History of Blockchain Technology
In The Beginning
The conceptualization of blockchain technology goes back 40 years when David Chaum first proposed a blockchain-like cryptographic protocol in a dissertation called “Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups” (Sherman et al., 2019). Nearly a decade later, Stuart Haber and W. Scott Stornetta, who worked for Bellcore, furthered cryptographic block storage when they invented a technique to create immutable timestamps to secure multiple digital records in a single block utilizing Merkle Trees. Several publications and patents awarded to Haber and Scott laid the groundwork for blockchain technology today. In 2004, Hal Finney introduced a technological concept called Reusable Proof of Work (RPOW), which served as a prototype for digital currency. Though this technology did not take off at the time, Hal Finney was the recipient of the first Bitcoin transaction and a champion of decentralized digital currency.
Bitcoin Launches Publicly
In 2008, Satoshi Nakamoto (a pseudonymous person or group of people, possibly Finney himself) wrote a pivotal whitepaper, “Bitcoin: A Peer to Peer Electronic Cash System,” that explained the concept of a decentralized, distributed digital currency, called bitcoin. Bitcoin launched in 2009 based on Nakamoto’s paper, and its launch was the culmination of the world’s first publicly available blockchain technology. Bitcoin enabled the first digital currency transactions utilizing a distributed public ledger detailing all records immutably on the network and ushered in the birth of cryptocurrency.
What is Blockchain?
While initially, Nakamoto’s concept served digital currency specifically, blockchain technology broadly applies his innovation to all assets (tangible and intangible). Denotatively, a blockchain is an immutable ledger of shared blocks (records) linked together with encryption to process, record, and track asset transactions in a network. Aside from the first block, or genesis block, each block contains a cryptographic hash of the previous block, a timestamp, and a Merkle Tree of transaction data. A chain of blocks forms through the linkage to previous blocks, hence the name blockchain. Originally, Nakamoto wrote these two words separately in his 2008 whitepaper, but eventually, the combined term debuted and has since gone mainstream.
Making Sense of Blockchain
Blockchain technology is a shared and secure digital ledger of records that enables fast information delivery. It is transparent, predicated on community consensus, and cannot be changed. It eliminates duplication issues and provides all members of a network a single source/view of truth regarding the end-to-end records in the system. Ultimately, blockchain technology allows anything to be traded and tracked on a blockchain network with greater speed, greater security, and greater transparency.
Key Blockchain Technology Terms Defined
Essential Blockchain Terms
Actor – An entity that participates in a network or performs an action in a blockchain.
Decentralization – Equates to data’s movement, actions, and interests favoring distribution amongst all actors in a system. Consent is required from all other actors for an actor or group of actors to control a system.
Consensus – This is a process that determines the single truth in a blockchain network. Consensus algorithms establish agreement parameters concerning which blocks can be added to the blockchain and the validity of nodes.
Distributed – All network actors have access to a shared, distributed ledger comprising all records of transactions.
Security – Blockchain networks are secure by design, utilizing cryptographic encryption and decryption.
Immutability – Actors cannot change or tamper with a transaction once recorded in a distributed ledger. A new transactional record must be created in order to rectify any error, providing all actors in a network access to both records: the original record and the new record that addressed an issue with the original record.
Smart contract – is an automatically executable code that runs on blockchain networks and defines specific terms, conditions, and rules governing transactions. Smart contracts are trustless and deterministic, providing ubiquitous outputs to all participants in a network.
Node – each node is a peer-connected participant in a blockchain network that can validate and propagate new blocks on the chain.
Proof-of-Work (POW) – A type of consensus mechanism used by Bitcoin originally, whereby network participants compete to solve computational problems to enable the right to produce the next block in a blockchain network.
Proof-of-Stake (POS) – A type of consensus mechanism whereby a blockchain network participant’s native cryptocurrency holding is directly proportional to the likelihood of enabling the production of the next block in a network. The more native cryptocurrency a participant holds, the greater the probability of subsequent block production.
DAPPs – Decentralized applications built on a blockchain network that does not require a central webserver to function and communicate.
Evolution of Blockchain Technology`
Blockchain 1.0 –> Blockchain 3.0 and Beyond
Blockchain 1.0 – The first generation of blockchain technology proving efficacy and market acceptance. The culmination of Blockchain 1.0 was the public launch of Bitcoin.
Blockchain 2.0 – Foundational Blockchain 1.0 technologies evolved to incorporate smart contracts to generalize and facilitate processing on a chain, providing expanding value and capabilities for peers in a blockchain network. The culmination of Blockchain 2.0 was Ethereum.
Blockchain 3.0 – This evolution of blockchain technology utilizes smart contracts to foster greater adoption across multiple industries and use cases, scalability, and interoperability. Third-party centralization for asset trading is no longer needed in this generation of blockchain, and it is thus permissionless. Front-runners employing Blockchain 3.0 are Polkadot, Aion, Wanchain, SkyCoin, EOSIO, and others.
Web 3.0 – The next generation or iteration of the internet, one that is autonomous, open, and intelligent. Web 3.0 is evolving from centralized networks like social media platforms towards decentralization. The backbone of Web 3.0 is blockchain technology, along with Artificial Intelligence, and Internet of Things (IoT).
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- A Very Brief History Of Blockchain Technology Everyone Should Read (forbes.com)
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- Stuart Haber and Scott Stornetta: How our timestamping mechanism was used in Bitcoin – CoinGeek
- Hal Finney, Cryptographer and Bitcoin Pioneer, Dies at 58 – The New York Times (nytimes.com)
- What is Blockchain Technology? – IBM Blockchain | IBM
- What is web 3.0, and what does it mean for you? – (r2c.io)
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- Blockchain Glossary of Terms: 128 Blockchain Terms and Their Definitions | Object Computing, Inc.