Much of blockchain’s life so far has been has in the shadow of bitcoin, the illustrious (or is it notorious) “killer app” of blockchain. Yet blockchain may end up a much larger part of history than any individual cryptocurrency.
To understand blockchain’s role, think of it as a distributed, digital ledger of transactions. For a given activity or industry using blockchain to record its operations, transactions made as part of that activity are grouped together in blocks. The blocks are linked one after the other to form a chain. Each block securely references the preceding block. The complete chain of blocks is replicated over a distributed network of independent computers. These aspects make blockchain practically tamperproof.
In fact, blockchain itself is history – an immutable, unfalsifiable record of transactions from the past to the present day. But let’s get back to our history of blockchain. There have been three main stages so far.
In October 2008, blockchain is used as the underlying principle driving the virtual currency of bitcoin, invented by “Satoshi Nakamoto” (whose identity has never been revealed). Bitcoin, also known as a digital currency or cryptocurrency, has been the most successful application of blockchain so far. The tradeable value of the bitcoin has now risen far above its initial value when launched.
Next, various people and entities (IT engineers, enterprises, others) realize that blockchain on its own is also a powerful technology. It can be used independently from bitcoin for other operations needing a decentralized system to record transactions and protect against fraud. Other cryptocurrency schemes start to appear. Visionaries begin to dream up other non-financial ways to use blockchain.
In December 2013, the concept of the Ethereum platform makes its appearance, offering blockchain capability for virtually any utilization. The platform enables so-called “smart contracts”, which are software programs executing legal and business contracts. Smart contracts begin to be used in applications as diverse as the supply of solar energy and sale of music.
Since the arrival of Ethereum and smart contracts, startups have offered many ideas for using blockchain. Major industry players like IBM and Walmart now use it, even if applications are still somewhat niche. Overall, blockchain seems to be slowly but surely moving to stage 4 of its history, that of mainstream adoption.