What came first the Chicken or the Egg?
We are not here to really discuss chicken or eggs but to gain an understanding of the birth of a technology that is changing the world. There are numerous viewpoints on whether Bitcoin would be possible without a blockchain and there are numerous viewpoints on whether a blockchain would have been possible with Bitcoin. But what about P2P protocols, or encryption or coding.
A recipe is only as good as its ingredients.
Consider that food for thought.
So did the real innovation come out as Bitcoin or was it the P2P networking protocols that created a blockchain? Are these equally important, mutually exclusive or perhaps even neither?
This is one of those question I routinely get and perhaps the way I look at is different than yours. Its clear they are complimentary to my understanding.
Figure 1 The chicken or the egg?
Let’s review and let you decide what is more important or are they equal.
In 2008 a whitepaper was released about a cryptocurrency named Bitcoin by an alias named “Satoshi Nakamoto”. Then in January of 2009 Bitcoin went live by creating its genesis block and the rest is history.
Essentially, the egg was laid to create what could likely be one the centuries greatest enterprise focused innovations.
Since 2009 blockchain technology has been clearly evolving and the number of blockchain platforms has exponentially multiplied. This technology is clearly growing in demand for technical expertise as well as enterprise intent in implementing blockchain is not slowing down. Bitcoin was meant to transfer value without intermediaries.
To be fair not every is a use case fit for blockchain. For example, Bitcoin, has done well but one important factor limiting its future growth is the transactions per second. (TPS), Transactions just don’t scale in the current platforms past a certain point. This is important to understand since this will limit the use cases for blockchain. Below is a chart from chapter one we discussed.
The main challenge for blockchains is that some use cases are not really the right use case right now. Perhaps, with technologies such as Hashgraph or with a new “Lightning Network” we may see greater scalability.
Figure 2 Comparing Transactions
So, lets finish up the article by reviewing where the blockchain industry started from and where we as an industry are likely going. Some of the best technical innovations are fostered by brutal competition of which is started under duress. Duress in the sense that the blockchain market space has had to readjust due to the crypto crash in 2018. ICO’s have dissipated and the market cap of the 2000 plus tokens/coins have significantly been reduced.
This to be fair and honest was exactly was needed to start eliminating the weaker players. The weaker players some of which were essentially blatant frauds that showed no value were giving the blockchain industry a bad reputation. This was true even though enterprise blockchains had nothing to do with this boom and bust.
The media as well as the blockchain industry has done a poor effort in distinguishing blockchains and cryptocurrencies. Even CEOs of large banks were clearly documented running amuck on these subjects
We as IT Professionals, Sales Professionals, Consulting Organizations or other interested parties in the blockchain world have a vast number of possibilities for both business and career growth. Its more of a question of having the foresight of where we started from and where we can go from here. Not an easy task with all the noise out there.
Blockchain History Review
Bitcoin had started the blockchain revolution and brought the world a slew of new contenders, Ethereum, Hyperledger and Corda are continuing it. Players such as Quorum, IOTA and others are continuing the innovations. Historically, its been realistic to expect competition to bring on innovation. Innovation brings on interest to the technology. Interest generally brings demand.
We know that in 2008 a whitepaper was released about a cryptocurrency named Bitcoin by an alias named pseudonym of “Satoshi Nakamoto” It was first made known in the year 2008 in a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”. Then in January of 2009 Bitcoin went live by creating its genesis block and the rest is clearly documented in history.
Initially, blockchains appeared to be developed only to support cryptocurrencies but that of course has changed. Blockchains need to be thought of as the enabler and the applications that are using it are being enabled. Before we discussed other platforms let’s review Bitcoin.
It is important to note again some of the most important purposes a blockchain serves are:
- Recording transactions
- Establishing identity
- Establishing contracts.
- Validating the truth
Let’s Look at Bitcoin.
Bitcoin was started in 2008 right at the height of the financial crisis. It was really created to bypass the current financial structure which most would agree is clearly corrupt and not very user friendly.
In 2009 the first genesis block was written in January 2009 by Satoshi. You can of course view this in a blockchain explorer.
From the release of Bitcoin, we know that it introduced some great benefits.
- Transactions that occur decentralized and not centralized
- Removed the need for intermediaries. This created both economic and structural efficiency.
- Censorship resistance since its transaction ledger is immutable.
- Transparency was provided by a blockchain explorer.
- Used a Proof of Work(PoW) consensus which is inefficient, but it’s been effective for the Bitcoin mission.
Bitcoin was effective for what it was designed to do, but it was not the right platform for creating a platform for Turing complete smart contracts. One added value that Bitcoin provided was that it had shown that the possibilities of changing how the internet worked could be used. Using a P2P platform could possibly use an automated system that would simulate human behavior and make decisions based on logic. This we know as “smart contracts”.
Ethereum would be laid as the foundation for this and the rest is history and that will be the next article on the history of blockchains.
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