Blockchain Basics 3 – A Snapshot History of Blockchain

carusovc/ November 12, 2017/ Blockchain Basics/ 0 comments

If you haven’t read part two yet, Breaking Down the Blockchain, click here.

The history of blockchain is an interesting story with many twists and turns that impact its identity as a living and dynamic technology that is changing our world. Although this post is not intended to be an one-stop encyclopedia of blockchains history, I hope to cover some of the key aspects that have helped shaped blockchain into what it is today. Let’s jump in!

A need for a decentralized revolution

To understand the origins of blockchain and how advanced the technology was for its time, we need a bit of context. The year was 2008. The emerging technology of the time included the release of Apple’s App Store as well as the first Android model smart phone. Services such as Hulu and Netflix were just starting out and the world was primed for the mobile and decentralized revolution.

In parallel to all of the emerging mobile tech, the world was also experiencing an economic phenomena. The U.S. housing market was crashing at a head-spinning rate putting thousands out of work and challenging the trust that large financial institutions were supposed to stand for. The worst recession since 1930 combined with ever increasing decentralized technologies created the perfect ecosystem for innovation…and that’s exactly what happened.

Satoshi’s Whitepaper

In the early 1980s, a quiet and secretive movement began to impact society and politics around the world. This movement was carried out by individuals who identified only as ‘Cypherpunks.’ Cypherpunks believe in utilizing the power of cryptographic encryption and other technological means to bring about social and political change. In November of 2008, an individual identified only by the pseudonym Satoshi Nakamoto released a paper unlike any other, changing the course of technology forever.

Bitcoin: A Peer-to-Peer Electronic Cash System

This white-paper was a proposal for a decentralized method of exchanging value via a cryptocurrency called Bitcoin. The paper details the logic and math behind a system where individuals could transfer value directly without using a 3rd party or other trusted intermediaries. While Bitcoin and other blockchains today have changed and evolved to meet demands, the core tenants they use are all derived from this exact paper. Soon after, in 2009, Nakamoto published the source code to his Bitcoin system, launching the first official blockchain. Only a year or so later, Satoshi Nakamoto, having accumulated an estimated 1,000,000 bitcoins disappeared without a trace. In the years after, many groups tried to discover who the real Nakatomo was, even calling out other cypherpunks such as the well-known Hal Finney. Even to this day, the identity of Satoshi Nakamoto is unknown, the Bitcoin whitepaper being the last remaining evidence that Satoshi ever existed.

Bitcoin’s Evolution

Only one year after the original Bitcoin code was released, the technology was beginning to be adopted at a rapid rate. The first Bitcoin exchanges were being formed allowing people to transfer fiat money (such as a U.S. dollar) into this new cyber form currency. Vendors and merchants were beginning to accept Bitcoin as a method of payment for goods and services. While Bitcoins usage was becoming more and more popular, it didn’t occur without its roadblocks. Throughout the years technical glitches or problems with scalability would force core developers to implement software updates, impacting every individual connected to the blockchain. These so-called software ‘forks’ cause massive amounts of tension within the blockchain communities and will be discussed in a later section. On top of these polarizing forks, many pioneering institutions in the industry would face unfortunate ends, testing the viability of Bitcoin.

One Bitcoin trailblazer was a Japanese startup, Mt. Gox. Mt. Gox, founded in 2010, was at one time the #1 Bitcoin exchange in the world, trading a record 70% of all Bitcoins in circulation. However, in early 2014, Mt. Gox suspended all trading and filed for bankruptcy announcing that approximately $450 million worth of Bitcoin had gone missing. This loss (or assumed theft) of Bitcoins shook the industry causing mass doubts in the safety and reliability of the technology.

Another one of the most infamous early applications of Bitcoin was the Silk Road. The Silk Road, launched in 2011, was a online dark web site where individuals could anonymously buy and sell any number of illegal items such as drugs and weapons. However, in October of 2013, the FBI shut down the website and arrested its founder Ross Ulbricht. Ulbricht was sentenced to life in prison without a possibility of parole.

While many of these early adopters faced unfortunate ends, they were the pioneers of Bitcoin’s adoption, proving it to be a viable method for Peer to Peer transactions. Bitcoin’s popularity continued to grow exponentially. Many startups started to jump on the Bitcoin bandwagon, surging the price of Bitcoin to ever increasing All Time Highs (ATH). Bitcoin would continue this path for the next 4 years, becoming a staple of technology revolutions. The below graph, taken for Coinmarketcap shows the rise in value of Bitcoin illustrating the ever-increasing adoption of this new technology.

Bitcoin’s Current State and Substitute Blockchains.

Today, Bitcoin is the #1 use of blockchain around the world. Bitcoin has grown from being hundredths of a cent in value to peaking above $7,600 in November of 2017. Thousands of firms large and small are all researching and developing applications for their own blockchain. Applications include government and voting accountability platforms, music ownership systems, and micro-payment channels. Bitcoin and blockchain have become one of the hottest new technologies out there and it doesn’t seem like the intrigue will die down anytime soon. While Bitcoin is the most popular use of the blockchain, it is not the only one. Many other systems have been released such as Ethereum and Litecoin, set on fixing some of Bitcoin’s core issues. While these substitutes will not be discussed here, later posts will give detailed analysis of these so called alternative coins AKA ‘Alt-Coins.’ Moving forward we will dive into the technical details of Blockchain to give you a better understanding of what goes on under the hood. Please keep an eye out for the last part in the Blockchain Basics series, coming soon. Thanks!

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