The Origins of Blockchain Technology

Most of us have already heard about Bitcoin – the new development in the field of financial transactions, a cryptocurrency that will presumably change the entire idea of how we use money. Bitcoin was indeed the first cryptocurrency based on the block chain technology. But the blockchain idea appeared long before, in 1991, based on a lot of previous technological developments. Here is its story.

In 1991, two scientists, Stuart Haber and Scott Stornetta, described blockchain technology as a way to securely encrypt data about file transaction using hashes and a later development, hash trees (1992). Hash is a code that is ascribed to each transaction with the file and is encrypted in this file. Each next transaction happening to the file has a different and unique hash. However, at every transaction, a block of information is added to the file data, containing all the previous hashes from all the previous transactions. In this way, to change of forfeit a hash, you’d need to change previously added blocks of information, which is already impossible. Blocks were organized into hash trees, also known as Merkle trees.

This technology adds up to two major advantages of block chain – its anonymity (a hash is just a code made up of random numbers that does not say anything about your transaction) and high security. Given these strong characteristics, the use of block chain was possible in many areas that needed high security, like finance, payments in online casinos like Euro Palace Casino, international trade and data management.

In 1998, a computer genius Wei Dai came up with an idea of a cryptocurrency he called “b-money”. Each b-money unit could be created by solving complex puzzles, and then exchanged anonymously among the member of a network. This idea was a solid point of reference for Satoshi Nakamoto, who mentioned it in his work of 2008 leading to the invention of Bitcoin. For the record, nobody knows who Satoshi Nakamoto is, and whether they exist at all.

Another development that lead to the creation of bitcoin was a spam-combatting system called HashCash. HasCash, developed by cryptographer Adam Beck, allowed to mark an email’s content with a certain unique hash. But the email’s content needs to pass some criteria of verification before a hash can be attributed to it. Thus, it would be very expensive and time-consuming for the spammer to send out identical emails to thousands of recipients, because each email would have to go through a verification process. This was one of the former uses of blockchain technology before Bitcoin which made it a popular idea.

Bitcoin is now used as an online currency, accepted by many businesses. Its main strong points are still anonymity and security. The term block chain has become a single word – blockchain, as has been used that way since 2016. This technology is one of the greatest invention of the new century, since it can potentially revolutionize cybersecurity and make life easier for many industries that require financial and database management.