The History of Blockchain
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The History of Blockchain

The History of Blockchain

Let’s take a look back at the history of blockchain technology and the innovations that helped create the decentralization and cryptocurrencies we know today.

The birth of peer-to-peer networks

The concept of a distributed network first started with the idea of peer-to-peer (P2P) sharing of data. A typical P2P network is a network between two or more devices that can collectively store and share files. Each member of the network is called a node and acts as an individual peer. The term peer is deliberately chosen because it implies the absence of a hierarchy within the network, meaning that nodes have equal power while storing and sharing data and there is no “middle man”.

Although P2P isn’t blockchain, the core idea for a distributed network was first established with the creation of ARPANET back in 1969. A precursor to the Internet, ARPANET was a client-server network that initially connected the UCLA, Stanford Research Institute, UC Santa Barbara and the University of Utah, while treating them as equal computing peers. A decade later came the Usenet, which was a distributed messaging system. Fast forward to 1999 and P2P became a household term with the sudden popularization of music-sharing platforms such as Napster, LimeWire and Kazaa. But while all this was going on, someone had already described the idea for blockchain technology in a research paper published 17 years before the Bitcoin whitepaper.

A breakthrough idea, largely unnoticed

The main idea behind cryptographically linking blocks in an append-only data structure was first published in a 1991 academic paper by research scientists Stuart Haber and W. Scott Stornetta. Even though they didn’t look to cryptography as a possible venue for digital money, their paper focused on using a public blockchain system to notarize documents. By storing hash values in a time-stamped block, it can be easily proved that a document existed at a certain time in a certain version. It was clear to Haber and Stornetta that making it hard for documents to be tampered with or backdated will have valuable real-world applications, ranging from registering intellectual property rights to contract arbitration. A year later, in 1992, Merkle trees were incorporated into the idea, moving the whole concept a lot closer to today’s concept of a blockchain. However, as it happens with most breakthrough ideas, this one also went largely unnoticed by the general public until money got involved.

An early Bitcoin prototype

It wasn’t until 2004 when computer scientist and cryptographic activist Hal Finney devised a system for receiving non-fungible, Hashcash-based, proof-of-work tokens and called it Reusable Proof of Work (RPoW). It was now possible to transfer cryptographic tokens from person to person. Solving the double-spend problem was achieved via RPoW by keeping the ownership of tokens registered on a trusted server. The server was designed to allow users throughout the world to verify the transaction ledger’s correctness and integrity in real time.

Enter Satoshi

In 2008 someone with the pseudonym Satoshi Nakamoto published a whitepaper introducing a decentralized peer-to-peer electronic cash system.  It was called, you guessed it, Bitcoin. It was based on the Hashcash proof-of-work algorithm, but Satoshi solved the double-spend problem not with RPoW but with a decentralized P2P protocol for tracking and verifying transaction. This meant that Bitcoins would be “mined” by individual miners for a reward via the proof-of-work mechanism and then verified by the other decentralized nodes in the network. Thus crypto mining was born.

Vitalik strikes back

In 2013, one of the earliest Bitcoin enthusiasts, a programmer by the name of Vitalik Buterin, came up with a brilliant idea. He devised a scripting language for building decentralized applications on the Bitcoin blockchain itself. The Bitcoin community said no, so Vitalik developed a new blockchain-based distributed computing platform and called it Ethereum. It was the first blockchain network that featured a scripting functionality enabling the deployment of smart contracts.

Smart contracts are scripts on the Ethereum blockchain that make it possible for transactions to be executed only if a certain set of conditions have been met.  This was the revolutionary functionality that opened up a world of use cases for blockchain beyond cryptocurrencies and enabled the creation of decentralized applications (DApps) and Decentralized Finance (DeFi). Ethereum’s smart contracts truly took the crypto world by storm and gave birth to a myriad of altcoins in the process.

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Published: 3 months ago 28 min to read

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