The concept of blockchain creation is not a novel one. Prior to the introduction of cryptocurrencies, many attempts had been made to create a digital currency. Blockchain and Bitcoin were created much before they were originally launched. Bitcoin and blockchain are very much not the same innovations since Satoshi Nakamoto first proposed the Bitcoin Whitepaper. At present, blockchain has evolved beyond the scope of digital currencies and into new unimaginable usages. The succeeding versions of blockchain have been a steady evolution of the limitations of previous generations. Since the introduction of Bitcoin, there have been subsequent versions of the blockchain, each one building on the fundamentals of its predecessor. The lines between each version are not hard and fast, but the path they took crosses Bitcoin, smart-contracts, decentralized applications, and new holistic blockchain environments. Though, it is said that blockchain was officially launched in 2008; it is believed that the primitive form of a blockchain was patented much earlier.
Discovery of the first primitive blockchain
The primitive form of a blockchain known as the hash tree or the Merkle tree was patented by Ralph Merkle in 1979 and functioned by verifying and handling data between computer systems and it was important to validate the data in order to make sure that nothing was changed during transfer. Therefore, it was used to maintain and prove the integrity of the data being used. Later in 1991, the Merkle Tree was used to create a secured chain of blocks which were nothing but a series of data records and each connected to the block before it. Moreover, the newest record entered into the chain contained the entire history of the chain. This entire process led to the development of the blockchain.
Bitcoin’s existence before its official launch
A decade before cryptocurrencies were launched; the concept of digital currency had been introduced by Wei Dai, a computer engineer in his paper titled ‘B-money’. In this paper, he discussed the idea of a digital currency that could be sent along with a group of untraceable digital pseudonyms. In the same year, there was another attempt known as Bit Gold that was drafted by Nick Szabo. It was pushed by inefficiencies within the traditional financial system such as requiring metal to create coins and to minimize the trust needed to create transactions. Though these concepts were never officially launched, they were part of the inspiration behind Bitcoin.
The upcoming article will introduce the evolution of blockchain after its official launch in 2008. We named it as the generations of blockchain.
First Generation of Blockchain Evolution: Bitcoin
In 2008, the first generation of the blockchain commenced when the term of Bitcoin was released as a new currency and the proof of this concept was established when Satoshi Nakamoto published his whitepaper called Bitcoin: A Peer-to-Peer Electronic Cash System which described the functionality of the Bitcoin Blockchain Network on 31st October 2008. This was the day in Bitcoin blockchain history that carved the route for the following events. After that, Satoshi Nakamoto mined the first block of the Bitcoin network thus channeling the blockchain technology.
During this phase, the concept didn’t get any response from the society because this technology required sophisticated software with a tough interface, cryptographic operations which included public and private keys, protocol basics, etc. Hence the common users did not adapt to cryptocurrency as they were already accustomed to the use of flat money that did the job for them. Moreover, the actual value of bitcoin was known only to cryptographers and IT experts. Hence the day of mining the first genesis block was not important to society. It could be said that blockchain was at a losing stage here because the real value of bitcoin and blockchain were unknown.
Advancement of Bitcoin and Blockchain
Blockchain and bitcoin advanced further when the first ever Bitcoin transaction took place on January 12th, 2009 between Takashi Nakamoto and Hal Finney when Nakamoto sent Hal Finney 10 Bitcoins (BTC). The next phase of the Bitcoin and blockchain evolution started when there was a monetary value assigned to the units of the emerging cryptocurrency. Earlier, there was no facility to buy and sell the bitcoins or even make payments outside the blockchain community network as they were not adopted yet by banks, foreign exchanges or any other payment service providers. There was a shift in the history of the bitcoin value history when the first ever transaction of Bitcoin for physical goods took place on May 22, 2010. The famous Bitcoin Pizza transaction saw two pizzas bought for 10,000 BTC by Laszlo Hanyecz.
Do you know what the current price of 10,000 BTC is? It is approximately 53 million United States Dollars.
However, the Bitcoin blockchain at that time could not fulfill their expectations since the source code did not allow for complete smart contracts. This means that their automated system could not simulate human behavior and prowess. Vitalik Buterin, a Russian Canadian programmer who co-founded Bitcoin Magazine wanted blockchain technology to allow for this level of scripting, and since the Bitcoin blockchain couldn’t scale up enough to make this happen, Vitalik decided to take it upon himself to get it done. In 2014, he put together a little project called Ethereum which was the rise of the 2nd generation of blockchain.
Second Generation: Transforming from digital money to smart contracts
The second stage of blockchain evolution emerged when Vitalik Buterin transformed the blockchain from programmable money to programmable value. He implemented this generation of blockchain when he encountered many problems such as wasteful mining hardware, centralized mining community, and the lack of network scalability. That’s when he conceptualized and implemented the concept of Bitcoin beyond just currency. To reimagine the potential, Vitalik conceptualized and developed the Ethereum blockchain. This unique network, often referred to as the world computer, utilizes a blockchain in the traditional sense with two network-wide cryptocurrencies—Ether and Gas. The difference in this generation of blockchain is the use of software which distinguishes this second generation from the first. The Etherium Virtual Machine was a complete suite of software protocols using a Turing programming language that allows anyone to run any program on the Ethereum blockchain, provided there were enough memory and time. Moreover, he proposed a platform, where the developer community could build distributed apps (Dapps) for the Blockchain Network.
The advent of the smart contract was the most significant milestone for the second generation of blockchain. Further adding to the strengths of this blockchain generation were Ethereum Virtual Machine and the smart contract which were pivotal components to the second blockchain. They enabled higher transaction speeds, improved scaling, and an explosion of functionality.
Third Generation of Blockchain Evolution: Decentralized applications
The third evolution of blockchain took place when decentralized applications (DaaP) came into existence. It could be said that this was not a third-generation evolution of the blockchain but a new frontier of functionality as these decentralized apps began to give the blockchain industry a real-world purpose. It was the next iteration of blockchain potential as there was a move from micropayments and asset tokenization to digital collectibles and decentralized lending. The 3rd generation blockchain has the ability to improve on the capabilities of its previous generations. There are various platforms of this generation. This generation of blockchain is still new on the block and it is trying to fix the failures of the versions that have existed in the previous versions of the blockchain. Focusing on scaling up, the third generation blockchain networks are also trying to introduce greater interoperability and boost network speeds. The approaches being taken by these 3rd generation blockchain solutions are promoting cross chain transactions, using techniques such as sharding and establishment of parallel chains. The third generation blockchain networks include prominent examples like Cardano, IOTA, and Nano.
Fourth Generation: Future possibility of inclusion of artificial intelligence
It is being said that the third generation is still trying to find higher adoption. Thus, it is still too early to think about the fourth generation of blockchain technology. It is being forecasted that the fourth generation of blockchain technology will be a combination of the third generation and artificial intelligence. In all these years of its existence, blockchain has accomplished much but has hit a major barrier when it comes to mass adoption. While big businesses, a few governments, and some individual entrepreneurs may be riding on the blockchain hype, the technology is yet to spread to local institutions, the common people, schools, colleges, and small businesses. The fourth generation of blockchain should seek to break that very divide, by making the technology accessible to institutions and industries, governments, and common folks.
Fourth Generation platforms will enable access to the common man
There are a few technologies that will enable access to local institutions and common people. First is “Multiversim”, a new blockchain platform which will be created with the objective of mass adoption in mind. Since existing blockchains would have a poor performance with respect to complex organized data, the fourth generation would adapt to the hierarchical and multifaceted nature of organizations and government. The new technology would hope to meet the requirements of organizations and governments in an efficient manner. Different projects like Aergo and Insolar are also in the making with respect to the fourth generation of blockchain evolution. Insolar is designed as a BaaS platform offering compliant, governance-friendly hybrid blockchain networks. It also promises to execute smart contracts using data from cloud-based domains. Aergo, for its part, offers to have sidechain solutions to solve existing scalability issues. For the fourth generation blockchain projects, the possibilities seem to be massive. Even as previously unseen solutions to the scalability issues keep emerging, the new projects will transform the landscape of blockchain with pragmatic features coming up.
Summarizingly, it can be said that Blockchain has evolved from the creation of its concept in the first generation of Bitcoin to the current generations. There has been a lot of transformation from digital money to micropayments and asset tokenization to digital collectibles and decentralized lending. The third generation of blockchain is still in progress and is trying to cover up the limitations of the previous two generations of blockchain. Moreover, it is trying to boost up the speed of the networks. The fourth generation of blockchain is yet to come into existence but aims to cater to the society in whole. Since it is believed that change is the only constant, it will be a wait and watch the situation as new exciting developments take place in blockchain technology in the future.