TradingKey - In April 2025, Powell stated that cryptocurrency is gradually becoming mainstream. It has gained significant attention in the public eye as a hot topic in finance, with over 300 million cryptocurrency users worldwide. But do you truly understand its essence?

What exactly is cryptocurrency?

And what is its development history?

Cryptocurrency, also known as "cryptocurrency" in English, refers to a type of digital currency. In simple terms, it is a medium of exchange that uses cryptographic principles to ensure transaction security and control supply, falling under the category of digital or virtual currencies.

Contrary to conventional currencies like the yuan and dollar, which are controlled and distributed by governments or financial organizations, cryptocurrencies function using decentralized blockchain technology. This means there is no single "manager" overseeing them; all transaction information is recorded on a distributed ledger spread across numerous nodes. It’s like countless computers around the world collaboratively keeping track of transactions. This structure significantly enhances both security and transparency.

Decentralization: A "Free Currency" Without Central Banks

Traditional currencies like the yuan and dollar are controlled by central banks, which determine issuance and regulation. In contrast, cryptocurrencies operate differently. Picture cryptocurrency as a global “accounting game”—without a bank acting as a referee, everyone can participate in verifying transactions!

Cryptographic Security: Only You Can Access Your Funds

The security of cryptocurrency transactions relies entirely on cryptographic technology:

Each transaction is converted into complex code that remains unreadable to others;

You possess a unique “digital key” (private key), akin to a safe combination—only by safeguarding it can you access your funds.

Important note: Keep your private key secure! If you lose it, no one can help you recover it; it's like losing your wallet in an endless void.

Limited Supply: Digital Gold That Naturally Resists Inflation

Many cryptocurrencies, such as Bitcoin, have an inherent “limited supply” feature—there will only ever be 21 million Bitcoins created, with no possibility of additional issuance. In contrast to traditional currencies, which governments can print based on economic conditions (like the Federal Reserve’s quantitative easing), cryptocurrencies lack this ability. This limited supply characteristic has led many to perceive them as tools for combating inflation—similar to gold but more portable.

Traceability: Transactions Leave Records While Preserving Anonymity

All cryptocurrency transactions are recorded on the blockchain, forming an immutable timeline.

Anyone can access specific transaction details—such as amounts, timestamps, and addresses (e.g., Bitcoin addresses appear as random strings)—using a blockchain explorer; however, the identities behind these addresses remain anonymous to protect user privacy.

In essence: You know “who sent money to whom,” but not “who’s who,” ensuring transparency while maintaining privacy.

High Volatility: A Rollercoaster Experience

Cryptocurrency prices can jump by 20% in one day or drop by 30%, exhibiting fluctuations far greater than those seen in stocks or forex markets.

Why? Factors such as market sentiment, speculative trading, regulatory changes (such as certain countries banning cryptocurrencies), technical vulnerabilities—and even a single tweet from Elon Musk—can trigger dramatic price shifts.

A word of caution: High volatility signifies high risk! Newcomers should avoid using their "emergency funds" for trading and prepare for the possibility of total loss before entering the market.

Before Bitcoin: The Emergence of Digital Currency (1980s-1990s)

You might be surprised to learn that the seeds of cryptocurrency were sown over 30 years ago!

DigiCash (1989): Programmer David Chaum created the first true “electronic cash,” utilizing a technology called “blind signatures” to allow users to trade anonymously—when you use it to make a purchase, the merchant doesn’t know who you are, but can guarantee that the money is legitimate. This was a groundbreaking innovation at the time, but it ultimately failed to gain traction due to regulatory and business model issues.

E-Gold (1996): Another early player allowed individuals to convert gold into electronic currency for transactions. While not strictly a cryptocurrency, it proved the viability of “digital gold,” paving the way for future developments.

The Birth of Bitcoin: The "Rebel" Born from Financial Crisis (2008-2011)

The financial crisis in 2008 saw banks collapsing and governments bailing out markets, leading people to realize just how fragile centralized financial systems can be. A mysterious figure (or team) known as Satoshi Nakamoto couldn’t stand idly by and launched Bitcoin in 2009, encapsulating its core idea in one statement: “Money does not need to be issued by central banks or recorded by banks; we can manage it ourselves using blockchain technology!”

What is blockchain? Simply put, it's like countless computers around the world collectively keeping track of accounts; every transaction is recorded on everyone’s ledger and cannot be altered, completely bypassing intermediaries.

May 22, 2010, is famously known as "Bitcoin Pizza Day," when Laszlo Hanyecz paid 10,000 BTC for two pizzas; this was the first documented commercial transaction using Bitcoin and demonstrated its potential as a medium of exchange.

In 2011, Bitcoin broke past $1 for the first time and transitioned from being seen as a "nerdy toy" into mainstream financial assets.

(Source: FreePik)

Price Rocketing: A Frenzied Decade from 13 to 20,000 (2013-2018)

2013: The Myth of Safe Haven Amid Crisis

When Cyprus' banks faced catastrophe and locals feared their deposits would be seized, they flocked to buy Bitcoin for safety. The price surged from 13 at the beginning of the year to an astonishing 266 in April—marking society's awareness that “this thing can also hedge against inflation.” By year-end, it reached $1,242 as exchanges proliferated and global interest in this “digital rebel” grew.

2017: A Super Bull Market Celebrated by All

With blockchain concepts gaining traction and Initial Coin Offerings (ICOs) raking in funds rapidly while institutional investments poured in, Bitcoin skyrocketed to 20,000 in December as total cryptocurrency market capitalization surpassed 800 billion!

2018: Bubble Bursts and Winter Sets In

After euphoria came a drastic drop; regulatory tightening led projects to fail and retail investors panicked into selling off their holdings. By mid-year, Bitcoin’s price had been halved multiple times until it hit a low of $3,122—a decline exceeding 80% in market cap—leaving what was once an abundant cryptocurrency space eerily silent as many presumed this frenzy had come to an end…

(Source: FreePik)

The Rise of Altcoins: The "Altcoin Era" Opened Up by Bitcoin

Following Bitcoin's rise, numerous newcomers emerged trying either to surpass or improve upon it. For example:

Ethereum was born in 2015—not only serving as currency but also functioning as a “blockchain app store,” allowing developers to create decentralized applications (like DeFi or NFTs), thus transforming blockchain from merely an “account ledger” into a versatile development platform.

As of 2024, there are over 25 thousand types of cryptocurrencies available! Some focus on speed (Litecoin), some prioritize privacy (Monero), while others rely entirely on hype (like Dogecoin spurred by Elon Musk), showcasing both rapid growth and immense diversification within the cryptocurrency market.