As we all remember, the first cryptocurrency, Bitcoin  (BTC), appeared in 2008. It made a path for other projects like Ethereum (ETH) or Tether (USDT). But if you search the Internet for information about crypto history, you can also find mentions of 1971. It’s rather strange — what kind of crypto could exist more than 50 years ago? Well, it couldn’t. But the idea of some new concept that could solve the problems of the imperfect monetary system appeared in 1971.

A little bit of history

The Second World War undermined the global economy, and most countries got into a deep crisis. To restore financial strength in 1944, the United States developed a new monetary system, called the Bretton Woods. Representatives of 44 states of the world came to an agreement during which:

• a fixed price of gold was set;
• the US dollar became the main currency;
• fixed exchange rates were established for other countries participating in the agreement.

As a result of the Bretton Woods agreement, the U.S. dollar was chosen as the world's reserve currency. This decision was made due to the fact that the U.S. economy at that time was the largest and least affected by the war.

The U.S. dollar became convertible, and over the next 25 years, the world economy was able to recover and continue to grow. Demand for dollars increased and remained at a stable height for decades. So the total issue of the dollar began to exceed the security in gold by 4 times. 

What happened in 1971?

In 1969, Richard Nixon came to power in the United States. By that time, the dollar had interfered with the export of goods, making it very expensive for a number of countries.

In 1971, some members began to leave the Bretton Woods system. The first was Germany, followed by Switzerland. Other countries started to exchange the US dollar for gold. The U.S. leadership began to seriously fear economic destabilization.

On August 15, 1971, Nixon made a step that became known as the Nixon Shock. He announced that he intends to reorganize the U.S. economy and decouple the dollar from gold. At the same time, Nixon argued that abroad the value of the dollar will decrease, but within the country the dollar will cost the same as today.

Consequences of 1971

So, by the beginning of the 70s, the largest economic power in the world had abandoned the “gold standard”. Central banks rejoiced – they had the opportunity to pursue a more flexible credit policy, work with free exchange rates and print money on a large scale to resolve economic and political issues. Unfortunately, all this led not to prosperity, but to stagflation – the depreciation of the currency in the absence of economic growth.

Ten years later, when Ronald Reagan was in power, there was an active reduction in taxes in order to attract new investment. As a result of Reagan's new economic policy, the unemployment rate fell, government spending on social programs was cut down, and at the same time the military budget increased significantly. The policy turned out to be a failure. America faced a sharp budget deficit. The consequences of the decision of 1971 are still not resolved – in the United States, there is still a low increase in income and a strong social stratification in society.

So what about cryptocurrencies?

The creation of cryptocurrency as a digital alternative to the traditional economy has become a way out of the difficult economic situation in which America and the entire West were. The moment when humanity began to think about cryptocurrencies happened in 1983, when David Chaum and Stefan Brands described the possibility of using electronic money. Such an idea was quite a surprise for that time, so things did not go beyond that.

American scientist David Chaum came up with the word “cryptocurrency” in 1989, when he developed a concept of digital money. He used it for the safety of transactions. A bit later, at the beginning of the 90-s, appeared necessary software for creation of decentralized currency. The history of the creation of cryptocurrency continued in 1997, when Adam Bakov suggested using the Hashcash system. It was supposed to prevent spam and to save us against DoS attacks. This system became a base for the formation of blocks in the blockchain. This meant the beginning of the functioning of cryptocurrencies.

Another contribution to the creation of crypto belongs to Hal Finney. He founded the hash block chains of the Hashcash system. In 1998, IT developer Wei Dai published a paper in which he introduced "b-money". He introduced the concept of an anonymous distributed electronic money system.

In 2009, Bitcoin version 0.1 was released. It only worked on a few versions of Windsows. Immediately after the release, Nakamoto and his team began the process of finalizing the cryptocurrency, trying to bring it to a better shape. In September 2009, Marty Malmi was the first person to make a crypto-to-fiat transaction. Later this year, on the Internet appeared a community of cryptocurrency miners on bitcoin.org. This made it possible to attract new people into the Crypto World.

In September 2009, a certain Marty Malmi made the first-ever exchange of crypto- for fiat. In November 2009, a community of cryptocurrency miners was created on the Internet on the website bitcoin.org. This made it possible to attract new people into the Crypto World.

The appearance of a Bitcoin was a kind of response to the 2008 crisis, which finally undermined the credibility of government economic management. Researchers of Satoshi Nakamoto personality revealed that the father of Bitcoin relied on the works of economists who were against the abolition of the "gold standard". One of them was the American scientist Ludwig von Mises. Basically, the cryptocurrency emerged as an alternative to the collapsing monetary system. And it all started in 1971, when the “Nixon shock” happened. The creators of the site "WTF Happened In 1971" explain all of that in detail.

Bitcoin was a pioneer of the crypto world. It was followed by many other coins, like USDT or BNB, that we use today. Moreover, this industry today doesn’t stop its development and more and more resources, projects and analyses of the market appear every day.Today it won’t a problem to find a USDT price prediction or a guide on how to use NFTs. And that all started to develop in 1971 – can you imagine that?

Criticism

The world would be much simpler if everything in it was unambiguous. Although the Nixon shock caused many economic problems, some of which had a long-term effect and appeared after 10, 20 and 30 years, experts consider Nixon's decision in 1971 to be correct. The connection between the abandonment of the "gold standard" and the subsequent economic decline has not been fully proven. There were a number of other reasons that Nixon's critics do not mention. In any case, the quality of living in America and the West after 1971 did become better.

Conclusion

Thus, the year of 1971 is mentioned in the history of the cryptocurrency for a reason. This is a turning point in the economic life of the United States and the world. The development vectors outlined in that period can be traced to this day, and the year itself, due to economic events, has become a full-fledged catalyst for the processes that we are witnessing today. 

Now cryptocurrency can be safely called an economic phenomenon of the 21st century. The emergence of Bitcoin has led to a change in the economic system of the world. A new type of market has formed – the cryptocurrency market, and with it an entire new industry appeared.

If you want to learn more interesting facts about crypto then don’t forget to check out our blog! You might like our articles “Can Blockchain Work Without Cryptocurrency?” and “The Layers Of Blockchain”.

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SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.