The beginning
The concept of blockchain technology was first presented in 1991 by research scientists Stuart Haber and W. Scott Stornetta, who devised a computationally efficient method for time-stamping digital documents to prevent forgery or backdating.
The time-stamped documents were stored in the system using a chain of cryptographically secure blocks, and Merkle trees were added to the design in 1992 to make it more effective by allowing several documents to be gathered into a single block. Nevertheless, this technique was never implemented, and the patent expired in 2004, four years before Bitcoin was created.
Reusable Proof Of Work (PoW)
Reusable Proof of Work, or RPoW, is a mechanism that Hal Finney (Harold Thomas Finney II), a computer scientist and cryptographic activist, presented in 2004. Receiving a non-fungible or non-exchangeable Hashcash-based proof of work token, the system created an RSA-signed token in response that could be passed from one person to another.
By maintaining the ownership of tokens recorded on a trusted server that was created to enable users all over the world to check their accuracy and integrity in real time, RPoW was able to resolve the double spending problem.
In developing cryptocurrencies, RPoW can be considered an early concept and a key first step.
The Bitcoin network
A person or group using the alias Satoshi Nakamoto submitted a white paper to a cryptography mailing list in late 2008 outlining the decentralized peer-to-peer electronic cash system known as Bitcoin.
The double spending security in Bitcoin was given via a decentralized peer-to-peer protocol for tracking and confirming the transactions, which was based on the Hashcash proof of work algorithm as opposed to employing a hardware-trusted computing function like the RPoW. In short, the proof-of-work process is used by individual miners to “mine” Bitcoins in exchange for a reward, and the network’s decentralized nodes subsequently confirm the transaction.
Bitcoin was created on January 3rd, 2009, when Satoshi Nakamoto mined the first block, for which he received a reward of 50 bitcoins. Hal Finney was the first Bitcoin user; on January 12, 2009, Satoshi Nakamoto gave him 10 bitcoins in the first bitcoin transaction ever.
Ethereum
Programmer and co-founder of the Bitcoin Magazine Vitalik Buterin claimed in 2013 that Bitcoin required a scripting language for creating decentralized applications. Lacking support from the community, Vitalik began work on Ethereum, a new blockchain-based distributed computing platform that included a scripting capability known as smart contracts.
On the Ethereum blockchain, smart contracts are scripts or programs that are deployed and run. They can be used, for instance, to conduct a transaction if specific criteria are met. Specific programming languages are used to create smart contracts, which are then translated into bytecode by a decentralized Turing-complete virtual machine known as the Ethereum virtual machine (EVM) and read and executed by it.
Additionally, programmers can create and publish applications that work inside the Ethereum blockchain. These programs are typically referred to as DApps (decentralized apps), and the Ethereum blockchain now hosts hundreds of DApps, including social media sites, gaming platforms, and money exchanges.
Ether, the Ethereum cryptocurrency, is a digital asset that can be moved between accounts and is used to cover the costs associated with the computing power required to carry out smart contracts.
Blockchain technology is currently attracting a lot of public interest and is already being used in many other applications outside of cryptocurrency. Watch our other films on Binance Academy for additional details on blockchain and other fascinating subjects.
