Origins of digital currencies date back to the 1990s Dot-com bubble . One of the first was E-gold , founded in 1996 and backed by gold. Another known digital currency service was Liberty Reserve , founded in 2006; it let users convert dollars or euros to Liberty Reserve Dollars or Euros, and exchange them freely with one another at a 1% fee. Both services were centralized, reputed to be used for money laundering, and inevitably shut down by the US government. [3] Q coins or QQ coins, were used as a type of commodity-based digital currency on Tencent QQ 's messaging platform and emerged in early 2005. Q coins were so effective in China that they were said to have had a destabilizing effect on the Chinese Yuan or RMB currency due to speculation. [4] Recent interest in cryptocurrencies has prompted renewed interest in digital currencies, with bitcoin , introduced in 2009, becoming the most widely used and accepted digital currency. Types of digital currencies
In traditional fiat money systems, governments simply print more money when they need to. But in bitcoin, money isn’t printed at all – it is discovered. Computers around the world ‘mine’ for coins by competing with each other. How does mining take place? People are sending bitcoins to each other over the bitcoin network all the time, but unless someone keeps a record of all these transactions, no-one would be able to keep track of who had paid what. The bitcoin network deals with this by collecting all of the transactions made during a set period into a list, called a block. It’s the miners’ job to confirm those transactions, and write them into a general ledger. Making a hash of it This general ledger is a long list of blocks, known as the 'blockchain'. It can be used to explore any transaction made between any bitcoin addresses, at any point on the network. Whenever a new block of transactions is created, it is added to the blockchain, creating an increasingly le