Due to the popularity of Bitcoin, past attempts at creating a cryptocurrency have often been overlooked. The breakthrough that catapulted Bitcoin into the position it is in today is blockchain. Prior to blockchain, many brilliant cryptographers had been trying to solve the problem of creating digital cash.
The following is a list of Bitcoin predecessors:
One of the earliest attempts at digital cash was the aptly named ‘DigiCash’ (not related to DigiByte). DigiCash was the brainchild of a well known Cryptographer, David Chaum. DigiCash was a digital currency that differed from normal credit card payments as it was anonymous. The idea was users could purchase DigiCash through a bank, and every token purchased would be placed into an anonymous account. The bank could confirm that the token was a real digital unit (through public/private key cryptography), but not be able to know who used it. DigiCash was founded in 1989, which is relevant to its eventual demise. E-commerce was not really viable until the late 90’s and in the meantime David struggled to get banking partners on board. When e-commerce was starting to ramp up, customers preferred the familiarity and perceived security of VISA and Mastercard. It was reported that at one stage, DigiCash was to be included with every copy of Microsoft Windows 95. However DigiCash and Microsoft could not come to an agreement, due to David being reportedly, notoriously hard to negotiate with. Unfortunately due to being stunted as an early mover, DigiCash filed for bankruptcy in 1998.
After the demise of DigiCash another prominent digital currency was born named e-gold. E-gold was unique in that it had the backing of physical gold coins in a safe deposit box behind the currency. The founders were relatively successful early, being the first digital currency system to be used by over a million users. E-gold was divisible into a thousandth of a gram of gold, which made it the earliest online example of a micropayment processor. Where it began to stumble was its centralised processing system. This was not secure enough to prevent hackers gaining entry, with further issues around the security of user owned copies of windows and internet explorer adding to the problem. E-gold then sought to ensure legitimacy around it’s operations as a money transfer service. Due to digital currency and gold both not being considered ‘money’ in the US; e-gold failed to gain a license as a transfer service bringing it’s chapter in history to a close.
B-money was a concept created in 1998 by Wei Dai, an introverted computer engineer with a strong interest in cryptography. Wei Dai introduced many concepts we see within Bitcoin. For example, the idea of having a digital ‘alias’ and the use of a decentralised network. Furthermore the use of a Proof of Work (PoW) function was floated as a way to create tokens. The use of the Hashcash PoW function was also discussed. Bringing these ideas together was novel, however B-money never actually launched a working product.
All of these concepts were a necessary step in driving the cryptocurrency idea to what would eventually become Satoshi’s Bitcoin.