The technology behind cryptocurrencies is blockchain. It allows everyone on the network to reach each other without the need for a third party to validate transactions.
The beginning
The idea behind blockchain technology was described in 1991, when computer scientists Stuart Haber and W. Scott Stornetta introduced a computationally practical solution for digital documents, as they were generated with a timestamp that could not be tampered with. .
The system used a chain of cryptographically protected blocks to store time-stamped documents. In 1992, Merkle trees1 were incorporated into the project, making it more efficient and allowing multiple documents to be collected in a single block. However, this technology was not widely used and the patent expired in 2004, four years before the inception of Bitcoin.
Reusable Proof of Work
In 2004, computer scientist and cryptographic activist Hal Finney (Harold Thomas Finney II) introduced a system called RPoW – Reusable Proof of Work. The system worked by receiving a non-exchangeable and non-fungible encrypted token based on Proof of Work, and in return created a token with an RSA2 signature that could then be transferred from person to person.
RPoW solved the problem of double spending by maintaining ownership of tokens registered on a trusted server designed to allow users around the world to verify real-time data for accuracy and integrity.
The RPoW can be considered as the initial prototype and a significant step in the history of cryptocurrencies.
Rede Bitcoin
In late 2008, a white paper introducing a decentralized peer-to-peer or (peer-to-peer) electronic money system called Bitcoin was posted to a cryptography mailing list by a person or group using the pseudonym Satoshi Nakamoto .
Based on the Proof of Work Hashcash algorithm, but instead of utilizing a hardware trusted computing function like RPoW, double-spend protection in Bitcoin was provided by a decentralized peer-to-peer protocol to track and verify transactions. . In short, Bitcoins are “mined” to generate a reward using Proof of Work by individual miners and then verified by decentralized nodes on the network.
On January 3, 2009, Bitcoin came to life when the first Bitcoin block was mined by Satoshi Nakamoto, who was rewarded with 50 Bitcoins. The first recipient to receive Bitcoins was Hal Finney who received 10 Bitcoins from Satoshi Nakamoto in the world's first bitcoin transaction on January 12, 2009.
Ethereum
In 2013, Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, stated that Bitcoin needed a scripting language for creating decentralized applications. Failing to gain community agreement, Vitalik began developing a new blockchain-based distributed computing platform called Ethereum. The Ethereum network introduced a new feature called Smart-Contracts.
Smart-Contracts are programs or scripts that are implemented and executed on the Ethereum blockchain, they can be used, for example, to make a transaction if certain conditions are met. Smart contracts are written in specific programming languages and compiled into bytecode, where a Turing-complete virtual machine called the Virtual Ethereum Machine (EVM) can then read and execute the contracts.
Developers can also create and publish applications that run within the Ethereum blockchain. These applications are often called DApps (decentralized applications), and there are already hundreds of DApps running on the Ethereum blockchain, including social media platforms, gambling applications, and financial exchanges.
The currency of the Ethereum network is called Ether, it can be transferred between accounts and is used to pay the computational processing fees used to execute smart contracts on the network.
In short
Currently, blockchain technology is gaining a lot of attention and is being used in a variety of applications, not limited to cryptocurrencies. For more information on blockchain and other interesting topics, don't forget to watch our other videos on Binance Academy.
Grades
1 - In cryptography scatter trees or Merkle trees are a type of data structure that contains a tree of summarized information about a larger piece of data - for example a file used to verify its contents.
2 - RSA is one of the first public key cryptography systems and is widely used for secure data transmission. In this encryption system, the encryption key is public and is different from the decryption key which is secret.