The term blockchain comes from a combination of two words, block (group) and chain. Giving the name describes the workings of the blockchain itself. The way blockchain works can be described as a collection of related blocks with functions to facilitate the execution process of transactions.
In other words, a blockchain is a collection of various data records that are processed or processed by a group of computers in which no entities exist. A collection of data blocks or records is secured and bound together by utilizing the principles of cryptography.
The network contained in it also does not have centralized authority or authority (centralization). The blockchain network contains various records shaped like an enormous notebook. Although the ledger can be shared, the contents in the ledger will not change. In addition, all the information in the ledger can be viewed and accessed by anyone because blockchain is decentralized.
Blockchain is the technology that forms the basis of the development of cryptocurrencies. It should be noted that the utility of blockchain not only serves to become a cryptocurrency but can also be used to become something worthwhile in various industries.
The initial idea of blockchain itself was formed in 1991. At that time, two people wrote and published a journal entitled Journal of Cryptography: How to Time-Stamp a Digital Document. The two people were Stuart Haber and W. Scott Stornetta.
Quoted from a book entitled Blockchain for Dummies (2017) written by Manav Gupta, it is explained that initially, blockchain was formed and developed to meet a great need for a system that works more effectively, efficiently, cost-effectively, is more secure, and is proven to be safer for performing tasks in the form of recapitulating various financial transactions that occur in the future.
Blockchain was first used as a cryptocurrency (Bitcoin) around 2009. Blockchain development was carried out by a Japanese named Satoshi Nakamoto. Unlike the money produced by a central bank, cryptocurrencies do not have central power or authority and do not have a working party to control them because they use a network with Peer-to-Peer (P2P) connections.
Blockchain Technology Evolution
From its inception to the present, blockchain technology has developed very quickly. These developments gave birth to various versions of the blockchain with advantages that were not available in previous versions. The following are three versions of the blockchain, from the first to the newest.
Blockchain 1.0 (Currency)
Blockchain 1.0 is the first generation blockchain of blockchain technology development which aims to bring transparency and public access to the global financial system. Blockchain technology realizes a completely decentralized, distributed, and immutable record of online transactions.
Blockchain 1.0 was preceded by the emergence of Bitcoin, which was introduced in 2009. Satoshi Nakamoto formed the genesis block (the first block in the Bitcoin blockchain), where subsequent blocks are linked and interconnected to produce one of the largest blockchains containing various information and transactions. The emergence of Bitcoin as a cryptocurrency is the beginning of the implementation of blockchain in financial transactions.
Blockchain 2.0 (Smart Contracts)
The subsequent development of blockchain technology is a smart contract, a computer program that resides in a blockchain network. Smart contracts are autonomous, transparent, and can be executed automatically if the specified conditions are met. Smart contracts can reduce execution, verification, and fraud prevention costs.
Smart contracts that run on the blockchain can be said to have an “embedded system security already” and are difficult to hack. Smart contract technology enables more complex levels of programming, giving developers more freedom to experiment with code and create decentralized applications (DApps).
Smart contract technology makes blockchain increasingly used for various real-world use cases, especially DeFi (Decentralized Finance). DeFi is a financial application ecosystem that allows users to take advantage of financial services such as borrowing, lending, and trading without needing to rely on a centralized entity such as a bank.
Blockchain 3.0 (Decentralized Application & Scalability)
We have now entered the third stage of the development of blockchain technology. The focus of the third-generation blockchain is to fix the weaknesses of the previous blockchain, where blockchain 2.0 often has problems in implementation. Examples include slow speeds or hefty transaction fees. Blockchain 3.0 improves on aspects of scalability, including interoperability and increased network speed.
One of the 3.0 blockchains is Vexanium, a public blockchain that can be used for retail use because it has low transaction fees and a much higher transaction speed than Ethereum.
In this phase, it can be seen that more and more companies and institutions are adopting blockchain. Blockchain technology is widely accepted in various industries to help run financial operations.