Blockchain technology has come a long way since its creation. What started out as the backbone of Bitcoin has evolved into a force that has expanded beyond cryptocurrency, moving its way into traditional finance and even healthcare.
In this blog we are going to explore the beginnings of the blockchain, how it has evolved over the years and what the future may hold for it.
Where it all started. The foundation of Bitcoin.
Blockchain technology first came onto the scene in 2008. An unknown person introduced the world to the Bitcoin whitepaper. This whitepaper showed the world a decentralised digital currency system that used a digital ledger to record transactions securely and with complete transparency. Unlike the traditional finance system that the world was used to, which relies on a person or an authority to verify transactions, Bitcoin used a peer-to-peer network to achieve the verification of transactions.
This proposed system removed the problem of having to trust a third party to verify a transaction honestly. These transactions would be verified by a network of participants through a process called Proof Of Work (PoW) where instead of a person, or group verifying a transaction, they would now be verified by computational power to ensure security.
This resulted in the creation of a transparent, censorship resistant system. This was the first of its kind and the first real introduction to the world of blockchain technology.
The introduction of Ethereum and smart contracts.
While the introduction of Bitcoin was revolutionary, it did have its own set of limitations. Once these had been established, in 2015 Vitalik Bulerin created one of the most popular, current cryptocurrencies to address this. This was of course, Ethereum.
Ethereum greatly expanded the possibilities of the blockchain beyond simple transactions. Ethereum introduced the concept of smart contracts. These are self-executing contracts, with a clear set of predetermined rules coded into them.
These smart contracts allowed developers to build decentralised applications (DApps) on the blockchain, opening the door for new use cases such as decentralised finance (DeFi), gaming and supply chain management. Ethereum’s ability to host programmable contracts changed the blockchain forever. From being a mere ledger for transactions, the blockchain became and eco-system of decentralised innovation.
The drawback of popularity and the beginning of layer 2 solutions.
As the blockchain became increasingly popular, so did the demand for its resources. This became a big issue, with the cost and time of transactions increasing drastically. Bitcoin and Ethereum both faced challenges that came down to the added time and ever-increasing cost of fees for processing transactions due to the congestion on the networks.
This led directly to the development of “Layer 2” solutions. These aimed to enhance the efficiency of the blockchain and in hand reducing the waiting time and the high fees.
The lightening network upgrade for Bitcoin and solutions such as Polygon and several large upgrades to Ethereum helped manage these problems by processing transactions off-chain, or by adding multiple transactions together and then recording them on the blockchain in one go. These improvements all helped reduce transaction times and reduce costs, moving the blockchain even more into the limelight and proving it has the potential to be embraced into mainstream adoption.
The rise of decentralised finance.
One of the biggest breakthroughs in blockchain’s evolution came with the emergence of decentralised finance (DeFi). Platforms such as Uniswap, AAVE and Compound used Ethereum’s smart contracts to create an open financial system that allowed its users to lend and trade assets without the need for a “middle man”.
Around the same time, Non-Fungible Tokens (NFTs) exploded into the crypto space, taking the digital world by storm. NTF’s allowed creators to monetise their own digital art, music and collectables. NFT marketplaces such as OpenSea and Rarible saw unbelievable growth, catapulting blockchain technology into the mainstream, even more so than previously seen. This once again showed the overwhelming potential of the blockchain to investors all around the world, and forced some groups of people who had previously dismissed blockchain technology as a “fad” to start taking it a little more seriously.
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What does the future hold? The start of Web3 and the Metaverse.
Taking a sneak peak into the future, blockchain technology is expected to play a critical role in the Web3 space. You can think of Web3 as the next step in the internet. Unlike the current web, dominated by centralised tech companies, Web3 hopes to introduce a decentralised digital space where users have total control over their own data and digital footprints.
Blockchain based social media platforms, decentralised autonomous organisations (DAOs) and privacy-preserving applications are ready to completely change how the average users interact online.
Adding to this, blockchain technology is being heavily integrated into the Metaverse. The Metaverse is a virtual world, where people can work, socialise and conduct business transactions using digital assets and smart contracts. Companies such as Met and Decentraland are investing a lot of money into blockchain powered economies, showcasing its potential beyond the traditional applications.
Crypto Analyst’s Final Thoughts.
Blockchain technology has already evolved from a miche experiment to a pillar of the digital economy. From the simple beginnings of Bitcoin, the introduction of Ethereum and smart contracts and the rise of DeFi, NFTs and finally Web3, blockchain technology continues to change our views on the world and push the boundaries of whats possible in the digital space.
As we watch the technology advance and take shape in todays world, blockchain’s influence is continuing to grow, paving the way for a decentralised future where trust, transparency and anonymity are the major priorities.
Whether you are looking at it from a financial standpoint, digital identities or looking at the Metaverse, blockchain technology is poised to reshape some of the biggest industries in the world and change the way all of its users interact with technology for years to come.