Blockchain technology has evolved with time and while it is mostly associated with bitcoin and cryptocurrencies, which is however not wrong, the technology has so much to offer than its use in digital currencies.
The internet altered dramatically as a result of each of these landmark advancements. Each stage was critical in establishing the internet as we know it today. Similarly, one can look back on the evolution of blockchain and divide it into stages denoted by significant advancements and inventions.
Given that blockchain technology has existed for a fraction of the time that the internet has, it is expected that significant advances will continue to occur. Even now, though, analysts have begun to divide the blockchain's history into at least three critical eras.
First Generation - Invention of Bitcoin
The first generation of blockchain is characterized by the invention and adoption of bitcoin after a pseudonym Satoshi Nakomoto released a paper titled Bitcoin: A peer to peer electronic cash system.
The first generation of blockchain is what you might call the "bitcoin era." It’s because it was the time cryptocurrency was first invented. While blockchain technology actually predates bitcoin, it was this digital currency that first made the technology famous. The first generation of blockchain is known for its decentralization and transparency.
This was the first use of blockchain technology and although blockchain technology has advanced to a great extent, one can say according to Satoshi Nakomoto’s design intent, blockchain technology was invented majorly for use as digital currencies.
Second Generation - Invention of Smart Contracts
The second generation of blockchain includes the invention of smart contracts, which are self-executing programs that can be used to verify and enforce contracts between two or more parties. A smart contract could include terms and conditions, as well as if-then statements. Ethereum brought about the second wave of blockchain with its creation in 2015.
The major innovation brought about by Ethereum was the advent of smart contracts. Typically, contracts in the mainstream business world are managed between two separate entities, sometimes with other entities assisting in the supervision process.
Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without an intermediary’s involvement or time loss. They can also automate a workflow, triggering the next action when conditions are met.
Ethereum works more like a cryptocurrency and an entire digital ecosystem giving developers the opportunity to build projects on the Ethereum network. The adoption of Ethereum and smart contracts led to the innovation of decentralized apps (dApps), Decentralized autonomous organizations (DAOs), etc
Third Generation - Internet of Value
The third generation of blockchain has been referred to as "the internet of value" since it allows for information to be transmitted and stored on a decentralized network without having to rely on an intermediary such as a bank.
As much as the first-gen and second-gen of blockchain were viable and proffered solutions to the problems of easy execution of transactions on the internet, they also posed another issue - scalability.
Basically, there are too many people trying to transact and too little space for it on the blockchain. It’s the classic “too many cooks and too little kitchen” problem. Bitcoin remains troubled by transaction processing times and bottlenecks.
Third-gen blockchain projects are designed with this in mind and the technology automatically resolves issues of scaling if they emerge. Essentially, more cake is bought automatically when needed so that no one is waiting for their slice.
Another issue that third-gen blockchain projects solve is interoperability. In the same way that you can’t charge an iPhone with a Samsung charger, the first iterations of the blockchain can’t interact with each other. While it might not sound like a big deal, interoperability is actually crucial for the industry to thrive because, in a world that is ever-growing and evolving, ease of data sharing is considered very important.
Every day, new applications of blockchain technology are found and executed. It's difficult to predict the exact direction in which these advances will take technology and the bitcoin sector in general. As supporters of blockchain, we find this quite exciting; we believe that we are living in a revolutionary era with a groundbreaking technology that is still growing and unfolding.