This won’t come as great news to everyone, but blockchain, along with any other technology, especially a new one, is changing and evolving. You’ve probably seen the phrase “first/second/third blockchain generation”, just not to be confused with blockchain layers! We explained what blockchain layers are in a previous article, which you can read by clicking here. This article covers the development of blockchain on a larger scale.
The Bitcoin generation
Bitcoin came into existence first, and while ideas about distributed systems, blockchain and “digital money” have existed before, the launch into the public domain, the public eye, is what created that popularity and demand for cryptocurrencies. The idea behind bitcoin as an innovation was precisely a decentralised network and distributed financial system, where anyone could send their assets around the world without much trouble, long delays and without using standard banking systems.
For the first 2-3 years after Bitcoin’s launch, until 2012, the public was very suspicious about the emergence of such technology and for several years there was a huge number of scam projects. The value of Bitcoin at the start was incredibly low and the first exchanges, which were more like the forums for community enthusiasts, calculated the value of one bitcoin by the energy used to mine a block. Over time, the number of users increased, and with them, the number of transactions, as the workload on the network and computers. Computer load and energy consumption became key factors in bitcoin’s value. Its cost and value as an asset increased, turning it into a sought-after investment.
Like any other blockchain based on its structure, Bitcoin lacked the scalability and throughput to process data faster. But the biggest issue is the blockchain’s first-generation functionality which means it is static and not prone to multitasking. But there is much more to blockchain than just sending digital funds. That’s what the development team that created the Ethereum.
The Ethereum generation
Ethereum, like Bitcoin, has the same features of sending assets through a decentralised network with higher throughput without using standard banking systems. The most important difference and innovation that has made Ethereum’s blockchain environment stand out is smart contracts. This functionality has opened up entirely new and much more useful tools to the world. Smart contracts allow two separate participants in a chain to interact with each other on agreed terms without mutual trust, creating applications to run on the blockchain. Smart contracts have taken the crypto industry to the next level in many ways, you can learn more about them here. The creation of applications, called dapps, has led to a great variety of routine things and activities: games, films, social media, art and even real objects can all be tokenised and run on a blockchain. And that is not the most striking thing that smart contracts have made possible: decentralised exchanges such as BIT.TEAM have emerged; marketplaces; exchanges that run on smart contracts and have a much higher level of trust than previous ones; launchpads, to launch your own crypto project, such as del.network, and much more.
The second generation has started to provide more opportunities to develop and evolve as a technology. It brought coders, and developers, into the industry, in other words, the IT industry found blockchain as a useful tool for developing non-cryptocurrency projects. While the first generation and bitcoin attracted the attention of traders, investors and others in the financial sector, the second generation of blockchain brought large corporations into the field to develop their own projects.
The Polkadot generation
One of the reasons that pushed the development of blockchain further is the applicability and functionality of the technology, and the need for project creators to work together and collaborate. For example, two networks can work with each other directly, without intermediaries, and use their advantages. In this vein, you could also think of blockchains being combined with smart contracts based on Ethereum or Bitcoin, and that would be… kind of right! The fact is that 1st and 2nd generations of blockchains cannot solve the scalability issue, unlike third-generation representatives. The network is overloaded, there are more participants and more information, and the consensus mechanism is not that fast and in total it leads to delays. And the way out was found by creating a new blockchain as always, but this time on a different and less energy-consuming consensus algorithm which is PoS. It does not require large electricity power like bitcoin, all you need to have are tokens in your wallet. Third-generation blockchains such as Polkadot, Cosmos, Decimalchain, and Cardano are layered, interoperable, and ready for increased traffic capacity without sacrificing information transfer speed.
The third generation of blockchain is best seen as an example Decimalchain. It is a third-generation blockchain, created in the Cosmos ecosystem and ready to interact directly with other chains in the system. Interaction between networks in the ecosystem takes place through the use of a protocol for crosschain transactions, known as IBC. It allows to send tokens directly and without additional actions, to create new bridges and protocols. For example, once EVM and IBC are implemented in the Decimal blockchain, tokens can be easily transferred from one blockchain to another, and a crosschain bridge for swaps with BNB will open, as will a path to the Ethereum blockchain. Meanwhile, the Cosmos ecosystem itself is an L0 blockchain, and its mission is to connect everyone by means of smart contracts written on it. The networks interact in all directions, with which it can only unite, and it certainly contributes to a useful and engaging basis for work.
Just imagine, you set up your project on a first-generation blockchain (not a good idea, but give it a try!). In order to grow your project and get more than just mental delight out of it, you need to partner, collaborate and work directly with other crypto project creators. On a first-generation blockchain, take bitcoin, as an example, its throughput is 4 transactions per second and its functionality is to send “digital gold” around the world and to trade on exchanges. At this time, your partners and competitors have a project based on Decimalchain. The blockchain’s throughput is up to 10,000 transactions per second; its features are to create your token and send it to any blockchain available for crosschain transactions. Thanks to IBC Decimal is free to interact with other networks in an ecosystem that already has more than 260 projects. On a first-generation blockchain, you can hardly create additional products, for your audience, improving the quality of work and performance. Decimalchain enables users and anyone interested to use specific platforms, such as launchpads or decentralised exchanges. You can send and receive tokens from blockchain to blockchain without switching to another network and at no extra cost.
Here we are through the emergence and development of blockchain technology, from the beginning to where we are now. You may have noticed the problematic changes in functionality that blockchain has undergone. In the beginning, its sole purpose and importance were to send funds to bypass financial institutions. Now, we literally have and are enjoying a new kind of the internet, where anyone can create their own blockchain, become a validator, participate in DAOs, exchange tokens from different blockchains, develop games and movies on a blockchain, create digital art and the list could go on and on. We are sure that in the near future will be new exciting options and ways of using cryptocurrencies. All in all, what remains is to explore and try. See you!