Ever since January of 2009, blockchain technology has been growing and evolving. What was once thought of as a fad, now stands on the brink of changing technology in a way that history will come to see as the time before blockchain, and everything that came after.
Just like Pong started the whole video gaming industry, spurring the technology advances that have changed our lives forever, so has the blockchain as it evolves into something much more than what it started out as. All new concepts go through a process of developing a refined set of advancements along the way, blockchain has been going through this transformation since its inception.
In the beginning, the blockchain was merely the technology supporting Bitcoin. That beginning produced:
- Decentralization of currency and financial transactions
- Decentralization of data/information storage using a distributed, decentralized database
- Eliminated the need for “trusted” 3rd parties to verify transactions
- Resistance to censorship, immutable, and corruption
- Introduced the Proof of Work Consensus Method, which is what makes the blockchain unique as it combines computational processing power through the use of nodes connected to the network. These nodes verify all transactions and secure a public ledger.
Many experts could see that blockchain had a use case that far exceeded Bitcoin’s need. They analyzed the situation by using the same method used to develop the structure of the internet (known as the internet protocol suite or TCP/IP Stack) and saw that blockchain was introducing a radical change to the internet itself, and so the need to act as a platform having its own applications built on top of its core just like Windows OS was built on top of DOS.
However, the Bitcoin blockchain at the time could not fulfill their expectations since the source code did not allow for Turing complete smart contracts. This means that their automated system could not simulate human behavior and prowess.
Vitalik Buterin, a Russian-Canadian programmer, wanted blockchain technology to allow for this level of scripting, and since the Bitcoin blockchain couldn’t scale up enough to make this happen, Vitalik decided to take it upon himself to get it done. In 2014 he put together a little project called Ethereum.
The Ethereum project was an evolutionary step in blockchain technology, which has seen many vast improvements. These improvements allowed for blockchain to become a platform through the concept of a virtual distributed machine. Ethereum and other similar platform projects are known as distributed virtual machines because they can run decentralized applications on their blockchains.
This technology can now program conditional transactions and build Turing complete smart contracts, giving it the ability to emulate human behavior. Another thing that Ethereum brought was the ability to conduct micro-payments, so it can handle small value transactions, which is essential if you want blockchain technology to apply to businesses (as an example) like large retail food chains or coffee houses. With the ability to run applications on top of the blockchain, it introduces the concept of tokenized digital assets. An example of this would be Factbars.
Ethereum also birthed the idea of decentralized organizations (DAO), which is a decentralized corporation running entirely on smart contracts. These would govern finances and company policy on the blockchain. But as the blockchain and companies interweaved there were a few problems that cropped up.
Scalability: How were these blockchains projects supposed to deal with the insane amount of transactions per second when they become widely used?
- Bitcoin blockchain can only handle 7 transactions per second
- Ethereum can handle 15 to 20 transactions per second
- Lightcoin can handle 56 transactions per second
- Ripple can handle 1500 transactions per second
Compared that to Visa, which handles 24,000 transactions per second, you can see the monumental issues blockchains have to solve before they takeover of the world.
- There was also the issue of cross-chain interoperability that if/when these projects became the norm and the services need to interact to create user friendliness amongst the varied applications on different blockchains would be required.
- Another issue was big data and widespread adoption. Would manually programmable smart contracts be something practical to use? How would organizations analyze the big data that blockchains provided?
For these things to happen blockchain technology needs to take another leap forward. One answer is parallel transactions or directed acyclic graph technology, which allows for many parallel streams of data to run at the same time on a network. This has the effect of dividing up the work and preventing a bottleneck that can slow transactions down to a crawl. This also allows for decentralized mining and cuts down on fees.
Sidechains also bring with them another solution. With these, you can transfer a tokenized asset over to another blockchain, which keeps the main blockchain freed up to handle more transactions while the transactions happening on the sidechain won’t be recorded until the users return the assets to the main chain, or a required recording of assets by the main chain occurs.
Cross-chain technology will solve interoperability. Projects such as the Lightning Network, which is still being built, will allow users and assets to communicate and trade withholdings from another blockchain.
It’s always fun to look back at emerging technology to evaluate all the steps it had to go through to get it to where it is today. Just like the days of Pong, which lead to Atari, Nintendo, and then to PlayStation and so on. The blockchain is quickly solving the problems that stand in its way of becoming the biggest thing to technology since the computer.
Today the blockchain is probably a lot like where Atari was in the 80s, we are still at the relatively early stages, but it won’t be long before we see the blockchain reaching into all of our lives. And for those who know how to make the right speculations, the chance to make money while helping this technology grow will be there for the taking. One day we are going to look back and remember the days when blockchain took mass adaption, it’s not that far away, and once we turn the corner, the world is going to be a vastly better place.
—
Which cryptocurrency to invest in? Get our free search report explaining why one blockchain is going to solve a massive problem and make a difference.