Blockchain technology has evolved significantly since its inception with Bitcoin in 2009. The technology has undergone significant transformations, with each generation building on the previous one to address the limitations of its predecessor.
This development has expanded the potential applications of blockchain beyond cryptocurrency, affecting sectors ranging from finance to healthcare to supply chain management. Understanding the three distinct generations of blockchain technology is therefore crucial to grasping its capabilities and potential. Let’s explore how blockchain has evolved from a simple distributed ledger to a platform for complex, interconnected ecosystems.
Key takeaways
- The ideas, concepts, and programming that make up a blockchain took decades to develop.
- Blockchain is the technology behind cryptocurrency, but cryptocurrency has come to the forefront for the better part of a decade.
- In addition to its uses in cryptography, blockchain has been explored to create a decentralized internet, as well as for commercial applications.
- Potential future uses of blockchain include tracking in supply chain management and other forms of asset management.
Generation 1: development and introduction
Ideas that could lead to blockchain have been circulating in computing communities since the late 1980s. The blockchains we know today are the culmination of decades of research and development by many people who will likely never be recognized for their contributions. Here are some ideas and concepts involving blockchains, designed and proposed by many people before Bitcoin:
Many of these began to be used together in the late 1990s in attempts to create distributed payment systems. Many failed projects eventually led to Bitcoin, so this generation represents the work before 2009.
Generation 2: Cryptocurrencies
The second generation, when blockchain was centrally identified with cryptography, marks the period between 2010 and 2022.
Bitcoin introduced cryptocurrencies to the world and their popularity was very rapid. Since then, many projects have attempted to resolve the problems encountered by the Bitcoin blockchain.
Ethereum emerged in 2015, bringing not only a cryptocurrency but also the idea that blockchain could be used to decentralize other aspects of financial life. It can host applications and smart contracts.
As the market value of cryptocurrencies fluctuated wildly and investors began to speculate on their prices, new cryptocurrencies emerged. These were introduced to raise funds for promoters trying to capitalize on the growing interest and money flow.
Initial coin offerings flooded the market with new cryptocurrencies and more capital flooded in. The blockchain and cryptocurrency industry has quickly become a space that has threatened to be overtaken by scams and fraud. The cryptocurrency market entered a “crypto winter” in 2018, only occasionally experiencing a price surge following hype from celebrities and well-known names in the industry.
The crypto regained much of its former popularity between 2023 and 2024, reaching new price highs, based on the approval of spot crypto ETFs.
Generation 3: Business Adoption and Web3
During the cryptocurrency craze, blockchain development continued as projects worked to attract interest from businesses and governments. The development of business uses, long evangelized by blockchain supporters, accelerated as researchers, financial institutions and large companies worked on solutions to the problems they encountered.
Walmart Inc. (WMT) created a supply chain tracking platform based on a blockchain network, and the Linux Foundation created a modular blockchain on which users can create custom blockchains according to their needs. International Business Machines Corporation (IBM) used Linux Foundation technology to develop more business products, and JP Morgan Chase (JPM) launched a commercial, customizable blockchain for businesses.
Web3 is still in its design phase, but it is emerging alongside AI and machine learning as a source of major new technological advances.
Some projects were still launching cryptocurrencies in 2023 and 2024, but many cryptocurrency projects founded in the 2010s have been overhauling their blockchains, attempting to become more relevant as the crypto storm subsides. Web3, the idea of restructuring how the Internet works through decentralization, has become the focus of blockchain-based projects.
The idea behind Web3 is to use blockchain, distributed ledgers, tokens and cryptocurrencies to create an Internet that cuts out middlemen. An individual’s data should remain under their control and only be used for marketing or other purposes if it was first purchased directly from them, not from a company that purchased it. collected without the knowledge of this person. A person’s intellectual property and creations can be owned by someone through tokenization; financial transactions can be carried out without relying on institutions using their money to make money for themselves, and much more.
So, the third generation began in 2023, when many existing blockchain and cryptocurrency projects started moving to Web3. There had been Web3 blockchain projects before, but they became the center of attention as cryptocurrency moved to the background of development.
Generation 4: the future
The third generation of blockchain is still young, but some have already looked towards the next generation of blockchain technology. Many expect the fourth generation of blockchain development to focus on business applications, allowing businesses to run decentralized applications.
Goals include improvements in scalability, user experience, and interoperability. Potential applications of the next generation of blockchain technology include real-time commodity tracking for supply chain management, secure records storage, enhanced security for voting and elections, and other uses industrial and general public.
How many generations of blockchain are there?
In fact, there have been three so far: research and development, the cryptocurrency craze, and Web3 and business development. Some proponents of the technology are now looking forward to the fourth generation of blockchain technology.
What is the 5th generation of Blockchain?
Some people refer to specific blockchain developments as generations, such as Bitcoin (first, only a payment method), Ethereum (second, a payment method, application development and smart contracts), etc. A fifth generation blockchain, by this definition, would have all the functionality of previous blockchains as well as applications in AI, supply chain management, and more.
What are the 4 types of blockchains?
Blockchains are generally thought to come in two types and two subtypes: public (decentralized, permissionless networks), private (networks controlled by a single organization), consortium, or federated (blockchains where multiple organizations share control of the network). and hybrid blockchains (where data is shared between public and private).
What gives value to cryptocurrency?
Cryptocurrencies are an important part of blockchain technology and some, like Bitcoin and Ethereum, have significant market value. This value comes from the fact that they are rare and can be used in financial transactions. Much of the value also comes from speculation, as people who believe in the value of a cryptocurrency are willing to pay high prices, believing that its price will continue to rise.
What is the difference between a blockchain and a cryptocurrency?
Cryptocurrencies are digital tokens that people can hold or transfer. Some cryptocurrencies have value and can be used as a store of value. Cryptocurrencies rely on blockchain technology to track transactions.
The essentials
It took many years for blockchains to become what they are today: large distributed networks that facilitate payments, enable applications, use automation to conclude agreements between parties, and serve as the basis for smart contracts.
