It’s been a few months since I got into the world of cryptocurrencies & Blockchain and I decided to formalize as much as possible what I understood and what I think are the key points of this new technology.
The posts that follow will, therefore, have the purpose of explaining the technology and highlighting its potential uses.
To understand the present we must first know the past.
The word Blockchain appeared for the first time in the Bitcoin code. Not in a magazine, nor in the official paper, but in the code!
So we can say that Blockchain’s story is somehow linked to that of Bitcoin. However, Bitcoin and Blockchain are two distinct things. In fact, while the first one is a digital currency, the second one is the technology behind this currency.
First Forms of Electronic Payment
The first electronic payment idea was born in 1982 by David Chaum, who wrote the paper Blind signatures for untraceable payments. Basically, through Blind Signatures, it was possible to hide the content of a message before signing it. The x message was hidden and sent to a third entity that applied a digital signature before sending the encrypted packet to the recipient.
In 1994, David Chaum founded a company called DigiCash to develop an electronic payment concept based on its paper. The first electronic payment attempt was born 14 years before the idea of Bitcoin.
Time-to-market is crucial and in this case, DigiCash has entered a market that was not ready to accept it. The company failed four years after its foundation.
In 1998 Nick Szabo proposed a form of decentralized electronic payment called “bit gold”. The idea behind bit-gold is very similar to the Blockchain concept. In essence, network nodes should have computational resources available to solve cryptographic puzzles. Most of the network would have to accept the puzzle solution before moving to the next puzzle. Bit gold was never created as a coin, but it remained only theory. Anyway, it can be considered as the basis on which the whole concept of Bitcoin and Blockchain has been built.
Also in 1998, Wei Dai published another paper (“B-money, anonymous, distributed electronic cash system”) where he highlighted the key points to create an electronic payment system:
- Using computational resources and verification methods of “proof-of-work”
- Rewards for computing power allocation
- A public registry that was verified and updated by all members of the network
- All transactions had to be digitally signed and verified by the network
This article was also quoted by Satoshi Nagamoto in his paper on Bitcoin.
Finally, in 2008 Satoshi Nagamoto wrote the paper “Bitcoin: A Peer-to-Peer Electronic Cash System”. In the paper, which I advise everyone to read, is explained the Bitcoin algorithm. Block chain words are not used within the paper, but they appear for the first time only one year later within the code.
In the initial block, Nagamoto left a message “The times 03/Jan/2009 Chancellor on the brink of second bailout for banks”.
The success of Bitcoin
The coin has aroused the curiosity of many since the beginning, and it had its rise with the birth of Silk Road in 2011. Bitcoin, which was initially adopted almost for gaming, had its first chance to be used for the real economy: drug traffic.
The association between Bitcoin and illegality was thus generated. In some ways, we can say that this association was giving him an incredible boost. In fact, in 2013 it reached the highest historical value: $ 1,000.
In the same year, though, the Silk Road was closed by the FBI and the coin collapsed to the value of $ 200. For many, it was the end of Bitcoin. Instead, it was only the beginning.
In fact, Bitcoin was no longer tied to illegal purposes and many companies began to be interested in the currency and in the above technology: the Blockchain.
The birth of Alt Coins
Next came a series of other cryptocurrencies that were then labeled as “Alt Coin”, or Alternative Coins.
The first one was Litecoin, as an alternative to Bitcoin. Faster and more efficient than Bitcoin, it used a different Blockchain, on which nodes could exchange transactions based on the same principle as Bitcoin.
Later in 2015, Ethereum was born. This coin brought Blockchain to another level: the Blockchain 2.0.
We can think about Ethereum as Blockchain’s Cloud. Thanks to Smart Contract, Ethereum allows you to create applications that run on Ethereum Blockchain. You can then create decentralized apps without having your own Blockchain. It is a revolutionary concept that can be seen as the future of this technology.
In the next chapters, we will get into the details of this technology.
- LTC Address: La5f6W1rPr5VHFGCrCmPJ3sSa2AiwKZJbU
- BTC Address: 1FG1j42MUze8jiW7JbgNaUMZxZeu7M1b4f
- Ripple Address: rPVMhWBsfF9iMXYj3aAzJVkPDTFNSyWdKy Tag: 562614972
- ETH Address: 0x0940958167ca9cbd6409999957a011be7907d904