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History of blockchain

We know that blockchain technology now has its main application where the tracking of transactions or events in a decentralized network is concerned; currently, the greatest scope to be found for this use case is in the area of finance. However, as a matter of fact, blockchain technology didn't appear as we know it and use it today until quite recently. The first ever idea of maintaining a chain of blocks to construct a tamper-proof timestamp of digital documents came about in 1991. But the concept wasn't popularized until an author with the pseudonym of Satoshi Nakamoto – whose identity is still not known today – showcased blockchains and their true use in decentralized networks in 2008, by publishing a paper titled Bitcoin: A Peer-to-Peer Electronic Cash System (https://bitcoin.org/bitcoin.pdf).

Later, in 2009, a reference implementation of blockchain technology was created by Satoshi Nakamoto. This was called Bitcoin. This was the first – and still remains the most popular – implementation of a blockchain-based electronic cash system. Satoshi took inspiration from several previous inventions, such as b-money and Hashcash, to create a decentralized digital currency.

Note: Although Bitcoin was responsible for the cryptocurrency revolution, there were several attempts to popularize electronic cash using cryptographic protocols that predated it. DigiCash is one such popular attempt from an American scientist named David Chaum. There was also a decentralized digital currency called Bit Gold, which was proposed by Nick Szabo, that had a similar architecture to Bitcoin.

Bitcoin was released in 2009 when Satoshi made the first transaction, which was inserted into the first block of the Bitcoin blockchain. This block is called the genesis block, and is the proof of the entire blockchain's legitimacy. Satoshi stopped contributing to the Bitcoin project in 2011 and is now allowing the open community to contribute to the project. Since then, it has grown from being a fairly simple digital currency to a resilient protocol that has become the reference implementation for every blockchain application. Although Bitcoin's market value is volatile, it's nearing the market value of $200 billion US dollars as of late 2018, which is almost half of the entire cryptocurrency market.

Bitcoin was the first decentralized digital currency to solve the problem of the double-spending attack. Maintaining an open distributed blockchain with a consensus for validating the block was the main thing that made Bitcoin a practically implementable decentralized currency. Bitcoin made use of a consensus algorithm called the proof-of-work (PoW) algorithm to prove that a node has actually worked to create a new block of the blockchain. This concept was also applied in an implementation called Hashcash, which was proposed to limit email spam by forcing the spammer to do some work before sending each email. This system prevented spammers from sending email in bulk, as a computation task was required before each email was sent. All the receiver needed to do was verify the work done by the sender. Similarly, the PoW consensus algorithm implemented in Bitcoin prevents any node from flooding the blockchain with its own created blocks, thus preventing any single entity from dominating the blockchain.