The evolution of the blockchain method has already led to meet with three generations of blockchains, where each generation is, in some ways, the improvement of the previous one. Surely there will be others in the future, which will bring news, from the point of view of functionality or performance or other aspects that now even imagine.

But what exactly are the first three generations of blockchains, and how do we recognize them?

First generation of blockchains

We have all heard of Bitcoin and many have invested FIAT money (Euros, Dollars, etc …). Bitcoin, born in 2009, is actually only an expression of the blockchain, which is at the base of the crypto money.

If Bitcoin was a ship, blockchain would be its sea.

Bitcoin can not exist without blockchain, or better, it would not make sense to exist.
The blockchain was born as an immutable register, Bitcoin as an alternative currency to the money of banks and governments, not manipulated by anyone and with an algorithm of shared consent. Bitcoin without blockchain would be just one of the many virtual coins in circulation, born and controlled by a single institution (public or private).

And what are the main characteristics of this blockchain that differ from its evolutions?

• The speed of transactions confirmation in the order of many minutes-tens of minutes
• No use other than currency exchange
• Only Proof of Work (PoW) consent algorithm

In particular, the confirmation of transactions requires whole minutes, each block is generated about every 10 minutes and theoretically, we should expect 6 to have an almost absolute certainty (not 100%) of the transaction confirmation without risk of rollback.

In its original version, no implementation of programmable objects (smart-contract) or assets (tokens) is foreseen, only the currency exists.

The transactions are controlled only with the PoW method, which requires the resolution of a given computational “challenge” by the network nodes. The first one who wins the challenge creates a new block in the blockchain, the other nodes copy it, and then start with the next challenge.

The second generation of blockchains

These blockchains were born to respond to the need to memorize assets, that is to certify the ownership of something to someone. An asset can be an act of a company, with a consequent voting right (even that which can be performed on blockchain). It can be a virtual object, directly saved on the blockchain as a document or a reference to it. It can be a right, like that of being able to access a private area of a website.

Among the first blockchain 2.0 platforms, we remember NXT, born in 2013, has released over time several new features including a marketplace, an encrypted messaging system and above all a new consensus algorithm called Proof of Stake.

• The speed of transactions confirmation in the order of a few minutes – tens of seconds
• Assets for different uses but not programmable
• Additional consent algorithm Proof of Stake (PoS)

To meet the world that runs and speed up the use of money and assets, the new blockchains have been designed for faster confirmation. For example, NXT or NEM have the creation of a block every 60 seconds or so.

If it is true that the assets memorable on these blockchains can be of any kind, it is true that they can not be changed dynamically, at the level of programming or conditioned by a possible algorithm.

The new concept of PoS consensus is based, not on a computational challenge, but on the probabilistic “election” of nodes that will guarantee the new block of transactions subject to confirmation. The nodes are chosen based on a logic that is based on different parameters, including (but not only) the amount of money present in the wallet assigned to the node. There are some variations of this type of consent, some more random and some less.

The third generation of blockchains

They are the most complex ones, created to make the memorable objects in the blockchain dynamic and complex. We talk about smart-contracts. Ethereum, the most popular protocol, was born in 2015 and immediately became a reference point for this kind of blockchain 3.0. Each smart-contract is able (then there is the human error …) to contain immutable programming code (this point is guaranteed by the blockchain), deterministic and secure. The possibilities of application of smart-contracts (and consequently of the blockchain at the base) become enormous, probably beyond the daily imagination.

• The speed of transactions confirmation in the order of a few seconds – tens of seconds
• Ability to create Smart-contract (Turing Complete)
• Various consensus algorithms (PoW, PoS, PoA, PoB, etc…)

To respond to the ever-increasing demands from the market, these blockchains were born with ever-faster consensus algorithms in the resolution (PoW) and entirely new algorithms. This brought the speed of transaction confirmation to higher levels, never before seen.

Over the years, especially during 2017, the aspect of energy consumption and information security linked to the consensus algorithms has become important. For these reasons, new proposals were born in the field of transaction approval, such as the Proof of Activity or the Proof of Burn that make the PoW approach theoretically obsolete. There has not been, and perhaps will not be, a transfer of the old blockchain to these new algorithms; because there was little time available to mature and then evaluate the various proposals, or because they did not get a broad consensus at the community level.

Smart-contracts as I said before, are a novelty for blockchains with incredible potential.

Final considerations

A clarification on transaction confirmation speeds is now made: there are groups of developers who have implemented blockchain-based systems with instant transactions (such as Lighting Network). In that case, we do not talk about blockchain but second-layer blockchain, that is the second level of blockchain that is above a basic blockchain.

The evolution of blockchain is a natural and inevitable thing. It is true that at the roots of these protocols are present technical aspects known for decades (like the Merkle tree, 1979) but it is still true that the innovations may be of your types: disruptive or incremental. Here we are witnessing incremental technological innovations, accompanied by innovations of use. And only by trying to apply blockchains to our life spheres will it be possible to find out how to improve them.

Surely if we keep our ideas only for us or closed in a drawer, maybe on paper, it will not be possible to make them grow or make them take an evolutionary leap.

Luca Venturella
https://www.linkedin.com/in/luca-venturella/

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