Last Updated on May 10, 2023
Given the ripple effect it is having on different industries, including banking, manufacturing, and education, blockchain technology has to be one of the most significant innovations of the twenty-first century. Many people are unaware that Blockchain has a long history dating back to the early 1990s.
Since its popularity began to rise a few years ago, a slew of new uses have emerged, all but confirming the magnitude of its significance as the race for digital economies heat up. From healthcare to trade finance, blockchain technology is currently democratising and revolutionising a wide range of industries. In fact, we’ve previously discussed multiple real-world use cases for blockchain here. But, before we attempt to forecast the future of blockchain, we must first examine its past. We’ll learn about its history of it as well as its evolution in this talk.
1991-2007: Creation of blockchain and the early years
When Satoshi Nakamoto published a whitepaper in 2008, it was the first time blockchain was made public. Although there is no singular inventor, the technology’s roots can be dated back to 1991.
Stuart Haber and W. Scott Stornetta released an essay about digital document timestamping in 1991. The author of the essay presented a method to prohibit users from backdating or forward dating electronic documents. The goal was to keep the document’s privacy intact while avoiding the need for a timestamping service to keep track of it. Haber and Stornetta revised the architecture in 1992 to include Merkle trees, which allowed many document certifications to be stored on a single block.
During these early years, there was a lot of other activity that contributed to the success of blockchain. For example, this period saw the birth of the peer-to-peer (P2P) network, which was popularized by the now-defunct Napster in 1999. Some contend that because Napster relied on a centralised server, it was not a true peer-to-peer network. Nonetheless, the service aided in reviving the P2P network by allowing the creation of a distributed system that could take advantage of the computing power and storage capacity of thousands of machines.
In this age, the concept of proof-of-work (PoW) was established to validate computing efforts and prevent cyberattacks. This gave rise to hashcash, a PoW technique that protects against denial-of-service attacks. Hashcash was created by Adam Back in 1997 to combat email spam. Then, in 2004, Hal Finney invented reusable PoW, a technique for exchanging an RSA-signed hashcash token for a non-exchangeable — or non-fungible — hashcash token. In bitcoin mining, the PoW method is critical.
2008-2009: Bitcoin and blockchain get their start
Satoshi Nakamoto released a white paper in 2008 that explained the concepts of bitcoin and blockchain. Nakamoto is assumed to be an alias for the person — or group of people — who proposed the technique. According to the white paper, blockchain infrastructure would enable secure, peer-to-peer transactions without the need for trusted third parties like banks or governments. Although Nakamoto’s exact identity is unknown, there has been no shortage of ideas.
The bitcoin/blockchain architecture, which was first introduced in 2008, was based on technologies and concepts developed over the previous three decades. The concept of a “chain of blocks” was also introduced by Nakamoto’s design. This enabled the addition of blocks without the need for them to be signed by a trusted third party.
In fact, Nakamoto defined an electronic coin as a “chain of digital signatures” in which one owner passes the currency on to the next. This is accomplished by “digitally signing a hash of the previous transaction and the public key of the next owner and adding both to the end of the coin,” according to his white paper. However, Nakamoto’s white paper was only the start. Bitcoin went from a notion to a reality in 2009.
The system was set up by Nakamoto such that there will never be more than 21 million bitcoins. Over 19 million have already been extracted. Bitcoin should reach the 21-million limit in 2140, based on the current rate of mining. In the meantime, despite price swings, their worth continues to increase. A bitcoin was worth less than a penny in October 2009. Each bitcoin is currently valued at around $30,000 (USD).
The Evolution Of Blockchain
Melanie Swann defines three stages of Blockchain in her book Blockchain: Blueprint for a New Economy. These three tiers all indicate how the technology is developing right now. It’s important to note that these multiple tiers or versions aren’t simply chronological milestones in Blockchain’s history. The distinctions between them are blurring, and the appearance of diverse features and capabilities will ultimately rely on how Blockchain technology is utilised.
This tier was created after Bitcoin was invented, and it is largely used for cryptocurrencies. Also, because Bitcoin was the first cryptocurrency, it’s only natural to classify this initial generation of Blockchain technology as cryptographic money. This includes all alternative cryptocurrencies, as well as Bitcoin. Payments and applications are among the primary applications. This generation began in 2009 with the launch of Bitcoin and ended in early 2010.
Financial services and smart contracts use the second Blockchain generation. Different financial assets, such as futures, options, swaps, and bonds, are included in this tier. This layer includes applications that go beyond currency, finance, and markets. Blockchain 2.0 includes Ethereum, Hyperledger, and other newer Blockchain technologies. This generation began in 2010 when ideas for using blockchain for other purposes began to arise.
This third Blockchain generation is employed to develop applications in government, health, media, the arts, and justice, in addition to the financial services industry. Ethereum, Hyperledger, and newer blockchains with the capacity to construct smart contracts are considered part of this blockchain technology tier, just as they were in Blockchain 2.0. This generation of Blockchain emerged around the year 2012, and several uses of Blockchain technology in various industries were investigated.
This generation offers a vision of Blockchain singularity, in which, like the Google search engine, a public Blockchain service will one day be available for anybody to utilise. It will offer services to people from all walks of life. It will be a public, open distributed ledger with general-purpose rational agents (Machina economicus) running on top of a Blockchain, making decisions and interacting with other intelligent autonomous agents on behalf of people, and governed by code rather than legislation or paper contracts. This does not imply that laws and contracts would vanish; rather, laws and contracts will be modifiable.
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