When asked about blockchain technology, tech-savvy or crypto-native individuals may be familiar with certain blockchain protocols such as Bitcoin and Ethereum. However, the question of how the concept of blockchain came about and what is its history is an afterthought for most people. In this article, we will answer how blockchain begin, who was involved, and why was there a need for blockchain technology to begin with.
The concept of blockchain technology was first described in 1991, when research scientists Stuart Haber and W. Scott Stornetta proposed a computationally feasible solution for time-stamping digital documents so that they could not be backdated or tampered with.
The system stored the time-stamped documents in a cryptographically secure chain of blocks, and Merkle trees were added to the design in 1992, making it more efficient by allowing several documents to be collected into one block. However, this technology was never used, and the patent expired in 2004, four years before Bitcoin was created.
A person or group using the alias Satoshi Nakamoto uploaded a white paper explaining the decentralised peer-to-peer electronic cash system known as Bitcoin to a cryptography mailing list in late 2008.
On the 3rd of January 2009, Bitcoin came to existence when the first bitcoin block was mined by Satoshi Nakamoto, which had a reward of 50 bitcoins. The content of the first block includes a headline from the UK's The Times newspaper on the same day, indicating that the creation of Bitcoin was a response to the 2008 financial crisis and mistrust in the traditional banking system. The Genesis Block is considered a significant part of Bitcoin's history, as it symbolises the birth of a new financial system and represents the start of a decentralised and trustless currency.
Transactions are recorded on a public ledger called a blockchain, ensuring the integrity of the currency. Miners validate transactions and add them to the blockchain in exchange for a reward in bitcoins. This system allows for secure and transparent transfer of funds without intermediaries.
A couple of years after Bitcoin’s inception, people started to feel the limitations of Bitcoin — primarily, it was designed as a decentralised digital currency. This means that it is only capable of making simple transactions like transferring and receiving currencies. Ethereum was the response to that limitation. The creator of Ethereum, Vitalik Buterin, saw the potential for blockchain technology to be used for more than just financial transactions. He proposed the creation of a new platform that featured a scripting functionality called smart contracts, which would allow developers to build decentralised applications and automate contractual agreements without the need for intermediaries.
Smart contracts are programs or scripts deployed and executed on the blockchain, they can be used for example, to make a transaction if certain conditions are met. Smart contracts are written in specific programming languages and compiled into bytecode, which a decentralised Turing-complete virtual machine, later called the Ethereum virtual machine (EVM) can then read and execute. This idea led to the creation of the Ethereum network, which went live in July 2015.
Developers are also able to create and publish applications that run inside Ethereum blockchain. These applications are usually referred to as DApps (decentralized applications) and there are already hundreds of DApps running in the Ethereum blockchain, including social media platforms, gambling applications, and financial exchanges.
The creation of Ethereum sparked a new era of blockchain development and paved the way for decentralized finance (DeFi), non-fungible tokens (NFTs), and many other innovative applications.
The future of blockchain technology is bright, with more and more blockchain protocols, e.g. Solana, Avalanche, and Near, already being invented to circumvent the limitations of Ethereum — namely, the high transaction fees (gas) and low transaction speed. Things move fast in Web3, and technology is constantly being innovated at an accelerated pace. A week can feel like a year, and 6 months can feel like an eon. Blockchain has enormous potential, with applications ranging from finance and banking to healthcare and voting.
In the near future, blockchain technology is expected to be used in a variety of applications, from digital identity management to supply chain management. In addition, blockchain technology is expected to be used to create secure and transparent voting systems, to facilitate peer-to-peer payments, and to create digital currencies.
In the long term, blockchain technology has the potential to revolutionize the way we do business, store data, and even vote. It’s no wonder that more and more companies and organizations are adopting this revolutionary technology. If you’d like to learn more about the emerging trends and technology of blockchain, sign up for our course today!
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