The story of how blockchain technology has evolved dates back almost a decade, which isn’t a long time if we see the extent of developments and progress the space has seen. To truly understand what has made blockchain a breakthrough technology across industries – that allows secure, peer to peer trades and records transactions without a third party involved – we need to retrace our steps and understand the genesis of the technology. The evolution of blockchain began as a quest to build a decentralised system, particularly for money, but has had a spillover effect across other industries that it has transformed as well. To get a brief overview of the history of blockchain technology, we’ve highlighted the major milestones that helped bring it to life.
1991: The Conception of a Cryptographically Protected Chain of Blocks
Though it may come as a surprise to many, blockchain’s evolution began years before the conception of Bitcoin. W Scott Stornetta was on a mission to find a solution to the immutability of digital records and joined forces with Stuart Haber, a cryptographer to crack the code to this lurking problem. The fundamentals of blockchain technology first materialised when Stuart Haber and W Scott Stornetta together invented the concept of a cryptographically protected chain of blocks, whereby digital time-stamped documents would be stored in a chain of blocks, making them tamper-proof.
1998: The Advent of ‘Bit Gold’
7 years later, Nick Szabo was inches away from inventing Bitcoin. Nick was working on one of the first attempts at creating a decentralised version of virtual money called ‘bit gold’. He described it as not just a payment mechanism but an independent long-term store of value that does not require a central authority. Bit gold had properties of cryptography and mining that helped it achieve its decentralised nature. One of these properties was the inclusion of time-stamped blocks that were generated through proof of work (PoW). While Nick drafted a whitepaper based on his theories of this new decentralised money, it was never really implemented.
2000: The Cryptographically Secured Chain Theory
In the mid-2000s, Stephan Konst presented his cryptographic chain theory in a paper titled, “Secure Log Files Based on Cryptographically Concatenated Entries”. His proposed model is similar to what we see today in cryptocurrencies, whereby entries in a chain can be traced back to their original point of genesis, helping prove authenticity.
2008: The Invention of Bitcoin
At the peak of the 2008 financial crisis, a major milestone was reached by Satoshi Nakamoto when he laid the foundations of what would today become a currency with hundreds of billions of dollars in market capitalisation. Satoshi Nakamoto, a pseudonym for an individual or group of individuals, published the first paper that defined a model for a new kind of peer-to-peer digital currency system called Bitcoin. This was the first case of the creation of a blockchain network that solved the problem of double spending, a huge problem in the blockchain industry. The Bitcoin blockchain was made open source and released to the public in January 2009, making it possible for people to examine the code and reuse it. The fundamentals of Bitcoin were so well conceptualised that was an inflexion point in blockchain evolution and it went on to form the backbone of future cryptocurrencies.
2014: The Birth of Blockchain 2.0
With a vision to take blockchain beyond the current financial use case proposed by Bitcoin, Vitalik Buterin released a whitepaper to describe the concept behind the Ethereum blockchain. Ethereum’s primary point of differentiation from Bitcoin was its ability to trade more than cryptocurrencies, opening up use cases for a wide spectrum of applications. In 2014, the Ethereum token or Ether was sold to participants in an attempt to crowdsource their idea and get running. Today it’s one of the leading technologies in the blockchain space and is continuing to grow.
2020: The DeFi Boom
Another major milestone in the evolution of blockchain was reached in 2020, with an acceleration of applications centred around Decentralised Finance or DeFi. DeFi is a technology based on distributed ledgers like those in cryptocurrencies and includes components like stablecoins, hardware to enable application development and software as well. In 2020, for the first time, DeFi applications surpassed $8 Billion in Total Value Located (TVL). Looking at this from a big-picture point of view, though centralised finance handles billions and billions of dollars every year, DeFi, having only started a few years ago, has managed to scoop up a sizable sum of money located in its applications.
These developments help put a finger on the pulse of the blockchain industry, shedding light on how far it’s come and how fast it’s growing. To conceptualise, the evolution of blockchain here’s a graphic visualisation of how the technology has evolved over time from its 1.0 version.
The Years Beyond: What’s the Future of Blockchain?
Blockchain has been under the radar lately with a leading stablecoin crashing in 2022 followed by a domino of crashes, including the FTX crypto exchange scandal. These recent developments in the blockchain industry could make some believe that we’re diving into uncharted waters with blockchain. However, the blockchain industry’s fundamental growth has been steadfast. There’s no dearth of innovative projects in the space, and looking ahead it seems like there’s going to be no turning back.
Going forward blockchains like Ethereum are only going to get stronger as they optimise on cost, speed and electrical consumption. Newer blockchain technologies are leveraging the power of interoperability whereby users and decentralised applications (DApps) can seamlessly switch from one blockchain network to another. On top of all of this, mass adoption couldn’t be too far off as businesses and governments increasingly look to integrate with blockchain technology through web 2.0 and web 3.0 partnerships. With the industry charging forward, it’s safe to say that this isn’t the time to turn our backs on blockchain technology, but embrace it and deepen our understanding of it. The best is yet to come.
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