• Blockchain is a digital ledger technology facilitating the recording of transactions.
• Mainstream organizations including Amazon and IBM are using blockchain.

Despite being so popular among people, cryptocurrencies are yet to enter the mainstream. Experts believe that blockchain, the technology underlying crypto assets, will survive even if crypto goes into oblivion. But, who knows? Many people are aware of cryptocurrency, however, only a few know how the sector has evolved. To this date, we have seen three generations of blockchain with each generation bringing something new to the table.

First Generation of Blockchain: Bitcoin (BTC)

Now we all are well aware of the first cryptocurrency to enter traditional society. In 2009, a ghost going by the name of Satoshi Nakamoto released Bitcoin (BTC), the largest crypto asset today. The idea was to send money digitally over the internet without the involvement of central entities. Inspiration to develop the concept came following the financial crisis of 2007-2008 (which is explained very well in the 2015 movie, The Big Short).

This was the secret message instilled by Mr. Nakamoto on the genesis block of Bitcoin: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” Currently, there are reportedly over 100 Million Bitcoin users across the globe. The asset has remained extremely volatile with the price hitting its all-time high of $68,789 in November 2021.

Countries including El Salvador and the Central African Republic (CAR) have accepted Bitcoin as a legal tender. The dominant cryptocurrency is sometimes linked by experts with greenhouse gas (GHG) emissions due to the energy-consuming mechanism, Proof-of-Work (PoW). It is estimated to consume 127 terawatt-hours (TWh) annually. It is enough to light a nation like Norway.

Although Bitcoin blockchain was meant to be a peer-to-peer financial ecosystem, the introduction of Ordinals, a data inscription facility, has scaled its use case.

Second Generation of Blockchain: Ethereum (ETH)

With Ethereum (ETH), the largest cryptocurrency by market cap after Bitcoin, the second generation of blockchain began in July 2015. Co-founded by Vitalik Buterin, Joseph Lubin, Anthony Di Lorio, Charles Hoskinson, and Gavin Wood, Ethereum serves as more of an ecosystem rather than an asset unlike the crowned crypto asset.

The blockchain introduced smart contracts to develop decentralized apps (dApps) in the ecosystem. According to Vitalik Buterin, Bitcoin and blockchain could be used in utilities beyond finance. The idea was to blow Bitcoin out of the water. Today there are estimated to be over 200 Million ETH owners globally. Additionally, it also introduced the concept of colored coins which later developed to be known as on-fungible tokens (NFTs)

As of now, it is the second-dominant cryptocurrency in the market. ETH, the native crypto of the ecosystem, hit its all-time high of $4,891 in November 2021. Currently, the ecosystem has the highest number of developers on the network and holds over 70% of NFT trading volume.

Last year, the Ethereum blockchain shifted its consensus mechanism from Proof-of-Work to Proof-of-Stake (PoS), aiming to reduce carbon emissions. The event was given the name, The Merge, allegedly reducing GHG emissions by over 99%.

Third Generation of Blockchain: Cardano (ADA)

After 8 years of Bitcoin’s emergence, the sector entered the third generation of blockchain with Cardano (ADA) in 2017, founded by Ethereum co-founder Charles Hoskinson. It was meant to solve a couple of issues dealt with by its predecessors—scalability and interoperability. The blockchain also introduced the PoS consensus mechanism and was considered the largest platform using it.

Scalability issues arise when there are more users on the platform than it was actually meant for. This leads to skyrocketing transaction fees on the network, sometimes more than the cost of a transaction. The highest recorded transaction fee on the Ethereum blockchain was $2.5 Million, sent to Spark Pool, a China-based mining pool, in June 2020.

Third-generation crypto assets are interoperable, unlike Bitcoin and Ethereum, meaning they can interact and exchange data with each other. Polkadot (DOT), Solana (SOL), Avalanche (AVAX) and more are a few examples of third-generation blockchains.

Future of Blockchain: Going Beyond Cryptocurrency

The majority of people often confuse blockchain with cryptocurrency. In reality, both concepts are different. A cryptocurrency is a digital asset developed on a blockchain, while a blockchain is a distributed ledger technology to store data. One can even develop a game using code and storing it on a blockchain that does not have to do anything with a cryptocurrency.

International Business Machines (IBM) uses blockchain for its food supply chain. Amazon’s Managed Blockchain is developing a reliable environment for financial institutes and business partners. The market is expected to become a $162 Billion industry by 2027. This indicates a potentially brighter future for organizations contemplating stepping into the arena.