of over 2,000 Bitcoin ATMs, we provide the quickest and most convenient way to purchase crypto. By providing our customers with their own keys to their wallets (with a paper wallet or our app), we can ensure they truly own the crypto they purchase. And with a typical transaction time of under 10 minutes, it’s also one of the fastest ways to get crypto into your wallet. Find a RockItCoin ATM near you on our locations page!