Blockchain is a technology of digital information storage and distribution within a public database that is not connected to a common single server. Let’s consider how it was created.
Many of the technologies that we now take for granted were revolutionary at the time. Just think how much smartphones have changed our way of life and workflow. It used to be like this: people left the office – and the connection was broken, because the phone was tied to a working place, not to a person. Now, you can create a new project directly from the smartphone anywhere in the world. And don’t forget that smartphones came into our lives only about ten years ago.
What is This Technology Really About?
We are currently living in the midst of a new technological revolution, which is marked by the introduction of blockchain system – a decentralized database of an ever-growing list of records called blocks.
This is a rather young technology. Blockchain history came into prominence in 2009, when Bitcoin (whose protocol is built on blockchain) was launched. Therefore, this technology is often positioned as a transactional network. The practical use of blockchain is virtually unlimited. Nowadays, this technology is successfully implemented in the areas of logistics, medicine, law, commerce, leasing, etc.
What are the blocks in this system?
A blockchain is literally a chain of a large number of blocks where various information can be stored. Each subsequent block stores data about each previous one in an encrypted form. The uniqueness of the technology is that the entire data register is decentralized, and its copies are simultaneously stored on tens of thousands of computers around the world. This provides the highest level of protection against outside interventions. The data stored in the system is almost impossible to be compromised, replaced or deleted.
Let us consider a specific example of where the blockchain technology can be used.
For example, it can be implemented during elections in order to achieve full transparency of the process. If the government of any country makes such bold decision, then we would be able to capture the first 100% non-falsified elections in the history of blockchain, and mankind as well. Such technological capabilities are already in place, therefore it is up to world leaders who are probably not interested in such prospects.
In addition, with the help of this technology, intermediaries can be eliminated from the buyer-to-seller chain, which makes cooperation more profitable and efficient.
The technology has a great future; many analysts compare the importance of its advent with the invention of the Internet. It is expected that the blockchain will be able to fully unleash its potential in the third decade of the 21st century.
- Bitcoin was the first major innovation of the blockchain platform. It was a kind of experiment with digital currency. Bitcoin’s market capitalization currently stands at nearly $300 billion. Millions of people use this cryptocurrency for payments, including the global remittance market.
- The second innovation was that technology can be separated from currency and used for all other types of inter-organizational cooperation. At the moment, almost every major financial institution in the world is exploring it.
- The third innovation in blockchain history (called “smart contract”) came out of the second generation of Ethereum, where operating algorithms were built directly into the blockchain. Due to this, bitcoin tokens could be represented not only in cash, but in other financial instruments such as loans and bonds. Now the market capitalization of the Ethereum smart contract platform is about a billion dollars, and the number of projects is in the hundreds.
- The fourth major innovation is called Proof-of-Stake. It is protected by the Proof-of-Work algorithm, according to which the decision is made by the group with the largest total computing power. These groups are called “miners” and run huge data centers to provide security of cryptocurrency payments. New systems get rid of these data centers, replacing them with complex financial instruments of the same or even higher level of protection. Proof-of-Stake systems are expected to start operating later this year.
- The fifth major innovation is scaling. At the moment, every computer on the network handles every transaction which significantly slows down the process. Indeed, scaling speeds up the process by determining how many computers are necessary for confirming each transaction and efficient division of work. Implementing this without sacrificing the legendary safety and reliability of technology is extremely difficult, but possible. It is assumed that blockchain transactions will be fast enough to keep up with the main payment systems (VISA and SWIFT) in the banking world.
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Who Invented Blockchain?
This question remains a mystery, because even today there are only assumptions about who invented this unique technology. The history of blockchain begins in 1991, when Stuart Haber and W. Scott Stornett experimented with storing documents using a cryptographically fixed block chain and tried to organize these documents into blocks.
However, the innovation had not attracted much attention until 2008, when an unknown programmer working under the pseudonym Satoshi Nakamoto gave a boost to its development. He solved some important technical problems that previously prevented the technology from functioning. Satoshi created Bitcoin – a peer-to-peer payment system built on the blockchain technology.
Why are Blockchain Transactions Safe?
Blockchain technology allows you to speed up any payment and financial asset transfer. It revolutionized the process of making payments and transactions. Thanks to a fast and secure transaction processing method, payments are made immediately with minimal cost. Protection against unauthorized access ensures that securities and confidential information are safely stored in each of the chain blocks.
Given the success achieved by the technology, common financial services may become obsolete in the near future.
Let’s consider the blockchain history in the context of a bitcoin. The architecture of this cryptocurrency has demonstrated immunity to hacking. A block chain is not an interconnected series of individual accounts, but a record of past transactions. When a user wants to transfer bitcoins, the entire system, which runs on the appropriate software, processes the sender's record using an algorithm and checks past transactions encoded in the blockchain to ensure that the sender owns the bitcoins.
Meanwhile, other elements check the recipient. Then the transaction is aggregated with others, and computers with the necessary software run a mathematical algorithm to verify them.
Theoretically, someone could break a block chain and change the record so that users transfer money to the hacker’s account. But this will require tremendous computing power. Bitcoin users check the ongoing transaction by viewing all past ones, so a hacker needs to crack a specific block, as well as the blocks following it, in order to manipulate each of them.
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What is Ethereum?
Ethereum is the successor of Bitcoin. It provides a significantly shorter block time than Bitcoin – 10 seconds compared with 10 minutes. This small amount of time spent on a transaction allows Ethereum blockchain platform to serve as a payment system and offer better efficiency in various types of transactions.
It’s wrong to position Ethereum only as a cryptocurrency. In fact, it offers a whole decentralized platform where everyone can create their own applications, or dApps. As a result, many developers of such startups chose the Ethereum platform.
The history of blockchain is full of different inventions, one of which is a blockchain wallet. This is a specialized storage with the high level of security that allows you to trade cryptocurrency and carry out operations with it quickly and easily.
There are 5 types of blockchain wallets:
- Desktop Wallet – requires installing a special program on your computer.
- Mobile Wallet – allows to make payments from anywhere; uses a simplified transaction verification system.
- Online Wallet – can be used from anywhere on any device after entering your data.
- Gadget Wallet – special individual device that can be connected to a computer, or work remotely.
- Off-line Wallet – allows to generate keys and print the corresponding document on the printer; can be stored anywhere, without the risk of hacking.
How to Withdraw from Blockchain Platforms?
There are several ways to make a deposit or withdraw funds from your wallet:
- Exchange Office. You can choose one of the exchangers offered on the Internet. As a rule, preference is given to those who offer the most favorable cryptocurrency rate.
- Cryptocurrency Exchange. Most cryptocurrency exchanges have a Russian language interface, which considerably simplifies working with them for Russian-speaking customers. Another advantage is 24/7 customer support.
- Marketing Services or Goods via Cryptocurrency Exchange. This method has become very popular with freelancers, as well as online store owners and people providing information services. There is no commission here. The customer pays for a product or service by crediting digital money to the seller’s wallet address.
Nowadays, the history of blockchain is widely known. Hundreds of specialists in computer science, cryptography and mathematics have been working on the development of this technology.
In addition, a number of conferences devoted to cryptocurrency and blockchain (the best known of them is Blockchain & Bitcoin Conference) are held around the world. On September 19, 2018 the event took place in Kiev. Leading industry experts, marketers, lawyers, investors and other specialists gathered there to discuss the industry prospects.
During the recent largest gaming conference in Russia, called Russian Gaming Week, experts also raised the topic of the blockchain perspective.
For the purpose of implementing the digital economy development strategy, many countries are creating regulatory sandboxes to study ways of introducing the blockchain technology into various industries.
Russia has already prepared the “Smart City” concept, in which a pilot implementation of this technology in many areas will begin in 25 municipalities.
Until the late 1990s, it was simply impossible to make payment by credit card over the Internet – e-commerce did not exist at that time. Blockchain history shows that another revolutionary change will happen very soon.
It should be taken into account that Dubai adopted a strategy that all government documents should be issued on the blockchain by 2020. As announced, major initial projects will start working already this year.
“The Internet of Agreements” concept presented at the World Government Summit is based on a strategy of significant transformations in the global trading system through the use of the blockchain technology, which will mitigate the consequences of events such as Brexit and the recent US withdrawal from the Trans-Pacific Partnership.
These global plans require confirmation in practice, but the expectations from the Dubai Blockchain Strategy are that the savings and benefits from innovation will outweigh the costs of the experiment.
Mariana Matscukato wrote in her book “The Entrepreneurial State” that the most advanced innovations, especially in infrastructure, are often at the mercy of the state.
Blockchain History: What to Expect in the Future
Experts believe that in the near future self-driving cars and drones will use blockchain to pay for charging and parking services. International money transfers, which previously lasted for days, will be reduced in time to hours and then minutes, providing a higher level of reliability.
These and other changes will lead to a widespread transaction costs reduction. When the price for conducting operations falls below a certain level, there will be a sudden, unpredictable aggregation and disaggregation of existing business models. For example, auctions used to be held locally for a limited number of people, which we can see now on sites like eBay. When costs fall, unexpected changes are going to happen in the system. The blockchain is expected to cause the reaction no less serious than electronic commerce in the late 1990s.
It is difficult to predict where it all goes. Has anyone expected the emergence of social networks? Who could have predicted that watching friends’ photos on social networks would replace the television? The history of blockchain shows us that future changes influenced by this technology will be akin to the invention of the Internet.
The blockchain technology is “maturing”, and more and more people are switching to this form of cooperation. It will expand in all areas: from supply chains to online dating. And considering how strongly it can develop in 10 years, the future is likely to come much earlier than we think.
As mentioned earlier, during the presentation of iPhone 11 the representatives of Apple expressed their interest in crypto assets.