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Evolution of blockchain

Over time Bitcoin and blockchain have been mistaken to be the same and have been interchangeably used by people. However, these are very two different concepts, as one is the underlying technology on which applications work and the other (bitcoin) is a cryptocurrency which is a product built using the blockchain technology.

Nevertheless, Bitcoin exist as a blockchain too called the Bitcoin network/blockchain, on which the native token which was discussed earlier is built.

Phase 1: Digital Currency

Bitcoin was introduced in 2008 by an anonymous developer/group of developers known only as Satoshi Nakamoto. Satoshi Nakamoto released a whitepaper describing it (bitcoin) as an electronic peer-to-peer system. Nakamoto's white paper pointed out the problems of our traditional finance, emphasizing how users had come to rely almost entirely on third-party intermediaries to process digital transactions.

These intermediaries were flawed with factors such as increased costs for transacting parties, slow transaction processing, and limiting the amount of transaction per user among other problems.

The solution entailed in Nakamoto's whitepaper was a decentralized and immutable timestamping network (Blockchain) which was a trustless and secured peer-to-peer network that eliminated the need for third-party intermediaries and also made transactions faster and cheaper for all.

However, these supposed users needed a way to transact with each other as this network was built with cryptography it needed a similar transaction means so came Bitcoin.

Since the introduction of bitcoin, which happens to be the first successful application of blockchain, numerous other applications have been invented as they all seek to leverage the functionalities of this innovative digital ledger technology.

Phase 2: Contracts

In a world where innovation is the order of the day, it soon came to the realization of some developers that Bitcoin might not have fully leverage the capabilities of blockchain technology. With the aim of solving bitcoin's limitations, Vitalik Buterin introduced a different blockchain (Ethereum) that could perform a lot more other functions in addition to being a peer-to-peer network.

Vitalik thought if we could revelotionized peer-to-peer payments, then we could do same to other of our day to day activity in finance and the internet at large, such as financial lending and borrowing, gaming, art and even social media.

His technology was made possible by introducing smart contracts which are conditional self-executing contracts.

Since its launch in 2015 the Ethereum technology has evolved to become one of the biggest applications of blockchain technology, doubling as the first true blockchain ecosystem that has succeeded in gathering an active developer community, this is made possible because its smart contract feature can be used to create many functions.

Phase 3: Applications

Blockchain evolution does not stop with Ethereum and bitcoin, as a lot of other projects have popped up with all having a similar agenda of leveraging blockchain technology.

Many of these projects have tried to address some of the shortcomings of Bitcoin and Ethereum, and also come up with new ways of leveraging blockchain's capabilities.

The third phase of evolution saw the creation of various decentralized applications which were entirely trustless and made sure users could utilize their functionality without a third-party.

Ethereum provided high leverage with its smart contracts and decentralized application but is plagued with severe scalability issues, i.e. it faces a hard time validating transactions when its network becomes too busy. This is due to the consensus method used by both Bitcoin and Ethereum: proof-of-work (PoW). PoW required miners to use high computing power to solve complex equations.

Miners can be overwhelmed by transactions sometimes so leading to slow transaction processing. To solve this Ethereum is moving to a proof-of-stake (PoS) consensus. Some other consensus method has been introduced such as proof-of-history, proof-of-identity, proof-of-capacity and many others.

The blockchain technology is still very much at its early stage and so many more innovations are certain in years to come.