How Did Blockchain Get Started?

April 17th, 2018

When technological revolutions arrive, they can quickly change the lives of individuals, but sometimes these technologies are taken for granted at first. Technologies that are used today by most people, were also taken for granted when they were first starting out. For example, consider how smartphones have changed how people do everything these days. There was a time not so long ago, when the only phone you could use was attached to a cord (a landline). Now there are businesses that are starting up from people’s phones!

Currently, we’re in the middle of another technological revolution: Blockchain. Not many people are aware of this term, but it is slowly grabbing the attention of millions around the world. Blockchain technology is a distributed database that is continuously growing lists of records called “blocks. Consider what’s happened in just the last 10 years:

  • The first major blockchain innovation was Bitcoin, a new digital currency experiment that first entered the market in 2009. The market cap of this new digital currency is hovering somewhere between $10 to $20 billion dollars. It is being used by millions around the world for making payments in both the large and small-scale markets.
  • The second major modernization was the Blockchain, itself. It was realized that the underlying technology operating Bitcoin’s digital currency system, could be separated and used for all other kinds of inter-organizational cooperation. Now almost all major financial institutes around the world are starting to research Blockchain-by the end of 2020, almost 30 percent of banks will use Blockchain.
  • The third major innovation was the “smart contract” which was embodied in second generation Blockchain system known as Ethereum. This new ethereum smart contract platform has a market cap of around a billion dollars and currently has hundreds of projects in the market.
  • The fourth major innovation is the proof of stake. The current Blockchain systems are secured using proof of work where the group having the largest computing power makes decisions. These groups are known as “miners” and can be found in every corner of the world. The miners operate over large data centers to provide security in exchange for digital currencies. Proof of stake system are expected to take over many outdated systems in many places by the end of the year.
  • Lastly, the fifth major innovation is the Blockchain scaling. In a Blockchain system, every system in the network processes all transactions. This takes time and makes the system slow, with a scaled blockchain the system will accelerate without compromising the security. This system will figure out how many systems are necessary to validate the transaction and divide the work efficiently.

All of these innovations have come to the surface in just the last 10 years from a group of computer scientists, cryptographers, and mathematicians from around the world. As these new technologies infiltrate themselves into society, things may start to get a little weird. With self-driving cars, drones, and other innovative technologies, Blockchain may soon be used to pay for services such using landing pads and charging stations. In the future, international currency transfers will go from taking a few days to mere minutes to be complete.

All of these new technologies and concepts will help to reduce transactions costs. With a drop in transaction costs, there will be a dramatic change in existing business models in different places. For example, auctions were once considered to be local and narrow business endeavors, rather than global, as it is now on popular sites. Blockchain technology is expected to trigger many such changes just as e-commerce sites have done since their inception in the market.

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