The History of Blockchain: From the Establishment to Broad Adoption

The modern world is developing at a tremendous speed. Even 20 years ago, Blockchain creator could not has imagined that his development would be so popular in the future. The history of this technology is of great interest to the public because over the past few years it has gained immense popularity in developed countries.

What is blockchain?

Recently, the world community has paid a lot of attention to blockchain technology. However, many experts still do not fully understand how it works.

Blockchain is a database that is duplicated and distributed across the entire network of computer systems in the blockchain. Simply put, it is a chain of blocks that are stored in chronological order and contain certain information.

The technology is characterized by the following moments:

1. Each block consists of a certain datum, which includes the hash from the previous and next blocks.
2. There are several types of blocks, and each of them has its structure. For example, blocks on financial transactions include the time, date, and amount of the transaction, as well as the electronic signatures of the participants in the transaction.
3. As soon as the attacker decides to change the information in the block, he makes changes to the structure of the cache, which leads to the chain breaking. This prevents fraud at any level.

The information that is stored in the block can be practically anything. Once it enters the blockchain, no person can modify or fix it. This ensures maximum data security and fraud prevention.

Large corporations are already using technology to provide public information about their activities, reports, and other documentation. This increases the level of trust between partners and allows you to conduct business more openly and legally.

To better understand how technology works, you need to study its history. This will help you understand why many companies today are using blockchain to grow their businesses.

Precursors to the emergence of blockchain

Like any other important technology, blockchain hasn't come out of anywhere. Creator of blockchain has gathered knowledge from several predecessor systems and put it together. Among the technologies that made it possible to create the blockchain are:

• Formation of a peer-to-peer network;
• Introduction to PKI and PGP encryption;
• Proof-of-work (PoW).

Let's consider the blockchain background.

Formation of a peer-to-peer network

Peer-to-Peer (P2P) networking is a technology that allows multiple computers to be linked to exchange data. It has been developed by leading American educational studies since the middle of the twentieth century but it was finally formed and became widely used only in 1999 when Shawn Fanning created an application for sharing music.

Introduction to PKI and PGP Encryption

The history of blockchain cannot be imagined without the Public Key Infrastructure (PKI) and Pretty Good Privacy (PGP) cryptographic protocols. They were designed to encrypt information for safe use on the Internet.

These two protocols have a different algorithm of work, but the essence remains the same - only a person who has a special certificate key can decrypt a message.

Proof-of-work approach

Proof-of-work is a protocol that was designed to prevent cyberattacks. It is designed in such a way that it analyzes all processes within a computer network and as soon as it notices an attempt to interfere, it immediately blocks the entrance. This technology is widely used in the development of cryptocurrencies.

Blockchain diagram

The blockchain scheme was described long before its invention. In 1991, Stuart Haber and Scott Stornetta came up with a technology that was designed to time-stamp digital documents to prevent tampering.

Within a year, Merkle trees became the first example of how this system can be used in practice. However, before the advent of cryptocurrencies, this technology was not used at all.

Creation of technology

The Creator of the blockchain is not known until now. In 2008, Satoshi Nakamoto (pseudo-anime) published an article titled "Bitcoin: A Peer-to-Peer Electronic Money System." It said that thanks to blockchain, it becomes possible to transfer money directly to the recipient without an intermediary bank.

Blockchain transaction history starts a year later when Satoshi created the first block and transferred bitcoins. Hal Finney became the first recipient of money through this technology. For several years, the blockchain has been used exclusively for financial transactions using cryptocurrency.

Ditching digital currency

Today, the most popular cryptocurrency is bitcoin. The more interest in it grew, the more alternatives appeared. Blockchain history cannot be imagined without the development of cryptocurrencies. There was a need to develop a new technology in order to be able to store all information about transfers, search for intermediaries and solve a number of other problems associated with cryptocurrencies.

The history of blockchain Ethereum begins in 2013 when Vitaly Buterin (professional programmer and co-founder of Bitcoin Magazine) begins working on a new blockchain-based computing system. The main difference of this technology is that it has smart contracts. They greatly simplify and speed up the process of conducting transactions without involving third parties.

The system is also trying to turn the attitude of people towards mining and encourages them to increasingly become validators. It also increases the interest of programmers in bitcoin, as getting them has become much easier than it once was.

The American state of Arizona passed a law in 2018 that allows taxes to be paid with bitcoins. Huge global corporations such as the Swiss multinational investment bank UBS and Microsoft are showing interest in blockchain-based smart contract technology. This suggests that it is becoming more and more profitable to use it.

How is blockchain evolving now?

In the past few years, more and more companies are starting to think about introducing blockchain technology into their system of work. Forbes Blockchain 50 is a list of the most influential companies that have already begun to use blockchain extensively to achieve their goals. Some of the most famous that made it to this list in 2021 included:

• Boeing;
• Microsoft;
• National Basketball Association;
• PayPal;
• Samsung Group;
• Visa and many others.

In blockchain technology history, this list has been formed for 3 years in a row, and each time a large number of well-known corporations are added to it. So, 21 newcomers were added to the list this year, which suggests that interest in blockchain continues to grow.

If the technology was originally developed for bitcoin transactions, then blockchain today can be used for different purposes: providing reports, controlling supplies, accelerating any international transfers, storing electronic documents, and much more.

The impact of blockchain on the financial industry

The history of blockchain technology is connected with the founding of the financial industry, so it is not surprising that it is developing at a tremendous speed in this industry. Many financial institutions have several benefits:

1. Instant transactions. The blockchain has access to a shared ledger, which dramatically speeds up the process of executing transactions between different banks. Smart contract technology makes sure that all the terms of the contract are met.
2. Peer-to-peer transactions. Since the system works without intermediaries, it is possible to reduce the cost of commission.
3. More trust and transparency. All data that is in the blockchain database are unchanged, it is impossible to make adjustments to them, which prevents the possibility of fraud.

Blockchain wallet today includes several cryptocurrencies and is one of the most secure in the world. With its help, you can make various financial transactions instantly and with a minimum commission. Today, mining and making transactions using bitcoins and other currencies has become more secure and convenient than ever.

Blockchain and retail industry

Bitcoin blockchain history is now inextricably linked to retail. Thanks to this technology, international brands and corporations can solve the following problems:

• Make payments in cryptocurrency. A huge part of large corporations is engaged in the resale of goods from different countries. To avoid losses due to currency conversions, many people prefer to use bitcoins.
• Transparency of the supply chain. Well-known brands put a big mark-up on their name, so they must provide evidence that the product is original and not fake. With the help of blockchain, it is possible to track shipments and prove that the goods came from the manufacturing facilities of the brand. This increases customer confidence.
• Client confidentiality. Many companies take the personal data of customers to further cooperate on an ongoing basis and send out advertising information. Third parties mustn't have the opportunity to obtain this information and the blockchain becomes an excellent solution to this problem.

If you combine blockchain and artificial intelligence, then a company that is engaged in retail trade can significantly reduce the cost of maintaining warehouses, wages of employees and reduce the risk of errors due to the human factor.

Another advantage of blockchain is that it simplifies the process of returning funds or goods. Due to the fact that the system stores all the necessary information about transactions, it becomes easier to confirm the payment details and the identity of the client, prevents the likelihood of fraud.

Influence of technology on logistics

Blockchain news today talks about the technology being widely used in logistics. Its use has the following advantages:

• Delivery efficiency. The system can record which product is assigned to which truck or plane, when it left and when it appeared on the spot, how long the road took and how much fuel was consumed. This prevents human error and fraud on the part of company employees.
• Inventory and dispute resolution. With international transport, there is always a possibility that the cargo will be lost as a result of an accident or detained at customs. The blockchain allows you to track these points to simplify the resolution of disputes with partners and customers.
• Security of payments. Payment for goods and services in international cooperation should take place as quickly as possible and with a minimum commission. Many companies lose quite a lot of money when converting currencies. If you carry out transactions in cryptocurrency and using blockchain technology, then both of these issues are removed.

Regardless of what types of transportation you are engaged in, freight or passenger, international or local, blockchain allows you to solve a huge number of problems and create more trusting relationships with partners and customers.

Blockchain and insurance industry

Blockchain background today can be easily used in the insurance industry to:

• Prevent fraud. A shared ledger allows you to learn the history of the client and identify suspicious behavior on his part. All data in the database is unchanged, so attackers cannot replace documents.
• Reinsurance. If a client wants to refuse the services of one insurer and conclude an agreement with another, then the blockchain can simplify the transfer of information from one organization to another.
• Claims management. Since the database registers and stores all the information, it has become much easier to prove the fact of payment or non-payment of the insurance premium. This makes it quick and easy to deal with claims if the firm operates within the law.

Some insurance companies are already using blockchain to store and publish information about their clients, in particular the medical history. This allows customers to easily share such data.

Blockchain problems today

Despite all the advantages of the technology, there are such Blockchain problems today:

• Consumes too much electricity;
• Difficult to understand, so many companies are afraid to use it;
• Lack of regulation can lead to consequences;
• Sometimes the system is too slow.

Thanks to the improvement of computer technology, most of the above problems will be solved.

Another point that scares some experts is that if most of the world's giants abandon banking services in favor of blockchain, this could lead to the collapse of the banking system and large losses for the industry. In addition, if blockchain and artificial intelligence replace the vast majority of workers in large retail chains, it will lead to unemployment.

Conclusion

Many global companies today are considering whether to use blockchain. This is not surprising, because it helps to significantly reduce costs, prevent fraud and create strong trusting relationships with partners.

The technology is ideal for those who want to work legally, do their job well, and receive a positive assessment in the form of profit.

Author: Laurence Dickerson

Author: Laurence Dickerson

CFO Consultant and Finance and Accounting Professor. Has been an operations, finance, and accounting professional for over 15 years, with a sharpened financial management expertise in various industries including financial services

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• Blockchain technology
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