CRYPTOCURRENCY C
Blinded Cash
Around the same time, or perhaps even earlier, American cryptographer David Chaum experimented with a different form of
electronic cash. He conceptualized a token currency which could be transferred between individuals both safely and privately; again, the similarities to modern day cryptocurrencies are striking. Chaum developed a so-called "blinding formula" to be used to encrypt information passed between individuals. "Blinded cash" could thus be safely transferred between individuals, bearing a signature of authenticity and the ability to be modified without traceability. Chaum founded DigiCash to put his concept into practice several years later. Although DigiCash went bankrupt in 1998, the concepts the company put forward as well as some of its formulas and
encryption tools played an important role in the development of later digital currencies.
Web-Based Money
In the 1990s, a number of startups made efforts at furthering the goals of DigiCash. Of these, perhaps the company with the greatest lasting impact on the broader financial world was PayPal (
PYPL).
PayPal revolutionized person-to-person payments online. It allowed individuals to quickly and securely transfer money via web browser. By connecting itself to the eBay community, PayPal secured a dedicated userbase which allowed it to grow and thrive. It remains a major payments service today. PayPal also inspired its imitators, including companies which attempted to provide a means for trading gold via web browser. One of the more successful of these operations was called e-gold, which offered individuals online credit in exchange for physical gold and other precious metals. This company ran into issues with various types of scams, however, and was eventually shut down by the federal government in 2005.
B-Money
In 1998, developer Wei Dai proposed an "anonymous, distributed electronic cash system" called B-money. Dai suggested two different protocols, including one which required a broadcast channel that was both synchronous and unjammable. Ultimately, B-money was never successful, and indeed, it was quite different from bitcoin in many ways. Nonetheless, it was also an attempt at an anonymous, private, and secure electronic cash system. In the B-money system, digital pseudonyms would be used in order to
Developed in the mid-1990s, Hashcash was one of the most successful pre-bitcoin digital currencies,
according to The Merkle. Hashcash was designed for a number of purposes, including minimizing email spam and preventing
DDoS attacks, Hashcash opened up a wide array of possibilities which would only be realized nearly two decades later. Hashcash used a proof-of-work algorithm to aid the generation and distribution of new coins, much like many contemporary cryptocurrencies. Indeed, Hashcash also ran into many of the same problems as today's cryptocurrencies today; in 1997, facing an increased processing power need, Hashcash eventually became less and less effective. In spite of the fact that it eventually fizzled out, Hashcash saw a large degree of interest in its heyday. Many of the elements of the Hashcash system worked their way into bitcoin's development as well.
