The basic technology behind cryptocurrencies is blockchain. It allows all clients in the network to reach consensus without having to trust each other.
In the first days
The idea behind blockchain technology was described as early as 1991 when scientific researchers Stuart Haber and Scott Stornetta presented a computationally feasible solution to seal digital documents so that they could not be invalidated or tampered with.
The system used a series of secured encrypted blocks to store time-stamped documents, and in 1992 a Merkle tree was incorporated into the design, making it more efficient by allowing multiple documents to be combined into a single block. However, this technology went unused and the patent expired in 2004, four years before the inception of Bitcoin.
Reusable Proof of Work
In 2004, computer scientist and crypto activist Hal Finney (Harold Thomas Finney II) introduced a system called Reusable Proof of Work (RPoW). The system works by receiving a non-fungible Hashcash based on a proof-of-work token and in return generating an RSA-signed token that can be transferred from person to person.
Proof of Work (RPoW) solves the problem of double spending by keeping ownership of tokens registered on a trusted server designed to allow users around the world to verify their authenticity and integrity in real time.
Reusable Proof of Work (RPoW) can be considered an early prototype and an important early step in the history of cryptocurrencies.
Bitcoin network
In late 2008 a white paper introducing a decentralized peer-to-peer electronic cash system – called Bitcoin – was published to a cryptographic mailing list by a person or group using the pseudonym Satoshi Nakamoto.
Hashcash is built on the proof-of-work algorithm, but instead of using the trusted computing function of hardware like RPoW, Bitcoin's double-spend protection is provided through a decentralized peer-to-peer protocol to track and verify transactions. In short, Bitcoin is mined as a reward using a proof-of-work mechanism by miners and then verified by decentralized nodes in the network.
On January 3, 2009, Bitcoin came into existence when the first Bitcoin block was mined by Satoshi Nakamoto, who received a reward of 50 Bitcoin. The first recipient of Bitcoin was Hal Finney, who received 10 Bitcoin 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 programming language to build decentralized applications. Failing to reach agreement in the community, Vitalik began developing a new blockchain-based distributed computing platform, Ethereum, which included a scripting function, called smart contracts.
Smart contracts are programs or scripts that are deployed and executed on the Ethereum blockchain, and can be used to This is an example of making a deal if certain conditions are met. Smart contracts are written in specific programming languages and compiled into digital code, a decentralized virtual machine (EVM) that can then read and execute.
Developers are also able to create and deploy applications that run within the Ethereum blockchain. These applications are commonly referred to as DApps (decentralized applications) and there are already hundreds of DApps running on the Ethereum blockchain, including social media platforms, gambling apps, and financial exchanges.
Ethereum's cryptocurrency is called Ether and can be transferred between accounts and used to pay for the computational power used when executing smart contracts.
summary
Today, blockchain technology is gaining a lot of public attention and is already being used in a variety of applications and is not just limited to cryptocurrencies. For more information about blockchain and other interesting topics don't forget to watch our other videos on Binance Academy.