Blockchain has been a story of one innovation to another. From 2009 to 2020 blockchain has evolved from just producing a digital currency to a platform for building applications with real world use.
What is Innovation?
Wikipedia defines innovation as the application of better solutions that meet new requirements, unarticulated needs, or existing market needs. This in a nutshell is what blockchain technology has done over the years, by providing better improved solutions built on already existing architecture that meets new requirements and existing needs.
Was Bitcoin the First Mover?
Bitcoin was the first mover in regards implementing cryptocurrency and blockchain technology but Bitcoin wasn’t the first move at creating a digital currency. During my research I found out that there were other electronic currencies before bitcoin like Digicash, eGold, Bit-gold, etc.
Innovation the Driving Force Behind Everything
Innovation is the driving force behind every technology including blockchain. Looking back in history the Wright Brothers (Wilbur and Orville) invented the airplane but the airplanes we have today are different due to innovations over the years.
We can also say the same about computers. Computers literally passed through innovative phases like vacuum tubes, transistors to integrated circuits. The story is the same in every industry from electronics, fashion, finance to automobiles.
Brief History of Digital/Electronic Currencies
Bitcoin is an innovation from the first forms of digital/electronic currencies like Digicash, e-Gold and Bit-gold. Let’s take a brief look at these electronic currencies.
DigiCash Inc was an electronic money corporation founded by David Chaum in 1989. DigiCash transactions were unique because they were anonymous due to the use of certain cryptographic protocols. DigiCash declared bankruptcy in 1998 and subsequently sold its assets to eCash Technologies, another digital currency company.
The e-gold system was launched in 1996. e-Gold was a digital gold backed currency operated by Gold & Silver Reserve Inc(G&SR) under the name e-Gold Limited. e-Gold allowed its users to open an account on their website which was being denominated in grams of gold or other precious metals and also gave its users the ability to make instant transfers of value (“spends”) to other e-gold accounts. At its peak in 2006, e-gold was processing over US$2 billion worth of spends per year. Spends here refers to the digital currency being transferred. E-gold user base had grown to over five million accounts by 2009, when transfers were suspended due to some legal issues.
Another decentralized digital currency was created in 1998 by Nick Szabo called “Bit-gold”. Although bit-gold was never implemented. The bit-gold architecture was quite similar to the Bitcoin structure of today. In the bit-gold architecture, a participant would dedicate computer power to solving cryptographic puzzles. In the network, solved puzzles would be sent to the Byzantine fault-tolerant
public registry and assigned to the wallet address(public key) of the solver.
Each solution would become part of the next challenge, creating a growing chain(similar to blockchain) of new property. This aspect of the system provided a way for the network to verify and time-stamp new coins, because unless a majority of the parties agreed to accept new solutions, they couldn’t start on the next puzzle. This process was quite similar to the procedure of mining bitcoin.
Bitcoin The Hybrid Innovation
From the above we can see bitcoin was an innovation from Digicash, e-Gold and most especially Bit-gold. Bitcoin marked the success of man at creating a completely decentralized digital currency and a blockchain where decentralized applications could be built on. These two accomplishments for me makes Bitcoin the biggest innovation of the present world.
Decentrality the Innovative Solution
The past forms of electronic currencies before bitcoin failed partly due to the system not completely being decentralized. The creator of Bitcoin, Satoshi Nakamoto worked on those short comings and provided an innovative solution by making bitcoin completely decentralized and open source. Complete decentralization was the formular that worked.
Smart Contracts Another Innovation
Bitcoin brought a decentralized digital currency and blockchain but Ethereum integrated a new innovation to the space called Smart Contracts. This was the game changer in the blockchain industry. If not for smart contracts we would just be stuck with using cryptocurrencies for payments and other money based services.
Brief History of Smart Contracts
Although smart contracts were first proposed in the 1990s by Nick Szabo, a computer scientist, lawyer and cryptographer. His reason for smart contracts was of bringing what he calls the “highly evolved” practices of contract law and practice to the design of electronic commerce protocols between strangers on the Internet.
Blockchain based Companies and Start-ups were able to deploy smart contracts in building decentralized applications with real world utility. Smart contracts opened the doors to innovative new ways of doing things utilizing blockchain technology by ensuring trust and eliminating the need for third parties. Today you can build a decentralized application for tracking assets, storing information, tokenizing assets, sending & receiving money, decentralized finance(DeFi) and managing business processes due to smart contracts.
From this article we can see that cryptocurrency and blockchain technology have been evolving over the years and the driving force behind this evolution has been innovation. Without innovation we would be stuck with Bitcoin as the only cryptocurrency which would have phased out eventually like Digicash, e-gold and Bit-gold. But innovators went further researching about blockchain. One notable innovator here is Vitalik Buterin, who invented Ethereum in 2014.
The creation of Ethereum ushered us into a new Era in the blockchain industry dominated by smart contracts. Vitalik believed blockchain technology could do more than just creating a digital currency. So he invented Ethereum, a platform where developers could build applications with real world usage. Due to Ethereum, the super powers of smart contracts were harnessed providing a new tool that would forever disrupt the blockchain industry. Smart contracts made Alternative Coins possible as these Alts coins mostly represented decentralized applications building platforms(blockchain) which are in turn crypto projects. Alt coins like Tron, EOS, NEO fall under this category.
DeFi is the new innovation in the blockchain space coupled with its exponential growth over the past 12 months. DeFi will be the defining factor that will revolutionize the Finance Sector and bring new innovative solutions to administering financial services to the banked and unbanked population needs.
We can only imagine the new innovative solutions that will be onboarded in the blockchain space in the coming months….