FEBRUARY 2, 2021
The history and evolution of blockchain
The cryptocurrency world is full of distinctive terms, but none as widely used and recognisable as “blockchain.” Even outside of crypto circles, blockchain has become synonymous with cryptocurrency, but the two don’t refer to the same thing. Though they’re closely related, blockchain history has roots that extend beyond crypto, and its applications keep expanding.
A blockchain is an immutable, transparent and often decentralised digital database. It’s a way of recording transactions so anyone can see them, but no one can change them. These databases are the underlying technology that makes crypto possible, but they can do so much more.
Blockchains have the potential to be one of the most disruptive technologies to emerge in a long time. Here’s how they came to be and where they can go from here.
Laying the foundation for blockchain
The earliest example of proto-blockchain technology originated in 1991 from researchers Stuart Haber and W. Scott Stornetta. These two scientists developed a way to timestamp digital records so people couldn’t tamper with them. To achieve this, the system stored documents as a block in a cryptographically secured chain.
In 1992, Haber and Stornetta added functionality to this timestamping method, allowing it to store multiple documents in one block. This system was essentially an early blockchain, but it never saw adoption. Their patent expired in 2004 and went under the radar until cryptocurrency made blockchains catch on later.
In 2004, a computer scientist named Hal Finney invented the first reusable proof-of-work (RPoW) system. This system proves that one user has performed a certain amount of computing, who then gets a digital token in return. RPoW would become a central part of how cryptocurrency works, and Finney would later become the first bitcoin recipient.
Bitcoin and the birth of blockchain
Perhaps the most significant moment in blockchain history came in 2008 with the emergence of Bitcoin. Someone under the pseudonym Satoshi Nakamoto posted a white paper describing Bitcoin, a digital currency that relied on blockchain technology. In early 2009, Bitcoin officially launched, becoming the first established cryptocurrency and the first substantial blockchain application.
Many people point to this moment as the official birth of blockchain. While the technology existed before Bitcoin, Bitcoin was the first example of blockchain as we know it today. It also put the technology to use, not just outlining it as a theoretical concept.
Bitcoin didn’t take off immediately, but it started a new age for both currency and blockchain. As cryptocurrency became more popular, so did blockchain, leading to new applications and innovations. While scientists had outlined blockchain technology earlier, cryptocurrency made it real and proved what it could do, and crypto all started with Bitcoin.
Ethereum and smart contracts
The next turning point in blockchain technology came with the launch of Ethereum in 2015. Many people equate Ethereum with Ether, its native cryptocurrency and the second-most popular crypto, but Ethereum is more than that. Ethereum is an entire blockchain-based platform, not just a blockchain, and it brought about two crucial innovations — smart contracts and DApps.
Smart contracts are self-managing agreements that take effect automatically after a specific event, like an expiration date or money transfer. These contracts can act as the building blocks for custom blockchain-based actions or programmes. With these tools, developers used Ethereum to design and implement blockchain processes outside of cryptocurrency.
These processes, called DApps, or decentralised applications, expanded what blockchains could do. People can now offer loans, track products and play games all on a blockchain. With blockchains being capable of much more than just supporting crypto transactions, blockchain app development entered a new age.
There are more than 3,000 DApps on Ethereum today, ranging from games to security solutions to financial services. Ethereum isn’t the only blockchain platform that enables smart contracts now, either. Thanks to this innovation, blockchain took off to where it is today.
Most blockchain applications today still revolve around cryptocurrency, but not all of them do. Businesses around the globe and across industries are waking up to the potential of this technology. Even though blockchain is still relatively new, it’s on the verge of something of a golden age.
One of the fastest-growing areas of blockchain adoption today is the financial sector. In 2015, the NASDAQ conducted the first blockchain shares trade, and many financial institutions have since embraced the technology. Companies like Bank of America and JP Morgan Chase now use blockchains to record transactions, authenticate customer data and fight fraud.
Many travel start-ups have started using blockchains to minimise fees and maximise security. Booking flights and hotels traditionally can be complicated and expensive, with varying prices and hidden fees. Listing availability and making reservations over a blockchain makes the process more transparent.
The private sector isn’t the only one embracing blockchain. West Virginia recently made history by enabling the first blockchain use in a federal election, letting overseas soldiers vote via blockchain. Some foreign governments like Singapore and China have invested heavily in the technology, hoping to bolster their security and finances.
What’s next for blockchain?
The world is still in the early days of blockchain history. This technology can do so much more than it does now, but some obstacles remain in the way. One of the most substantial barriers to widespread blockchain adoption is scalability, or a lack thereof.
Many blockchain applications face issues with bottlenecking and slow processing times. Since blockchain transactions require immense computing power to verify them, their security often comes at the expense of speed. Given the prevalence of this issue, the next big innovation for blockchain will likely be something to make it more scalable.
When blockchain technology does become more scalable, it could change the world. Countries could use it in tax filing to increase security and reduce fraud. Hospitals could use it to protect patient data and share information between doctors. If nations across the globe embrace it, blockchain technology could make international trade more secure.
Blockchain history has just begun
It’s difficult to say how blockchain technology will evolve in the future. The technology has come a long way in its relatively short history, and the world is just starting to recognise its potential. While the future is uncertain, it’s become evident that blockchain is one of the most promising technologies of our time.
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