We’re now in the midst of another quiet revolution: blockchain, a distributed database that maintains a continuously growing list of ordered records, called “blocks.”
Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. Satoshi Nakamoto, whose real identity still remains unknown to date, first introduced the concept of blockchains in 2008. The design continued to improve and evolve, with Nakamoto using a Hashcash-like method. It eventually became a primary component of bitcoin, a popular form of cryptocurrency, where it serves as a public ledger for all network transactions. Bitcoin blockchain file sizes, which contained all transactions and records on the network, continued to grow substantially.
History of Blockchain
The blockchain technology was described in 1991 by the research scientist Stuart Haber and W. Scott Stornetta. They wanted to introduce a computationally practical solution for time-stamping digital documents so that they could not be backdated or tampered. They develop a system using the concept of cryptographically secured chain of blocks to store the time-stamped documents.
You can’t discuss the history of blockchain technology without first starting with a discussion about Bitcoin. Shortly after Nakamoto’s whitepaper was released, Bitcoin was offered up to the open source community in 2009. Blockchain provided the answer to digital trust because it records important information in a public space and doesn’t allow anyone to remove it. It’s transparent, time-stamped and decentralized.
“Blockchain is to Bitcoin, what the internet is to email. A big electronic system, on top of which you can build applications.
Understanding the Chronology
Let’s consider what’s happened in just the past 10 years:
• The first major blockchain innovation was bitcoin, a digital currency experiment. The market cap of bitcoin now hovers between $10–$20 billion dollars.
• The second innovation was called blockchain, which was essentially the realization that the underlying technology that operated bitcoin could be separated from the currency and used for all kinds of other interorganizational cooperation.
• The third innovation was called the “smart contract,” embodied in a second-generation blockchain system called Ethereum, which built little computer programs directly into blockchain that allowed financial instruments, like loans or bonds, to be represented, rather than only the cash-like tokens of the bitcoin.
• The fourth major innovation, the current cutting edge of blockchain thinking, is called “proof of stake.” Current generation blockchains are secured by “proof of work,” in which the group with the largest total computing power makes the decisions. These groups are called “miners” and operate vast data centers to provide this security, in exchange for cryptocurrency payments.
• The fifth major innovation on the horizon is called blockchain scaling. Right now, in the blockchain world, every computer in the network processes every transaction. This is slow. A scaled blockchain accelerates the process, without sacrificing security, by figuring out how many computers are necessary to validate each transaction and dividing up the work efficiently.
Cryptocurrencies date back to 2008, with the initial cryptocurrency being Bitcoin.
Since that time, over 10,000 cryptocurrencies have launched. The most widely accepted and largest cryptocurrencies by market capitalization are Bitcoin and Ethereum. Many supporters praise cryptocurrencies because they are decentralized and independent of governmental influence, eliminating practical risks such as a government’s aggressive spending or “easy money” fiscal policy that can cause inflation – which happens with standard fiat currency.