The Blockchain Revolution ft. Ethereum

Blockchain technology was initially designed to be an immutable and transparent ledger system for Bitcoin to run on. Although blockchain has been a significant force behind cryptocurrency, its security and transparency have seen its growth in different areas.

New crypto technologies are popping up, and the adoption of blockchain technology might have led to the development of the Ethereum blockchain. Ether is the second-largest cryptocurrency in the world after Bitcoin, and its success can be attributed to the Ethereum blockchain.

Find out more in this detailed guide on how the blockchain revolution has contributed to Ethereum’s success and the positives of this evolving technology.

What is Blockchain Technology?

Blockchain is a decentralized technology that doesn’t rely on a central authority. It acts as a decentralized database managed by various users through a distributed digital ledger technology. Any transaction running on blockchain currencies uses cryptographic identifiers for authentication. The consensus protocol ensures that participants collaborate to update the ledgers instead of using a third party.

Each transaction on the blockchain is time-stamped, which guarantees security to users. Moreover, users can trace any transaction. As the records on the network grow, they are combined into blocks and chained together through cryptographic techniques, which form the name blockchain.

When the term blockchain is mentioned, most people associate it with. Bitcoin as it’s the central technology backing the digital currency. However, there’s more to blockchain than cryptocurrencies and financial transactions.

History of Blockchain Technology

Although Blockchain’s popularity grew with the invention of Bitcoin, the technology has a rich history.

Here’s a brief timeline of the notable events that led to the development of blockchain.

  • 1991

Stuart Haber and Scott Stornetta describe a cryptographically secured chain of blocks.

  • 1998

Nick Szabo, a computer scientist who works on bit gold, a decentralized digital currency

  • 2000

Stefan Konst writes on cryptographic secured chains and ideas for implementation.

  • 2008

Satoshi Nakamoto, a pseudonym representing computer developers, release a white paper establishing a model for blockchain.

  • 2009

Satoshi Nakamoto and Hal Finney, a computer scient make the first successful Bitcoin transaction.

  • 2013

The Bitcoin market cap exceeds $1billion. Buterin publishes Ethereum Project paper challenging other blockchain capabilities besides financial transactions.

  • 2014

Ethereum project is crowdfunded through an ICO and raises over $18 million in BTC while exploring new avenues for blockchain.

  • 2020

Blockchain becomes a significant player in the Covid-19 fight by helping store medical research data and patient information securely.

How Did Blockchain Technology Lead to the Emergence of Ethereum?

Back in 2011, Vitalik Buterin was curious about blockchain technology as a programmer. He co-founded Bitcoin Magazine. However, he thought that those in the Bitcoin community only focused on one aspect of blockchain technology. Buterin thought there was more to blockchain beyond the financial use cases.

The young developer thought of a platform that could augment and improve on bitcoin, ultimately expanding the blockchain’s capabilities. In 2015, Vitalik developed Ethereum, a different blockchain platform that featured decentralized smart contracts self-executing agreements coded into the blockchain. Smart contracts have been used to create decentralized autonomous organizations and issue ICO tokens.

Ethereum’s blockchain is based on a scripting language that can run smart contracts across all nodes and be verified without requiring a third party like a legal system or court. Users can use Ethereum to trade, secure, decentralize, and codify anything, which makes it more versatile than Bitcoin.

Ether exists as an internal cryptocurrency within the Ethereum ecosystem, and it’s used to settle the outcomes of smart contracts that are executed within the protocol. Like Bitcoin, Ether can be mined and traded on cryptocurrency exchanges with currencies like USD. Ether can also pay for computational effort done by nodes on its blockchain.

Will Ethreum replace physical currency as the primary source of transactions? Experts believe that ETH prices will remain bullish and reach new highs this year, but it’s unlikely that ETH will replace physical currency as the primary source of transaction in the next few years. The future of Ethereum is looking up in terms of its prospects and value. The introduction of the Ethereum 2.0 upgrade is expected to contribute to the rise in Ether’s value.

Ethereum Blockchain and the Rise of NFTs

Blockchain had been tied to the world of cryptocurrency until now. Tokens can represent any digital asset, and programmers can track ownership and implement functionality based on programming instructions. These tokens can be contracts, music files, merchandise, or medical records.

Recently NFTs or non-fungible tokens are all the rage. These are blockchain-based tokens designed to store digital media like art, music, or video. Each NFT can verify the sole ownership, authenticity, and history of any digital media.

NFTs provide digital creators with the ability to buy and sell their creations and get a share of profits and credit.

Blockchain has newly found uses that have allowed this technology to get into other industries like identity security, media, government, and others.

The Introduction of Ethereum 2.0

Ethereum 2.0, Eth2, or Serenity is an upgrade to the existing Ethereum blockchain. The upgrade seeks to improve Ethereum’s network speed, scalability, and efficiency. That will allow for more transactions per second and address any security concerns.

Unlike Ethereum that uses the Proof of Work mechanism, Ethereum 2.0 uses the Proof of Stake mechanism. Proof of Work is an energy-intensive process that involves miners decoding complex mathematical puzzles with the help of computer hardware processing power. Anyone who solves the puzzle first adds a new transaction on the blockchain.

However, with Ethereum 2.0 using the Proof of Stake mechanism, the platform will use transaction validators instead of miners to verify a transaction. Minting occurs when most validators claim to have seen a block, and it’s added to the blockchain. Validators get rewarded for performing the block proposition. This mechanism uses less computing power, which makes it energy efficient.

Ethereum 2.0 is expected to solve the scalability problem as the system can conduct close to 10,000 transactions per second. Previously, Ethereum could only support 30 transactions per second, leading to network congestion and delays. Furthermore, Eth2 will be more secure and decentralized as it requires a vast number of validators.

Are There any Implications of Blockchain Technology?

Despite blockchain being revolutionary and enabling other features other than cryptocurrency transactions, it has its downsides. Some of its shortcomings include:

Excessive Use of Energy

Blockchain technology using the Proof of Work mechanism relies on the miners to solve complex mathematical puzzles using computing power. A disproportionate amount of electricity is used to create the next block, which makes this technology energy-intensive. The excessive use of energy could have a detrimental effect on the environment and may not be sustainable in the long run.

Scalability Issues

Although blockchain facilitates BTC transactions, it can only allow seven transactions per second. That’s because each node has to verify a transaction in the network as the system is distributed. Users may take several hours to complete their transactions.

Final Thoughts

Blockchain technology challenges the status quo of creativity and innovation by allowing companies to experiment with evolving technology like decentralized forms for news media or peer-to-peer energy distribution. Blockchain’s immutability, transparency, and decentralization make it a force to reckon with.

Previously blockchain was only considered a network to store financial data and records. However, this has changed as more companies find blockchain a reliable source to facilitate other types of transactions and store data for different industries like healthcare and education. Blockchain is now deployed to facilitate smart contracts, identity management, supply chain analysis, among other functions.

Despite its shortcomings, blockchain shows promising growth in the future and can transform many industries.