In 2008, the global economy was brought to its knees. It was such a major economic downturn that several billion-dollar corporations disappeared into thin air. Millions of average people were wiped out financially. However, just as the dark clouds of the 2008 recession pervaded the global economic scene, a minor prophet emerged from obscurity with a message of hope: a peer-to-peer digital cash system that wouldn’t require the role of central intermediaries or third parties to facilitate transactions. Why was this message important at the time?
You see, many had entrusted their financial future into the hands of mega-corporations only to be wiped out in 2008. A new system void of this kind of groups was a strong message of hope for the financially devastated.
The 2008 crisis was the worst the world had seen since the great depression of the early twentieth century. But the crisis had been brewing for a very long time. One of the factors that contributed to the crisis was an event that occurred several decades earlier.
You see, before 1971, the US dollar was backed by gold and other currencies were pegged to the US dollar. However, in 1971, Richard Nixon, then US president took the US off the gold standard. The implication of this was that the Federal Reserve could print dollar bills without the discipline of gold. Without the discipline of gold, billions of cash were printed from thin air. But since this money needed a home, it flowed to some of the biggest banks of the world. But banks are not just in the business of keeping money, so this cash began to find its way to other organizations, who gladly borrowed this money.
Since this cash was a humongous pile, there was still room for more outflow. Before long, this cash found its way to ordinary individuals and eventually to “subprime” borrowers. Eventually, this activity snowballed into a giant hot air balloon. And since anything that bloats beyond its proportions eventually collapses, this balloon busted in 2008 and the flames burnt the finances of many ordinary individuals that had put faith in the institutions.
At the time the bitcoin whitepaper became public in 2008, the stage was set for a revolution. Unlike the US dollar, bitcoin would not be minted by a central government but by an incentive system that rewards miners for solving computational problems. Although Bitcoin has been through turbulent times, its value has continued to rise.
In 2010, the value of bitcoin to the dollar was a few cents. As I write this, the value of one bitcoin has gone north of ten thousand dollars. Even more remarkable is the fact that bitcoin has surpassed the value of gold.
Bitcoin has been around for about ten years that it’s safe to say that cryptocurrencies are the future of money. Although crypto coins will not replace fiat money entirely, they will become an integral part of e-commerce in the not-too-distant future.
Abraham Jimoh is a tech enthusiast with an almost maniacal interest in emerging technologies with disruptive potential.