Blockchain is a technology used in the modern world to settle and store assets. It is a single data system for different users. People connect to an open network and use their personal computers to store records. Information is duplicated and recorded simultaneously for all users. Data cannot be deleted or edited, only added to, so important information will always be available to all participants.
Often, blockchains conclude contracts and use digital documents to guarantee fair and trustworthy partnerships.
1) Important technologies that preceded the emergence of the blockchain
Innovations preceding the blockchain
- Peer-to-peer (P2P) is a peer-to-peer network in which multiple devices connect to share resources. For example, when one client downloads files, these files are immediately available for other users to download. The server queries the other systems for a list of active peers and adds some of them to its list. The first networks were developed and implemented in the 20th century for different purposes: APRANET (1969), its advantages: privacy, implementation and use of e-mail and USENET (1979) for communication and file sharing. Although P2P systems were previously used in applications, the introduction of Napster (for music sharing), developed by Sean Fanning, in 1999, popularized the technology.
- PKI and PGP ciphers are tools for the secure exchange of data in electronic systems. Of course, there are differences: PGP is public-key encryption software for protecting data, while PKI is a public key infrastructure for internet security. It is exchanged by means of each user’s public and private key. To deliver information to a particular recipient, the sender receives the recipient’s public code and uses it to encrypt the information. The information can then be decrypted using the recipient’s private key. Both technologies provide a secure exchange of information and a strong authentication mechanism. A PKI can be used to create a system for accessing data on external media.
- Proof-of-work is a fraud protection protocol (protection against DoS attacks, spam prevention, etc.). The idea is to complicate the process and make any manipulation unprofitable and prevent double spending in transactions. Without the validation mechanism (mining and hashing), the network and data would be insecure and easily stolen. A hash consists of 256 pseudo-random bits and often the owner of the chain makes up the code several times to match the rules, so it would be impossible for attackers to unravel the combination and compromise the data. The idea of POW was published by Cynthia Dworko and Moni Naor in 1933, and first used by Marcus Jacobson and Ari Jewels. The algorithm is used in digital currency.
2) Studies by Stuart Haber and W. Scott Stornett
In 1991, mathematicians began to think seriously about how to protect the information on various personal computers and avoid tampering with documents.
Scientists have experimented with storing documents on a cryptographically fixed blockchain and have tried to systematize these systems into blocks.
They used a previously patented design, the hash tree or Merkle, for their algorithm, which led to its enhancement and performance: increased security, transaction authentication and the systematization of multiple data into a single block. The researchers published their observations and research in “How to Record a Digital Document in Time” in the Journal of Cryptography.
As a result, the inventors became internationally renowned and the first digital currency, bitcoin, was developed based on research.
There is no definitive answer as to who created blockchain, as the creator of the hash tree concept is Professor Ralph Merkle, scientists Haber and Stornett introduced the innovations, and Satoshi Nakamoto added to the technology: limiting block size to 1 MB, which allowed quick transactions and work on gadgets.
3) Bitcoin
Blockchain was first used by developer Satoshi Nakamoto for financial transactions in 2008. Satoshi Nakamoto is a pseudonym for one person or group of people. The creators still remain anonymous.
Development began in 2007, and a year later released the first system powered by blockchain technology. Bitcoin is mined through mining – solving cryptographic problems. In simple terms, it is a ledger of funds where no funds can be obtained without access to the owner’s wallet.
In 2009, the technology went online.
Bitcoin was originally created for online transactions, but it has now become a digital asset in its own right, convertible into any digital currency (such as US dollars or euros).
4) Ethereum
Programmer Vitalik Buterin is the author of the cryptocurrency Ethereum.
The technology is being used not only for transactions, but also in asset-transfer transactions. For the first time, the creator of Ethereum began using smart contracts to enter into contracts. They are fully legal, as is the offline format. Electronic documents are encrypted and written in high-level programming languages.
Once the contract is signed and accepted by all parties, the contract enters into legal force. The information in the contract is available only to the parties to the transaction and is closed to third parties.
Not only is Ethereum a cryptocurrency, but it is also a decentralized platform (dAps), so many aspiring developers are using the technology to create their own digital currency.