This blog is the first of a three-part series of guest posts by Eddie Mitchell titled ‘Blockchain Generations’. Eddie is a seasoned writer on all things Blockchain and crypto and we’re delighted that he has agreed to become a regular contributor to Rhetoriq.
In order to grasp an understanding of which trajectory blockchain technologies are evolving toward, it is best to explore generations of the technology that have come before and where they are believed to be going.
Much like the World Wide Web which is presumed to be in its 2.0 phase has it evolved and will continue to do so in ‘stages’, blockchain technologies are believed to be exiting the 2.0 generation and entering the 3.0 generation, though these two generations will be examined properly in subsequent articles.
Since the Genesis Block was mined on January 3rd, 2009, the technology has undergone drastic changes and has gone from an internet sub-culture following, to industrial adoption and global discussion.
It seems only fitting that as the tenth birthday of Bitcoin approaches, that its deep history, early uses, ‘hype cycle’ and growth of adoption are examined. Furthermore, Gen 1.0 was host to other cryptocurrencies such as Litecoin, which were the first real-uses of blockchain technology at this time.
Concepts akin to that of cryptocurrencies as we know them had been circling around computer science communities since for some time before. The first electronic cash payment called “eCash” was created by cryptographer Dr David Chaum.
Chaum began as a computer science professor at Berkeley University, USA, and was an early advocate of digital privacy. His 1981 paper “Untraceable Electronic Mail. Return Addresses, and Digital Pseudonyms” establish the fundamental fabrics for encrypted internet communications.
“You can pay for access to a database, buy software or a newsletter by email, play a computer game over the net, receive $5 owed you by a friend, or just order a pizza. The possibilities are truly unlimited.”
Though the project ultimately failed, his papers and projects had spawned the earliest notions cypherpunk amongst other cryptographers, hackers and activists. By the mid-to-late 90s, several other cryptocurrency related projects had begun to take root.
1997 saw the invention of ‘HashCash’, invented by Adam Back, a Proof-of-Work (PoW) algorithm that is used as the Bitcoin mining function that the blockchain community is now very familiar with.
1998 gave rise to two other virtual tokens which were critical to the establishment of BTC; these vital predecessors were named B-Money and Bit Gold. The former was built upon Chaum’s vision of “untraceable digital pseudonyms” for payments with inventor Wei Dai describing B-money as an “anonymous, distributed electronic cash system.”
Bit Gold was another fundamental ingredient to the emergence of Bitcoin that was created by Nick Szabo; according to Szabo, third trusted parties (TTPs) were unnecessary middlemen that could be considered securities holes. Being against centralization, Szabo developed Bit Gold, an unforgeable set of PoW chains.
Szabo is also credited as being the brains behind Smart Contracts, now popularized by the Ethereum Network, a Gen 2.0 technology.
Birth of the Blockchain
In 2008, the elusive Bitcoin founder and Blockchain inventor Satoshi Nakamoto released his whitepaper titled, “Bitcoin: A Peer-to-Peer Electronic Cash System”, a document that has transformed and tantalized the world since.
Blockchain or distributed ledger technology (DLT) is at the core of all modern cryptocurrencies. It is designed to open, transparent, immutable and efficiently record transactions between two parties without risk of forgery or being tampered with.
Bitcoin was the first practical use of the technology; it draws its name from the underlying data structure consisting of 1-megabyte files called ‘Blocks’, which are bits of data that are essentially ledgers themselves containing financial transaction information and ‘chained’ together through complex mathematical algorithms.
Satoshi proposed the use of a P2P network in order to solve the problem of double spending; was that digital currencies or tokens could be used in more than one transaction, an affliction that physical currencies were not subject to.
To correct this, Satoshi developed a decentralized approach that removes the use of third-party intermediaries to verify transactions and instead implemented a PoW consensus algorithm that applied confirmations to transactions, making it almost impossible to double-spend BTC and turning digital currencies into a viable financial option.
In 2011, Nakamoto had apparently “moved on to other things” according to an email correspondence between him and early Bitcoin developer Mike Hearn.
A Decade of BTC in Brief
The very first Bitcoin transaction occurred January 12th, 2009 when Satoshi sent 10 BTC to software engineer Hal Finney. By the end of 2009, $1 bought 1,309.3 BTC.
In 2010, the famous ‘two pizza’ BTC purchase took place. At this point, two pizzas were purchased from Papa Johns for 10,000 BTC, which approximated to $25 at the time and now, is worth millions. However, after this, Bitcoin began to gain traction and proved that it could indeed change how people do business online, forever.
Years following this saw Bitcoin rise from a single dollar in 2011, to $1000 in 2013 which flung the cryptocurrency into mainstream discourse; with the prospect of further riches to be gained, Bitcoin became a household name.
2014 was somewhat of a dark era for BTC after a large cryptocurrency exchange named Mt. Gox suffered the largest BTC hack in history, losing 740,000 BTC. This devastated confidence in the crypto, causing its price to drop drastically and stagnate until 2016 where it began to break out once again.
2017 will always be the year that brought the underlying technology of blockchain into mainstream consciousness. BTC surged from $1,000 to $3,000 in June and by December had spiked up to over $19,000. This drew unprecedented levels of attention to cryptocurrencies and blockchain technology as a whole.
As we near the end of 2018, Bitcoin and blockchain technologies are being developed, discussed, integrated and regulated by industries and governments across the globe, cypherpunk gen 1.0 is taking the world by storm,
Adoption Era 1.0
BTC is presently accepted in millions of stores around the world through multiple applications; it is also transforming the lives of those living in third-world countries by offering true financial inclusivity for the unbanked population, which is estimated to be around 2.5 billion people and provides financial security to those impacted heavily by hyperinflation in countries like Venezuela.
As the value of Bitcoin spiked and settled, the underpinning technology that is blockchain became recognized the world over as a technological solution with versatile applications. Supply chains, medical record databases and even central banks around the world are clamoring to implement DLT into their systems with Fourth Industrial Revolution (4IR) technologies also looking to be supported by blockchain.
Gen 1.0 blockchain technology has redefined money, redistributed wealth, transformed industry and catalyzed an unforeseen technological revolution. These standards set in place have paved the way for a higher standard of the blockchain, one that is presumed to have begun with the introduction of the Ethereum Network.
In Blockchain Generations Part 2.0, we’ll be taking a dive into the beginnings and happenings of the Ethereum Network, a platform that since 2015 has not only become the Bitcoin Network’s main competition, but also an extremely practical tool for building blockchain innovations.