The Evolution of Blockchain Technology and Crypto

Blockchain technology is the moving force behind cryptocurrencies, but many people don't understand its exact role in crypto. Today, cryptocurrency is rapidly becoming a widely recognized digital asset class, but in 2009, when Bitcoin was launched, blockchains were an enigma to the public.

In this article, we'll have a look at the evolutionary path of blockchain from a theoretical concept to the technology behind multibillion-dollar assets like Bitcoin and Ethereum.

Blockchain Technology in the 20th Century

The idea of blockchains first emerged in the early 1980s as the brainchild of mathematician Ralph Merkle, who invented the Merkle Tree, a method for distributing public keys and digital signatures, which would prove essential for crypto. Computer scientist David Chaum built on this theory and devised a digital system of interconnected computers that could verify transactions in a trustless decentralized system.

Chaum also created DigiCash, an early precursor to crypto, in 1989. However, it was Hal Finey who created the Proof-of-Work (PoW) blockchain concept in 2004. PoW would later become the cornerstone of the Bitcoin blockchain.

The Launch of Bitcoin 

In October 2008, a mysterious developer only known by his online pseudonym, Satoshi Nakamoto, published the Bitcoin whitepaper. Nakamoto laid out the idea of Bitcoin as a decentralized peer-to-peer electronic cash system that uses blockchain technology and the PoW mechanism to facilitate transactions. In short, the PoW consensus mechanism uses miners who act as network nodes with the hashing power of their computers, also referred to as mining rigs. The miners are responsible for validating all transactions, and in return, they get a portion of the newly mined coins.

A few months later, after publishing the BTC whitepaper, Satoshi Nakamoto launched the Bitcoin blockchain and mined the genesis block of the BTC blockchain by himself. Hal Finey was the first person ever to receive a BTC transaction from Nakamoto and was a passionate member of the BTC community. 

The Growth of Crypto Popularity

In the following years, the popularity of Bitcoin exploded, and BTC went from being worth less than a dollar in 2009 to over 1000 USD at one point in 2013. The first Bitcoin exchanges were launched in 2010, and soon after, developers started launching the first altcoins. Most of those coins went bust, but some of them, like Litecoin (LTC) and Dogecoin (DOGE), survived and became some of the top cryptocurrencies on the market today. Thanks to the growth of popularity and coin value, BTC mining was becoming a lucrative business, and soon enough, BTC had thousands of dedicated miners across the globe. 

Contrary to crypto skeptics, Bitcoin didn't turn out to be a scam or a short-lived trend. It became increasingly popular, with many companies starting to recognize its potential, which resulted in the exponential growth of the whole crypto market.

Ethereum Joins the Market

In 2015, Ethereum joined the market. While Bitcoin was mainly used as digital, blockchain-based money or a store of value, Ethereum added a new dimension to blockchain functionalities. Ethereum introduced smart contract programming, allowing developers to launch thousands of decentralized apps (dApps). Instead of just using crypto for payments, Ethereum developers showed the world that blockchain technology can be used to create and launch platforms that can help change numerous industries. 

DeFi and NFTs

Ethereum paved the way for creating decentralized finance (DeFi) as one of the most essential products of blockchain technology. DeFi allows users to easily access a wide range of financial services by connecting their crypto wallets to the appropriate dApp and using services such as crypto staking, yield farming, lending, and borrowing. It's much faster and simpler than using a bank. Also, while banks offer less than 1% annual interest on savings accounts, staking and yield farming showed users that it's possible to earn several percent yearly returns with crypto.

Another critical product of Ethereum is non-fungible tokens (NFTs), which became especially popular during the 2021 bull market, when some of the most popular NFTs were trading for more than 100,000 USD a piece. NFTs are blockchain assets that are one-of-a-kind and have a unique blockchain identity. While a vast portion of NFTs are artwork, NFTs can also be used to tokenize real-world assets such as contracts, documents, land deeds, event tickets, real estate, and much more.

The Rising Prominence of Proof-of-Stake Blockchains

Crypto has had several bull and bear markets throughout the years, during which investments have soared or plummeted. Still, regardless of the price trends, crypto continued to evolve during these market cycles. During the 2021 bull market, numerous high-profile blockchains that use Proof-of-Stake (PoS) technology, like Solana (SOL), Avalanche (AVAX), Cardano (ADA), Polkadot (DOT), and others, gained significant market value. Instead of using miners and a bunch of electricity like Bitcoin's PoW blockchains, PoS networks use staked crypto to ensure the validity of transactions. 

Each node in a PoS network stakes its crypto to guarantee that it will only approve valid transactions. If a node approves a fraudulent transaction, it would automatically lose all of its staked coins. This mechanism consumes way less electricity, and it allows anyone to join the fun and earn some staking rewards by delegating crypto to a staking node. Furthermore, these PoS blockchains introduced numerous blockchain programming functionalities, high speed, scalability, and super-low fees, making them a more efficient alternative to Ethereum.

The Future

The crypto market is quite unpredictable, and digital currencies are highly volatile assets, so there's no way we can predict cryptocurrency's future. However, judging by the historical development of crypto and the exponential growth of global adoption, the blockchain market is here to stay, and crypto skeptics have definitely been wrong to dismiss crypto in the early 2010s.