Cryptocurrencies were born in 20008 as a concept built around blockchain. Bitcoin was released in 2009, creating the first majorly used cryptocurrency. Cryptocurrencies are not backed by any government, and derive value from the complexity of “mining” new coins. The algorithm is designed to get more complex as each “coin” it found, causing the release of new bitcoins to slow down because of algorithmic complexity that outpaced computer development.
Gordon Moore, co-founder and former CEO of Intel, is most famous for coining “Moore’s Law.” Moore first observed in 1965 that every year the number of transistors on an integrated circuit was doubling, creating geometric growth in computing power. In 1975, it projected that they would double every two years, creating what would be known as Moore’s Law. The cryptocurrency algorithms take advantage of this fact, by making each coin sufficiently harder, while assuming the computer power will double every two years.
Bitcoin was originally a novelty, traded at were traded for pennies, where in 2010 two Papa John’s pizzas were purched for 10,000 Bitcoins, or $63 Million US Dollars at Bitcoin’s 2021 peak. Bitcoin later developed an unsavory reputation for anonymous transactions in black markets.
As the most famous cryptocurrency, Bitcoin gets the headlines, but the entire field creates interested tax and finance implications. The IRS doesn’t treat it as a currency, resulting in complex treatment for those using it as a currency. It is treated as a store of value, similar to how one would be taxed on gold that is purchased and sold.