Blockchain Technology’s 3 Generations

It’s possible to look back on blockchain developments and divide them into three stages, marked by significant developments and innovations: research and development, cryptocurrency, and Web3 and enterprise uses.

The blockchain technology we are familiar with has only existed since 2009, so it’s likely that there are still important developments to come—there is no telling what will happen. Here’s where we are so far.

Key Takeaways

• The ideas, concepts, and programming that make up a blockchain took decades to develop and many failures.
• Blockchain is the technology behind cryptocurrency, but cryptocurrency took the forefront for the better part of a decade.
• Cryptocurrency’s popularity waned, replaced by growing interest in blockchain’s uses in creating a decentralized internet and for businesses and commercial applications.

Generation 1: Development and Introduction

The ideas that would go into blockchain have been swirling around in computer science communities since the late 80’s and early 90’s. The blockchains we are familiar with today are the culmination of decades of research and development by many people who will likely never be recognized for their contributions. Here are a few of the ideas and concepts used in blockchains, conceived of and proposed by many individuals before Bitcoin was proposed:

• Timestamps
• Merkle trees
• Cryptography
• Distributed databases
• Encrypted electronic ledgers
• Programming languages
• Smart contracts

Many of these began being used together in the late 1990s to try to create distributed payment systems. Many failed projects ultimately led to the ideas behind Bitcoin, so this generation could be defined as all efforts before 2009.

Generation 2: Cryptocurrencies

Created using blockchain technology, Bitcoin introduced the idea of cryptocurrencies to the world, and it caught on very quickly. Within a matter of years, people were buying pizzas with it, and other projects emerged to mimic it. Many of these projects attempted to address issues the Bitcoin blockchain was experiencing.

Ethereum appeared, bringing with it not only a cryptocurrency but the idea that blockchain could be used to decentralize everything. It included the ability to create applications that used a blockchain in addition to smart contracts, which are programs that automate the actions users agree on.

Investors discovered that cryptocurrencies‘ market value fluctuated and began purchasing them to speculate on their prices. This prompted the emergence of more cryptocurrencies, which were introduced to raise funding for developers trying to capitalize on the increasing interest and money flowing in.

Initial coin offerings (ICOs) flooded the market with new cryptocurrencies, and more capital poured in. The blockchain and cryptocurrency industry became rife with frauds and scams, and regulators stepped in to calm it down. The cryptocurrency market entered what many called a crypto-winter in 2018, only occasionally experiencing a rise in prices following news releases and hyping by celebrities and well-known names in the space.

Crypto regained some popularity between 2023 and 2024, fluctuating based on the collapses of large exchanges and the approval of Spot ETFs. However, cryptocurrency popularity has waned as development has been redirected. So, this generation could be defined as 2010 to sometime in 2022.

Generation 3: Enterprise Adoption and Web3

During the cryptocurrency craze, blockchain development continued as projects worked to attract interest from businesses and governments. Enterprise uses, long evangelized by blockchain proponents, accelerated as researchers, financial institutions, and large companies developed solutions for issues they experienced. Walmart created a supply chain tracking blockchain network; the Linux Foundation created a modular blockchain where users could build customized blockchains for their needs. IBM used the Linux Foundation’s creation to further develop business solutions, and JPMorgan Chase launched a commercial, customizable blockchain for businesses.

Note

Web3 is very much still a concept, but as of 2024, it is emerging alongside artificial intelligence and machine learning as one of the next technological advancements.

Cryptocurrencies were still being launched by some projects in 2023 and 2024, but many of the cryptocurrency projects that launched during the 2010s overhauled their blockchains and networks, attempting to become more relevant as the crypto storm calmed. Web3, the idea of restructuring the way the internet works through decentralization, became the focus of blockchain-based projects.

The dream behind Web3 is to use blockchain, distributed ledgers, tokens, and cryptocurrencies to create an internet that removes intermediaries. Our personal data could remain in our control, only being used for marketing or other purposes if it was purchased from us—not from a business that collected it without our knowledge. Our intellectual property and creations can belong to us through tokenization; financial transactions can be conducted without relying on institutions that use our money to make money for themselves, and much more.

Thus, the third generation could be defined with a starting year of 2023, when many existing blockchain and cryptocurrency projects began switching to Web3. There were Web3 blockchain projects before then, but it became the focus as cryptocurrency moved to the development background.

How Many Generations of Blockchain Are There?

It depends on who you ask and how they define them. Generally, there have been three: research and development, the cryptocurrency craze, and Web3 and enterprise development.

What Is the 5th Generation Blockchain?

Some people refer to specific blockchain developments as generations, such as Bitcoin (first, only a payment method), Ethereum (second, a payment method, app development, and smart contracts), and so on. A fifth generation blockchain, under this definition, would have all of the features of previous blockchains and more.

What Are the 4 Types of Blockchains?

Blockchains are popularly thought to come in two types and two subtypes: public and private and permissioned and permissionless.

The Bottom Line

Blockchains took many years to evolve into what they are today: large distributed networks that facilitate payments, allow applications to be created on them, use automation to complete agreements between parties, and much more. They are also being used to develop solutions to remove the intermediaries involved in every aspect of modern life. Whatever blockchain evolves into next is anyone’s guess, but it will be interesting to witness.

Read the original article on Investopedia.