Timeline of blockchain development
Already a long time before blockchain and cryptocurrencies emerged, the backbone of these technologies already existed. For example Bitcoin wasn’t the first step into digital money. The research on the underlying cryptography started in the 1940s and with the open-source movement in the 1980s the first approaches into digital money and distributed computing found their beginning (Herweijer et al., 2018). Later in 2008 somebody released under the pseudonym Satoshi Nakamoto a whitepaper on a purely peer-to-peer version of digital cash — called Bitcoin (Nakamoto, 2008). By combining cryptography, distributed computing and peer-to-peer networks, Bitcoin established an immutable system to record interactions without the need for a third party such as a bank.
This article has been originally published on digitalcube.blog by Merih Özgül Deutsche Version verfügbar unter ledgerlabs.li
If all the components of blockchain technology already existed, why is it special? The simplest way to explain the revolutionary step of blockchain technology is to compare it with the internet. In its’ earliest version (Web 1.0) the internet was a place for people to gather information. In the following years, the internet became more and more a medium of interaction. Hence, the architecture of Web 2.0 allowed users to send and receive information. In 1995 the internet was a medium to exchange information — for example by sending an email. (Voshmgir, 2019)
With blockchain technology the third era of the internet was entered (O’Dair, 2018). Before the invention of Bitcoin, transferring values to other parties over the internet was not possible because of the double-spending problem. The double-spending problem is a classic problem which comes with digital assets. In contrast to an email where the counterparty receives a copy of the sent message, digital assets become valuable due to their scarcity and are not intended to get multiplied.
In the physical world avoiding double spending is easy. If you take a 100 Swiss Franc bill and give it to a friend, you cannot spend the same bill on something else, as you do not possess it anymore. In the digital world, someone needs to keep track of the assets to whom they belong and needs to make sure that people do not spend their digital cash several times. Before Satoshi Nakamoto came up with the concept of Bitcoin, it was not possible to avoid double-spending of digital assets. By providing a transparent ledger of all transactions in the system and securing them by cryptographical methods, blockchain technology tracks the possession of all assets within the network and therefore solves the double-spending problem. This revolutionized the way how one can exchange values in the Web 3.0.
Besides the possibility to exchange value over decentralized peer-to-peer networks the third generation of the web further enables the automation of these transactions. In 2014 Vitalik Buterin a Russian-Canadian software developer invented Ethereum. Building on blockchain technology, he describes a platform for decentralized applications, that utilize smart contracts for automated interactions between network participants (Buterin, 2014).
Ethereum’s technology stack can be divided into three layers. The first layer consists of a large network of computers that process transactions and keep a shared database updated over time — the Ethereum blockchain. Secondly, developers are able to run programs that allow rule-based and tamper-resistant interactions on the Ethereum blockchain called smart contracts. Using smart contracts in combination with an immutable record of transactions, decentralized applications (dApps) can be used. Thisapplication layer describes different services provided on top of the Ethereum network. As these applications are decentralized and follow the smart contracts rule, they have no central point of failure. Consequently, nobody can just switch off a dApp.(D’Aliessi, 2018)
In the following years, smart contracts were increasingly used to raise funds. In such Initial Coin Offerings (ICO) startups issued tokens that were connected to their businesses in exchange for Bitcoin or Ether. While ICOs represented a possibility for entrepreneurs to get funding for their ideas, the method was also misused. In 2017 the hype around Initial Coin Offerings found its peak and the ICO bubble burst.
Today, the blockchain ecosystem has become much more mature and several platforms for smart contracts like Ethereum emerged. Some of the projects like Corda from R3 or Hyperledger by IBM focus more on building permissioned blockchain networks intended for enterprise applications. Others like Hedera Hashgraph or IOTA are experimenting with different data structures to achieve greater scalability while minimizing transaction costs. Technically, these projects cannot be considered as a blockchain anymore — even if they aim for the same objective. Due to that the term distributed ledger technologies (DLT) was introduced to cover such kinds of distributed networks.
Sources
Buterin, V. (2014). Ethereum: A next-generation smart contract and decentralized application platform. URL https://github. com/ethereum/wiki/wiki/% 5BEnglish% 5D-White-Paper.
D’Aliessi, M. (2018, June 12). How Does Ethereum Work? Retrieved from https://medium.com/@micheledaliessi/how-does-ethereum-work-8244b6f55297
Herweijer, C., Waughray, D. & Warren, S. In World Economic Forum. (2018). Retrieved from http://www3.weforum.org/docs/WEF_Building-Blockchains.pdf
Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. Retrieved from https://bitcoin.org/bitcoin.pdf
O’Dair, M. (2019). Blockchain: The Internet of Value. In Distributed Creativity (pp. 15–30). Palgrave Macmillan, Cham.
Rauchs, M., Glidden, A., Gordon, B., Pieters, G. C., Recanatini, M., Rostand, F., … Zhang, B. Z. (2018). Distributed Ledger Technology Systems: A Conceptual Framework. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3230013
Voshmgir, S., & Kalinov, V. (2018, 11. September). Cryptography & Blockchain Infographic — BlockchainHub. Retrieved from https://blockchainhub.net/blog/infographics/cryptography-blockchain-infographic/
About the author
Merih is a technology enthusiast and blogger from Austria. His curiosity drives him to explore disruptive technologies. His articles focus on technology trends and digital start-ups. During high school Merih developed a strong enthusiasm for programming with a special focus on web development. In 2015 he discovered his passion for blockchain technology. With his contributions he wants to support the growing community.
Disclaimer
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