From the first mention of blockchain in 2008, this terms became an extremely hyped buzzword. It’s difficult to find a modern person that didn’t hear about crypto. However, blockchain is a less familiar idea for the overall audience as people prefer not to dive into the tech debris often. The catch is that proper knowledge about the described projects brings advantages in various spheres, including investments and analysis.
This guide is a starting point for all who are interested in decentralized projects. It covers all the main stages of blockchain evolution briefly. By the end of the text, you will be able to answer how we got from one odd cryptocurrency to all-pervading tech that can reshape the entire world.
The Global Idea of Decentralization
First and foremost, it’s essential to grasp what blockchain means, how it works, and why it was invented more than ten years ago.
There are numerous definitions of the term but they all describe one simple essence. For example, Merriam-Webster mentions that blockchain is a base that stores publicly-available information without central authorities. Technically, the system is a chain of blocks store various data and connect to each other via cryptography. Traditional projects have a few primary innovative features:
- Peer-to-peer networks don’t work with central storages but keep information at different machines of all users that want to be involved. People can download the full copy of any chain to act as validators and generators of new blocks. As a result, such networks don’t have central points of vulnerability.
- Crypto systems are created for people. With the lack of central authorities, all users can choose the development direction of their community. This is called consensus. Additionally, participants can check specific data parameters to ensure that a given package isn’t corrupted or modified.
- Blockchain systems can’t be modified retrospectively. As long as all subsequent blocks include every bit of info from previous blocks, any change must be accepted by the entire community. That’s why data in such storages is much safer than in traditional systems.
- Finally, information is protected by advanced crypto principles. The main method is based on the public-key approach. Basically, it’s almost impossible to hack or break the described platforms because of the extreme difficulty of algorithms. Still, frauds can access data at intersections with centralized sites.
Means, the described technology is a new page in the data-related era. Blockchains provide for storing and exchanging information in safer and more transparent ways. But projects also evolve to solve various issues.
Key Generations of Blockchains
From the very first idea stated by Satoshi, decentralized networks changed greatly. Some of the defining principles like immutability and transparency remained the same but a lot of tech things are more innovative now. Reviewed systems are known for poor scalability so developers constantly try to find a solution and these works, directly or indirectly, change the nature of systems. Let’s take a look at five major blockchain stages.
Blockchain 1.0: Currencies
Despite the ideas about decentralized crypto systems were stated before Satoshi, this person (or these persons) created the very first working prototype. Today, a lot of persons think that blockchain is synonymous to Bitcoin but that’s a wrong approach. The latter is the first digital-only money system based on decentralization – cryptocurrency.
Bitcoin represents the first stage of blockchains’ history. It’s the simplest adoption that focuses on quick, secure, and independent from regulative bodies money transfers all over the world. Some projects like Litecoin and Bitcoin Cash chose the same way with the most attention to payments and transfers.
Blockchain 2.0: Applications
However, there were more innovators. Vitalik Buterin described his vision of new platforms in 2013. He blamed mining algorithms and lack of scalability of Bitcoin and also proposed a new product called Ethereum. This system expanded previous ideas beyond and over finances only. Ethereum is referred to three key features, commonly:
- Smart Contracts. Small applications that come with predefined conditions and execute automatically when these conditions are met.
- Software products built on blockchain and for the needs of users. A lot of new crypto projects emerged from Ethereum.
- The Ecosystem for Developers. The community for users who want to create apps, drive the community, and invent new stuff.
Still, the high popularity of this new project turned into its main issue. Similarly to Bitcoin, Ethereum was unsuccessful in solving scalability issues. Moreover, it faced significant problems with the unregulated and often fraudulent activity of various partners that entered this ecosystem with new apps and ideas without real products.
Blockchain 3.0: DAG
It’s difficult to define the third generation because there are different meanings and understandings. One of the necessary conditions includes modern tech basement focused on solving scalability problems and, partially, switching to alternative protocols such as PoS. In addition, the 3.0 stage integrates into traditional industries quickly by adopting blockchains to real needs.
The defining tech that moves these projects forward is called DAG. Unlike traditional chains, this one connects blocks independently, means, they don’t have to be linked subsequently. As well, one block can be related to several other parts. As a result, DAG is much more suitable for large data packages as it can process information quicker.
Blockchain 4.0: Industries and cross-chains
The next two generations are mostly theoretical because even 3.0 real working products are pretty rare, not to mention Blockchain 4.0 and 5.0. But let’s talk about them, too.
Two key focuses of the fourth development stage are:
- Industry blockchain 4.0. Businesses based on automation, ERP, and integration of different systems will benefit from blockchain tools because of higher trustworthiness.
- Cross-chains. With the increasing popularity of different systems, they should become interconnected. In this case, atomic swaps can help.
Right now, developers are far away from both goals. Traditional businesses are cautious about blockchain systems but they start to learn and integrate them slowly. Moreover, there are thousands of different blockchains that exist independently. Cross-chain operations are pretty difficult technically and, hence, rare. But the blockchain 4.0 world is moving towards completing these objectives, undoubtedly.
Blockchain 5.0: World
The final forecasted evolution stage is even less predictable. First opinions on blockchain 5.0 systems include abstract stuff such as “unique tech”, “high speed”, and “innovations”. Say, it can be reached thanks to the money of institutional investors, e.g. large corporations or governments. Most likely, 5.0 projects will be linked with innovative industries such as biotech, aerospace or robotics. Plus, under blockchain 5.0 the world can expect even higher speed and lower network fees.
The community of decentralization enthusiasts is somewhere between blockchain 2.0 and 3.0 now. Traditional Bitcoin/Ethereum approaches can’t satisfy the demands of the growing audience but innovative projects aren’t new standards yet. Further blockchain 4.0 and blockchain 5.0 systems feature even poorer development results but look highly promising. The main trend for the nearest years should include the integration of centralized companies and blockchains.
About the Author
Dmitry Reshetchenko is a Junior Outreach Specialist for Diceus, a technology partner for developing enterprise solutions. He is passionate in his belief that a partnership with IT blogs is of great importance. Dmitry works mostly with Tech blogs.