History Of Blockchain Technology:
A Detailed Guide to Blockchain technology has to be one of the biggest innovations of the 21stcentury given the ripple effect it is having on various sectors, from financial to manufacturing as well as education. Unknown to many, is that the history of Blockchain dates back to the early 1990s.
Since its popularity started growing a few years back, a number of applications have cropped up all but underlining the kind of impact it is destined to have as the race for digital economies heat up. In this discussion, we’ll learn about the history of Blockchain with Blockchain evolution.
1991-2008: Early Years of Blockchain Technology
How did blockchain emerge? Stuart Haber and W. Scott Stornetta envisioned what many people have come to know as blockchain, in 1991. Their first work involved working on a cryptographically secured chain of blocks whereby no one could tamper with timestamps of documents.
In 1992, they upgraded their system to incorporate Merkle trees that enhanced efficiency thereby enabling the collection of more documents on a single block. However, it is in 2008 that Blockchain History starts to gain relevance, thanks to the work one person or group by the name Satoshi Nakamoto.
Satoshi Nakamoto is accredited as the brains behind blockchain technology. Very little is known about Nakamoto as people believe he could be a person or a group of people that worked on Bitcoin, the first application of the digital ledger technology.
Nakamoto conceptualized the first blockchain in 2008 from where the technology has evolved and found its way into many applications beyond cryptocurrencies. Satoshi Nakamoto released the first whitepaper about the technology in 2009. In the whitepaper, he provided details of how the technology was well equipped to enhance digital trust given the decentralization aspect that meant nobody would ever be in control of anything.
Ever since Satoshi Nakamoto exited the scene and handed over Bitcoin development to other core developers, the digital ledger technology has evolved resulting in new applications that make up the blockchain History.
A very common question, when was blockchain invented? we see can say Blockchain was invented in 1991.
2008-2009: Bitcoin and blockchain get their start
In 2008, Satoshi Nakamoto published a white paper introducing the concepts behind bitcoin and blockchain. Nakamoto is thought to be a pseudonym used by the individual — or group of individuals — who proposed the technology. Blockchain infrastructure would support secure, peer-to-peer transactions without the need for trusted third parties such as banks or governments, according to white paper. Nakamoto’s true identity remains a mystery, but there has been no shortage of theories.
The bitcoin/blockchain architecture introduced in 2008 built on technologies and concepts from the previous three decades. Nakamoto’s design also introduced the concept of a “chain of blocks.” This made it possible to add blocks without requiring them to be signed by a trusted third party. In fact, Nakamoto defined an electronic coin as a “chain of digital signatures,” where each owner transfers the coin to the next owner. According to his white paper, this is done by “digitally signing a hash of the previous transaction and the public key of the next owner and adding these to the end of the coin.”
But Nakamoto’s white paper was just the beginning. In 2009, bitcoin went from concept to reality.
- 3, 2009. Nakamoto mined the first bitcoin block, validating the blockchain concept. The block contained 50 bitcoins and was known as the Genesis block — aka block 0.
- 8, 2009. Nakamoto released Bitcoin v0.1 to SourceForge as open source software. Bitcoin is now on GitHub.
- 12, 2009. The first bitcoin transaction took place when Nakamoto sent Hal Finney 10 bitcoin in block 170.
- 12, 2009. The #bitcoin-dev channel was created on Internet Relay Chat for bitcoin developers.
- 31, 2009. The first bitcoin exchange — Bitcoin Market — was established, enabling people to exchange paper money for bitcoin.
- 22, 2009. Nakamoto launched the Bitcointalk forum to share bitcoin-related news and information.
Nakamoto set up the system so there would never be more than 21 million bitcoin. More than 18 million have already been mined. Based on the current rate of mining, bitcoin should reach the 21-million limit sometime around 2140. In the meantime, their value continues to grow, despite continuous fluctuations in price. In October 2009, a bitcoin was worth less than 1 cent. Today, each bitcoin is worth more than $35,000 (USD).
2010-2012: Bitcoin and cybercurrency take hold
On May 22, 2010, bitcoin made history when Laszlo Hanyecz paid 10,000 bitcoin for two Papa John’s pizzas. The pizzas were valued around $25, a trade that would now be worth more than $350 million.
Not long after, a programmer named Jed McCaleb launched Mt. Gox, a Tokyo-based bitcoin exchange. Mt. Gox was short for Magic: The Gathering Online eXchange — a carryover from a fantasy card game. At its peak, Mt. Gox handled more than 70% of all bitcoin transactions. But in August 2010, a hacker exploited a bug in the blockchain code and created more than 184 billion bitcoin in block 74,638, tarnishing bitcoin’s reputation. Nakamoto published a new version of the bitcoin software, but by the end of the year, he disappeared from the bitcoin scene completely.
Despite Nakamoto’s disappearance, the bitcoin trajectory continued at a steady pace. By the end of January 2011, one-quarter of the 21 million bitcoin had been mined. And by early February 2011, the value of a bitcoin was equal to the U.S. dollar. Shortly thereafter, Jed McCaleb sold Mt. Gox to Mark Karpelès. And soon after that, bitcoin reached parity with the Euro and British Pound Sterling. Later that year, WikiLeaks started accepting bitcoin donations. However, Mt. Gox was hacked and bitcoin was stolen, causing an artificial drop in value and resulting in suspension of trading. Then in October 2011, Litecoin was released, representing one of the earliest bitcoin spinoffs.
By 2012, the taste for cryptocurrencies was well established. The bitcoin price hovered around $5 for most of the year, with many fluctuations up and down. Early that year, Mihai Alisie and Vitalik Buterin launched Bitcoin Magazine and published their first issue in May. The Bitcoin Foundation was also established to promote bitcoin and improve public perceptions.
That same year, Coinbase raised more than $600,000 in its crowd-funded seed round, leading the way to become one of the top bitcoin exchanges. In addition, Chris Larsen and Jed McCaleb founded OpenCoin. This led to the development of the Ripple transaction protocol for currency transactions and real-time payments.
2013-2015: Ethereum and blockchain rise to fame
When 2013 arrived, bitcoin was well-established and continued on its upward trajectory. In February, Coinbase reported selling $1 million worth of bitcoin in a single month at more than $22 each. By the end of March, with 11 million bitcoin in circulation, the currency’s total value exceeded $1 billion. And in October of that year, the first bitcoin ATM launched in Vancouver, B.C.
But it wasn’t all good news for digital currency. Both Thailand and China banned cryptocurrencies. The U.S. Federal Court seized Mt. Gox’s funds in the U.S. And the FBI shut down Silk Road, confiscating 26,000 bitcoin.
Despite these setbacks, one of the most important events in blockchain’s history occurred. Vitalik Buterin, co-founder of Bitcoin Magazine, published a white paper that proposed a decentralized application platform. This led to the creation of the Ethereum Foundation, which launched in 2014. Ethereum paved the way for blockchain technology to be used for purposes other than cryptocurrency. It introduced smart contracts and provided developers with a platform for building decentralized applications.
The year 2014 was a turning point for blockchain, as financial institutions and other industries began to recognize and explore its potential, shifting their focus from digital currency to the development of blockchain technologies.
But this didn’t push bitcoin out of the limelight. The UK tax authority classified bitcoin as private money. The Mt. Gox bitcoin exchange filed for bankruptcy. And the Bitcoin Foundation vice chairman was arrested for money laundering. Even still, several companies accepted bitcoin by the year’s end, including the Chicago Sun-Times, Overstock.com, Microsoft, PayPal and Expedia. Bitcoin’s acceptance only added fuel to the blockchain fires.
In 2015, the Ethereum Frontier network launched, enabling developers to write smart contracts and decentralized apps that could be deployed to a live network. Ethereum was on its way to becoming one of the biggest applications of blockchain technology. It drew in an active developer community that continues to this day.
But other important events also occurred that year. NASDAQ initiated a blockchain trial. The Linux Foundation launched the Hyperledger project. And nine major investment banks joined forces to form the R3 consortium, exploring how blockchain could benefit their operations. Within six months, the consortium grew to more than 40 financial institutions.
2016-present: Blockchain goes mainstream
Today, a growing number of industries view blockchain as a valuable technology — separate from bitcoin or other cybercurrencies. Despite this trend, however, each year from 2016 to present had its ups and downs.
- The word blockchain gained acceptance as a single word, rather than being treated as two concepts, as they were in Nakamoto’s original paper.
- The Chamber of Digital Commerce and the Hyperledger project announced a partnership to strengthen industry advocacy and education.
- A bug in the Ethereum decentralized autonomous organization code was exploited, resulting in a hard fork of the Ethereum network.
- The Bitfinex bitcoin exchange was hacked and nearly 120,000 bitcoin were stolen — a bounty worth approximately $66 million.
- Bitcoin hit a record high of nearly $20,000.
- Japan recognized bitcoin as legal currency.
- Seven European banks formed the Digital Trade Chain consortium to develop a trade finance platform based on blockchain.
- Approximately 15% of global banks used blockchain technology in some capacity.
- Bitcoin turned 10 this year.
- Bitcoin value continued to drop, ending the year at about $3,800.
- The online payment firm Stripe stopped accepting bitcoin payments.
- Google, Twitter and Facebook banned cryptocurrency advertising.
- South Korea banned anonymous cryptocurrency trading but announced it would invest millions in blockchain initiatives.
- The European Commission launched the Blockchain Observatory and Forum.
- Baidu introduced its blockchain-as-a-service platform.
- Walmart launched a supply chain system based on the Hyperledger platform.
- Amazon announced the general availability of its Amazon Managed Blockchain service on AWS.
- Ethereum network transactions exceeded 1 million per day.
- Blockchain research and development took center stage as organizations embraced blockchain technology and decentralized applications for a variety of use cases.
- Nearly 40% of respondents incorporated blockchain into production, and 55% viewed blockchain as a top strategic priority, according to Deloitte’s 2020 Global Blockchain Survey.
- Ethereum launched the Beacon Chain in preparation for Ethereum 2.0.
- Stablecoins saw a significant rise because they promised more stability than traditional cybercurrencies.
- There was a growing interest in combining blockchain with AI to optimize business processes.
Throughout these five years, there was a growing interest in using blockchain for applications other than cybercurrency. This trend continues into 2021 as governments and enterprises look to blockchain to handle a variety of use cases. This includes voting, real estate, fitness tracking, intellectual rights, the internet of things and vaccine distribution. Moreover, multiple cloud providers now offer blockchain as a service, and the demand for qualified blockchain developers is greater than ever.
The future of blockchain technology
Trying to predict the future of any technology is never easy, and blockchain is no different — especially since its history is so short. However, if blockchain continues on its current path, it affects many industries — including retail, mining, travel, healthcare, education, agriculture and entertainment. The biggest effect might be in financial services, especially with the growing movement toward decentralized finance, which uses permissioned blockchains to handle complex financial use cases. Governments will also likely continue to embrace blockchain.
As universities, governments and private corporations continue to research and invest in blockchain, the technology will only improve. But they must first address the challenges that blockchain brings — particularly regarding security, privacy, scalability and interoperability. Blockchain is also not suited to every use case, and business must evaluate deploying it before investing in the technology and putting it into production.