Undoubtedly blockchain technology has risen to its prominence with the advent of cryptocurrencies. This is because it is the underlying technology leading to the emergence of cryptocurrencies (of course other technologies are supporting the development of cryptocurrencies). The application of blockchain to various fields even far beyond the concept of cryptocurrencies helps a system or clients participating in a network to attain consensus without having to initiate the level of trust between each other.
A blockchain refers to a software network that is distributed among different participants and it acts as a digital ledger with a mechanism of safely transferring assets without the need for an intermediary (Nofer et al 2017). In other words, it is a database of records that are distributed with records of all transactions or virtual events as they are being executed and later shared among all participating parties. We are all familiar with the internet which has made it possible for its users to easily exchange information digitally. Similarly, blockchain aims to enable the digital exchange of units of value, this ranges from currencies to anything else of value that can be tokenized, stored, and exchanged via a blockchain network (Gupta, 2017).
History of Blockchain
Unlike the popular perspective at the moment that blockchain technology emerged in 2008 after the introduction of Bitcoin by Satoshi Nakamoto, research indicates the technology existed way before this period. Stuart Haber and Scott Stornetta two leading research scientists in 1991 introduced the idea of time stamping digitized documents to avoid tampering or backdating (Anascavage and Davis, 2018). In order to achieve these scientists used cryptography to secure a chain of blocks as a way of storing the time-stamped documents (Anascavage and Davis, 2018). Later in 1992, the system went under further improvement with the incorporation of Merkle trees, and this allowed the integration of several documents into a single block similar to the concept now known as a blockchain. Unfortunately, until 2004 this technology remained unused with no further development leading to the lapse of the technology patents. However, in the same year (2004) Hal Finney a cryptography activist and computer scientist reawakened the use of blockchain technology through the introduction of the Reusable Proof of Work (RPoW) system. The result of the system was achieving the ability to receive a non-exchangeable (non-fungible) Hashcash based proof of work token. Hashcash refers to the Proof of Work algorithm that requires computational work to process data and it’s difficult to produce but remains easy for other participants to verify.
On the other hand, there was the creation of RSA-signed token and this introduced the peer-to-peer transactions. Hal Finney through the RPoW was able to solve the double-spend problem and this was possible through storing the ownership of tokens that are registered on a trusted server (Binance Academy, 2020). Further, the system and design adopted in the server could be accessible by anyone worldwide hence, such participants or users can verify its integrity and correctness in real-time. Therefore, the RPoW concept is an early illustration of the blockchain application and a significant milestone in the development of cryptocurrencies.
In 2008, a person or group under the alias Satoshi Nakamoto introduced a whitepaper titled a decentralized peer to peer electronic system known as Bitcoin to a mailing list of cryptography scientists and technology enthusiasts. The idea was to introduce a currency system using the Hashcash PoW algorithm as well as utilizing hardware trusted computing function noteworthy the RPoW was introduced to Bitcoin hence achieving the alienation of double-spend problem in the network. Besides, this infrastructure was to be provided and governed by a decentralized peer to peer network with the objective of tracking, verifying, and confirming transactions within the network. As a result, the whitepaper described in detail the mining process of Bitcoin with miners earning rewards in the form of Bitcoin using the PoW mechanism and other participants as nodes which are computers decentralized across the world verifying transactions within the network (Nakamoto, 2008).
The first Bitcoin was introduced by Satoshi Nakamoto on 3rd January 2009 through mining the first bitcoin block named block height Genesis with a reward of 50 Bitcoins (Binance Academy, 2020). A block height refers to the number of blocks linked together in a blockchain network. For instance, the initial Block Height was 0 (zero) also known as the Genesis Block.
Thereafter, Satoshi Nakamoto on 12th January 2009 made the first Bitcoin transaction by sending 10 Bitcoins to Hal Finney. Bitcoin is the premier cryptocurrency and the digital asset that led to popularising of the blockchain technology.
Anascavage, R., & Davis, N. (2018). Blockchain technology: A literature review. Available at SSRN 3173406.
Binance Academy. (2020, October 21). What Is Blockchain Technology? The Ultimate Guide. Retrieved December 12, 2020, from https://academy.binance.com/en/articles/what-is- blockchain-technology-a-comprehensive-guide-for-beginners#other-consensus- algorithms
Gupta, S. S. (2017). Blockchain. John Wiley & Sons, Inc.
Nakamoto, S (2008). Bitcoin: A Peer-to-Peer Electronic Cash System Retrieved from https://bitcoin.org/bitcoin.pdf
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