Blockchain technology has gone through many different phases after it was discovered by Satoshi Nakamoto in 2008. Blockchain has evolved as the usage areas of technology have been expanded. The fact that Bitcoin allows financial transactions without requiring a trusted authority has inspired many areas in the industry. Now, blockchain has started to play a key role in many sectors such as supply chain, health, education, entertainment.
What is Blockchain?
Blockchain is a distributed database system where encrypted transactions can be recorded and tracked. The fact that the transactions can not be changed creates the opportunity to share the blockchain with everyone. In this way, anyone with internet access can be included in the network and transact transparently. With this power given by blockchain technology, many cumbersome jobs that are difficult to manage and follow, which are dependent on the central authority, can be done more easily and safely in less time.
Blockchain 1.0: Cryptocurrency
Blockchain 1.0 is the era that started with Satoshi Nakamoto’s mining of Bitcoin. In this version, it has been seen that money can be transferred reliably without the need for an authority using crypto money. While normally a real identity is needed when transferring money, blockchain has shown that anonymous people who do not know each other can make transactions.
Miners are required according to the Proof of Work protocol in order for Bitcoins to be mined on the blockchain network. It has been understood that the revenue can be distributed among the masses much more easily in the blockchain network, as the miners are rewarded with crypto money in return for their verification. Thus, blockchain has become the main technology of cryptocurrencies and has started to be used widely.
Blockchain 2.0: Smart Contracts
The concept of Blockchain 2.0 first emerged in 2014. It is smart contracts that cause the blockchain to evolve in this step. Smart contracts are programs prepared to store the action to be taken on the blockchain under the conditions agreed by the two parties. Thanks to smart contracts, blockchain users now have the opportunity to do much more than transfer cryptocurrencies. Transaction costs have decreased and it has been possible to make transparent transactions much faster.
Smart contract technology is currently centered around Ethereum. By integrating the Ethereum blockchain smart contracts into its protocol, it has opened up space for programs that will take place automatically when conditions are met. Since smart contracts cannot be tampered with and cannot be hacked, many sectors that need an environment of trust have started to use blockchain technology, which appeals to a much wider audience, by disabling central players. In fact, smart contracts laid the foundation for decentralization.
Blockchain 3.0: Decentralized Applications
The next step in the evolution of blockchain started with the widespread use of decentralized applications. Back-end code of decentralized applications (DApp) runs on the blockchain, while back-end code in traditional applications runs on a central server. Thus, even enterprise-level databases can be made reliable and transparent. Blockchain 3.0 has demonstrated that blockchain technology can be used in real-life business scenarios.
Another innovation in Blockchain 3.0 is that it allows different blockchain networks to work together. With the Inter-Blockchain Communication (IBC) protocol, different blockchains can transfer data without attacking each other’s sovereignty. This has facilitated the integration with different technologies of blockchain technology and expanded its usage areas.