Blockchain: Past, Present, And Future

Blockchain: Past, Present, And Future

Your friends talk about blockchain, your colleagues talk about blockchain, you heard even your mom saying this word. If you want to know who is blockchain and what does he do, keep reading. This article is particularly aimed at newbies, so if you are familiar with the matter you are most likely to not find something new.

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Your friends talk about blockchain, your colleagues talk about blockchain, you heard even your mom saying this word. If you want to know who is blockchain and what does he do, keep reading. This article is particularly aimed at newbies, so if you are familiar with the matter you are most likely to not find something new.

The beginnings

Now, before we take off with explanations and theories let’s quickly check the events from the recent past that led to the creation of bitcoin and the first blockchain network, eventually. Blockchain is the core technology behind every cryptocurrency you can think of.

Digicash was a cryptocurrency payment system, developed by David Chaum back in 1989. Within the system, all transactions were anonymous thanks to Chaum’s Blind Signature Technology, which was first described by him in 1982. Unfortunately, DigiCash was way before its time and the company filed bankruptcy in 1998.

In 1996 Douglas Jackson created another digital currency and his E-Gold was backed by real gold. During the 1990s many criminals were supposedly connected with E-Gold transactions, money-laundering and other fraudulent activities and the US government shut down the company. Jackson was even forced to plead guilty to money-laundering accusations.

1998 – Two cryptographers, Nick Szabo and Wei Dai created Bit-gold and B-money respectively. Their creations are maybe the closest to what we now call a blockchain. Decentralized systems, which reward miners or in other words, people who devoted computing power that settles the transactions.

Ripple Pay (2004) – Ripple is today one of the big players in the crypto community but back then it was just an exchanging system that practically connected trusted parties.

RPOW – Reusable Proofs of Work – this network allowed participants who share their computing power to receive tokens and trade them between each other.

Fast-forwarding to nowadays

Why everyone praises distributed ledgers (blockchain)? Why even governments and banks are interested in them? Why should we care and why some claim blockchain is the best invention since the birth of the internet?

But, first things first. Bitcoin was the first cryptocurrency to deliver blockchain to the masses. Its network is comprised of interconnected sets of information (transaction) called blocks. So this is where the term blockchain comes from. Each block holds identical copies of the others that make up the bitcoin network. Whenever a change occurs, it automatically gets a cryptographic prove that the person who sends the coins is actually the one who owns them. Since all ledgers record each transaction, it cannot happen more than once. No, you cannot beat the system and spend your tokens twice. Therefore you do not have to know who is sending you digital money nor trust him. The system itself cannot be compromised, so it guarantees each transaction is legal.

Many other cryptocurrencies have emerged from the bitcoin stem. Their developers duplicate the bitcoin blockchain and rework it, thus improving the functionality of the system. However, during the creation process programmers have realized that distributed ledger technologies can be applied in other areas as well. Internet corporations such as Facebook, Google, LinkedIn and many others hold a tremendous amount of personal data. What if we disrupt them with blockchain alternatives?

The Ethereum platform was originally built to settle cryptocurrency transactions but today many startups use it to develop various decentralized applications. For instance, Storj is one of those who preaches that storing your files in numerous places is safer than in one cloud, so what they offer is a decentralized file-storage service. Moreover, renowned companies like JPMorgan also see how distributed ledgers can solve persistent problems like slow transactions for example. Yeah, in the beginning, bitcoin was only alleged of financing crime and money laundering but the core technology underneath it proves to be more than useful.

What about storing important data and classified documents? As of writing, we assume that blockchain is tamper-proof, though understandably this is going to change someday.

But let’s go back to digital currencies once again. When bitcoin was launched in 2009 its software was open source. This means that anyone could take a look at it, modify it, improve it, copy it, etc. Some enthusiasts decided to create a better cryptocurrency. One of them was Charlie Lee, who designed Litecoin, a faster and lighter version of bitcoin. Namecoin was another project and it went a step further. It used the modified bitcoin code to register .bit domains. Why? Because a central authority controls traditional domains and if the authority doesn’t like you, your website will be taken down. In other words, censorship might occur and Namecoin found a way to fight it. Namecoin stores .bit domains on a blockchain and parties who do not have the encryption key cannot seize it.

Because the bitcoin code was designed to handle only payments developers who need other applications either start from scratch or use the Ethereum platform. Ethereum was the first company to deliver smart contracts to the table. How do they work? You and your buddy make a bet who is going to win the Superbowl and input your predictions and your bets in the form of digital coins to the network. After the final, the system checks the result and gives the winner the sum. See? No third party needed, no human intervention needed.

However, blockchain systems can be trusted only in case the cryptographers write the code properly. If they intentionally leave errors, you may have your data stolen or your money stolen. What’s the moral of the story? If the developers are immoral blockchain cannot get your back covered.

We already mentioned that the big sharks are also keeping an eye on distributed ledgers. In fact, they are experimenting with it and the project is called Hyperledger. It involves JPMorgan, The Depository Trust & Clearing Corporation and the Bank of England along with IBM. But it’s not only financial institutions that are flirting with blockchains. Nasdaq OMX company, the one that owns the stock exchange, allows private traders to share stakes via blockchain since 2015. The Australian Securities Exchange relies on blockchain startup Digital Asset Holdings to settle post-trade processes in the Australian equity market.

Where do we go now?

The hype is real, that’s for sure. But are we ready to embrace the change? I mean, not everyone wants their information to stay permanent. Perhaps before distributed ledgers go mainstream some time has to pass. The Internet is our prime source of information now but its foundations were laid more than 70 years ago.

Undoubtedly, we will see a lot of blockchain implementations in the next years. Apart from digital payments that are already common, we might start using decentralized social media, search engines, and file sharing platforms like YouTube for example. Now let’s imagine that each of us has a digital ID. You can use it to open a bank account, to buy an apartment, to start a company, to verify yourself at the airport. The opportunities are just endless.

What if blockchains automate lawyers’ and accountants’ tasks? What if your bequest is on a smart contract and it transfers automatically everything to your heirs when you die? Cryptocurrencies already showed everyone that anonymous and untraceable money transfers are possible and governments cannot disrupt the system. Now it’s up to blockchain developers to justify that this is actually what we need, like and support.