The use of blockchain technology is a novel strategy for the creation of alternatives to conventional institutions. It is a decentralized system that is unchangeable and transparent, and it has become the backbone of a lot of different sectors in the contemporary day. The first instance of a decentralized digital currency, Bitcoin, was developed in 2008 by an anonymous individual or group of persons using the pseudonym “Satoshi Nakamoto.” This event marks the beginning of blockchain technology. Since then, blockchain technology has advanced significantly, and the progression of this technology has been nothing short of phenomenal. In the following paragraphs, we shall investigate the origins of blockchain technology as well as its development throughout time.
The development of blockchain technology:
The history of blockchain technology can be traced back to 2008 when an unknown person or group of people under the pseudonym “Satoshi Nakamoto” created Bitcoin. This event was mentioned earlier. Bitcoin was the first digital currency to be decentralized, making it possible for users to conduct transactions directly with one another without the intervention of a third party. The blockchain, which is a distributed ledger that records all of the transactions that take place on the Bitcoin network, was the essential innovation that made this possible.
In the early days of Bitcoin, blockchain technology was utilized primarily for the purpose of easing cryptocurrency transactions. However, its developers quickly saw its potential and began looking into how it could be used in other fields of business. Ethereum was conceived by Vitalik Buterin in 2014 as a decentralized platform that would enable programmers to construct decentralized apps (DApps) on top of its blockchain. The blockchain technology that underpins Ethereum was the first to implement the idea of “smart contracts,” which are agreements that may carry out their terms autonomously provided certain prerequisites are satisfied.
The development of the technology behind blockchain:
Since its creation, blockchain technology has seen significant advancements. Today, it is utilized in a diverse array of industries, including the financial sector, healthcare, management of supply chains, and many others. Let’s take a closer look at the ways in which technology based on blockchains has progressed over the years.
Blockchains of the second generation:
The primary goal of first-generation blockchains was to simplify the process of conducting peer-to-peer financial transactions; accordingly, developers of second-generation blockchains devised a way to circumvent these limitations. These blockchains presented novel features and conceptualizations, which allowed for the creation of decentralized applications (DApps) and smart contracts with a higher degree of complexity.
BitShares, which was developed in 2013, is an example of a blockchain that is considered to be of the second generation. BitShares is a decentralized exchange that eliminates the need for a middleman in the trading of cryptocurrencies. Users are able to trade cryptocurrencies directly with one another. BitShares operates on a blockchain that is of the second generation and was the first to use the Delegated Proof of Stake (DPoS) consensus method. Token holders have the ability to vote for delegates who are accountable for the validation of transactions on the network thanks to DPoS, which is a consensus algorithm. This approach enables speedier processing of transactions and eliminates the danger of centralization that may arise in other types of consensus systems.
EOSIO is yet another instance of a blockchain that belongs to the second generation. It was developed in 2018 by Dan Larimer and Brendan Blumer. Developers are able to create decentralized applications (DApps) and smart contracts by using EOSIO, which is a decentralized platform. The DPoS consensus technique is used by EOSIO, however, a variation of it called Delegated Proof of Stake with Byzantine Fault Tolerance (DPoS+BFT) is used instead. Byzantine Fault Tolerance (BFT) is a fault-tolerant consensus mechanism that can withstand up to one-third of the nodes being malicious. This consensus mechanism combines the benefits of DPoS with BFT, which is a fault-tolerant consensus mechanism.
Second-generation blockchains, such as BitShares and EOSIO, have the capacity to handle a large number of transactions in a single second, which is one of the benefits of using these blockchains. For instance, EOSIO can manage up to thousands of transactions per second, which is a big improvement over first-generation blockchains like Bitcoin, which can only process a few transactions per second. This makes EOSIO substantially quicker. Its scalability is crucial for blockchain technology to be used in businesses that demand large transaction volumes, such as the financial sector and the management of supply chains.
Second-generation blockchains such as BitShares and EOSIO brought additional capabilities and ideas that made it possible to construct DApps and smart contracts with a greater level of complexity. Because of their capacity to handle a large number of transactions in a given period of time, they are well-suited for use in sectors that place a premium on transaction throughput. The utilization of the DPoS consensus mechanism and its various iterations helps to lessen the possibility of centralization, which is a risk that is present in the utilization of other consensus mechanisms.
Distributed ledgers of the third generation:
Blockchain technology has progressed to the point where it is now capable of supporting blockchains of the third generation. The broad use of blockchain technology has been hampered by problems relating to scalability, security, and interoperability, all of which are being addressed by these blockchains.
Cardano, which was launched in 2017, is one of the most renowned instances of a blockchain that belongs to the third generation. Cardano is a decentralized platform that relies on a proof-of-stake (PoS) consensus mechanism that is referred to as Ouroboros. Proof-of-stake, or PoS, is a consensus mechanism that allows nodes to validate transactions and create new blocks based on the number of tokens they hold rather than on the computational power they possess, as is the case with proof-of-work, or PoW, consensus mechanisms. PoW consensus mechanisms allow nodes to validate transactions and create new blocks based on the number of tokens they possess.
In order to facilitate the creation of decentralized applications (DApps) and smart contracts, Cardano’s architecture is intended to be both flexible and scalable. A multi-layer design is used, with the Cardano Settlement Layer (CSL) and the Cardano Computation Layer making up its components (CCL). While the CCL is in charge of the development of decentralized applications (DApps) and the execution of smart contracts, the CSL is responsible for the settlement of transactions.
Cardano’s multi-layer design and Proof-of-Stake consensus mechanism make it possible for the platform to process transactions more quickly and have a greater transaction throughput than blockchains of the first and second generations. In addition, Cardano intends to solve the problem of interoperability by using an open-source platform that enables communication across different blockchains.
Polkadot, Avalanche, and Algorand are a few more instances of blockchains that are considered to be of the third generation. Polkadot is a platform that supports several blockchains and enables interoperability across various blockchains. A consensus mechanism known as Avalanche-X is used by Avalanche. This mechanism enables both a faster processing of transactions and a higher transaction throughput. The necessity for a leader election procedure is removed thanks to Algorand’s implementation of a Proof-of-Stake (PoS) consensus mechanism and a one-of-a-kind cryptographic protocol known as Pure Proof-of-Stake (PPoS). This lowers the potential for centralized control.
To summarise, blockchains of the third generation, such as Cardano, Polkadot, Avalanche, and Algorand, strive to tackle the problems of scalability, security, and interoperability that have hampered the broad use of blockchain technology. The use of PoS consensus techniques, multi-layer design, and open-source platforms enables them to execute transactions more quickly, increase the throughput of transactions, and communicate across chains. As a result of these developments, blockchains of the third generation are appropriate for use in sectors that call for a high transaction throughput in addition to decentralized and secure systems.
Interoperability in the blockchain:
Interoperability in the blockchain is a term that describes the capacity of distinct blockchains to communicate and collaborate with one another. One of the most notable examples of a blockchain interoperability project is called Cosmos, and it is also known simply as Cosmos. It is a decentralized network with the goal of creating an internet of blockchains, in which different blockchains can communicate with each other and transact with each other without any problems. Proof-of-work and proof-of-stake are two examples of traditional consensus mechanisms; however, Cosmos employs a novel consensus mechanism known as Tendermint, which is intended to be more time and resource effective than these traditional mechanisms.
Tendermint is a Byzantine Fault Tolerant (BFT) consensus method. This means that it requires two-thirds of the validators to agree on a block before it can be added to the blockchain. This guarantees that the network remains secure and intact. This consensus mechanism was developed to be more effective and scalable than traditional consensus mechanisms. As a result, it enables faster transaction processing and higher transaction throughput.
Because Cosmos employs a modular architecture, it enables developers to build their very own blockchains and connect those blockchains to the Cosmos Hub, which serves as a hub for a variety of different blockchains. Several blockchains are able to interact and do business with one another because of the Cosmos Hub’s implementation of the Inter-Blockchain Communication (IBC) protocol. The IBC protocol is a standardized protocol that allows several blockchains to interoperate with one another. This is possible independent of the underlying technology that each blockchain use.
Wanchain, Polkadot, and Chainlink are a few examples of additional blockchain interoperability projects. Polkadot is a platform that supports several blockchains and facilitates interoperability across various blockchains. Oracle networks like Chainlink, which are decentralized, making it possible for smart contracts to access data from the real world. Wanchain is a cross-chain platform that makes it possible for multiple blockchains to interface with and transact with one another.
The issue of interoperability across blockchains is an important one in the development of blockchain technology. Interoperability is vital for the development and widespread implementation of blockchain technology because it allows various blockchains to interact and do business with one another. In order to enable blockchain interoperability and create a decentralized and linked environment for the future, projects such as Cosmos, Polkadot, Chainlink, and Wanchain are now at the forefront of the industry.
The development and progression of the technology behind blockchains have been nothing short of phenomenal. What was once a decentralized kind of digital money has evolved into a form of technology that is radically altering the ways in which people do business with one another. Since its creation, blockchain technology has gone a long way, but we are only starting to scratch the surface of its possible applications. What the future holds for blockchain technology is anyone’s guess at this point, given the emergence of blockchains of the second and third generations, as well as the idea of interoperability across blockchains.