In 2008, a mysterious whitepaper of digital currency came out and spread throughout the Internet. The whitepaper was published by Satoshi Nakamoto which carried the new concept of a cutting-edge technology. People discovered the huge potential to implement its underlying technology in many different fields which causes a digital revolution. Now, it has become the digital gold for the geeks named Bitcoin. And its underlying technology — Blockchain, had become a popular field that many talents devoted themselves to.
Many blockchain projects have rised after the Bitcoin’s debut. And the later development of blockchain technology can be generally divided into three phrases. Blockchain 1.0 refers to Bitcoin which is the very first application that applied the concept of blockchain. Blockchain 2.0 refers to Ethereum which supports smart contracts to power huge amount of DApps. As for Blockchain 3.0, the community has not reached a consensus where several projects are still making efforts to earn the title.
Blockchain 1.0 refers to the Distributed Ledger Technology (DLT) that Bitcoin applies. This electronic cash system is powered by the consensus of a distributed network. Satoshi Nakamoto also published Bitcoin’s whitepaper at the same time when the world was suffering from financial crisis. Hence, he designed digital currency with the characteristics of decentralization, unalterable, transparent and anonymous. Bitcoin brought up the concept of Blockchain which became the fundamental of Blockchain 2.0 and 3.0 later. Though this characteristics may be possibly be broken down, but they still form the shape of the first cryptocurrency that can complete peer-to-peer payment without a third party.
Blockchain 2.0 features smart contracts than can use to create DApps and launch ICOs. Smart contracts are programs built by codes, and run on the blockchain. Once the conditions set in advance are fulfilled, the smart contracts will execute automatically without the need of verification from third party like banks and lawyers. Ethereum is the representative of Blockchain 2.0. It is a codable blockchain that enables everyone to create decentralized applications on the blockchain. Though Ethereum opens the way for mass creation of DApps, the latency and unsufficient bandwidth of network limit its development. Hence, some Blockchain 3.0 projects are seeking to improve the performance.
Let’s take a look at the uses of smart contracts, a Blockchain 2.0’s feature.
Example 1: Ken wants to buy some stock photos from Michael. When Ken transfers cryptocurrencies to Michael’s wallet, the condition of smart contract will be satisfied. Then the ownership of those gorgeous photography will be passed to Ken automatically.
Example 2: Hybrid Decentralized Exchange JOYSO is powered by the smart contracts of Blockchain 2.0. The smart contract verifies the matched orders and broadcasts to the blockchain after users sign to approve transactions from MetaMask or other hardware wallets (Ledger Nano S, etc). The audit usually done by a third party is then replaced with smart contract as a trust machine. Users keep their private key and funds to themselves during the trade. This difference makes JOYSO more secure than other centralized exchange.
It is still unclear what is next for Blockchain and what changes Blockchain 3.0 can bring. However, the concept of Blockchain 3.0 can be divided into two main parts. One is to implement Distributed Ledger Technology in real life cases, the other is to solve the technical issues of Blockchain 2.0, for instance, scalability and storage constraints. The combination with IoT is a popular topic, where IOTA gains the most attention. IOTA tried to establish the communication between things with data exchange. With data exchange and cryptocurrency, it can further achieve flow of funds.
Think of a situation that we’re driving a car heading for a road trip. We set the destination in the smartphone that will exchange the data with the car. Based on this data, the car will suggest you to go to gas station if there’s not enough gasoline. When we arrive, the gas station will exchange data with the car again to determine how many fuel to add and whether there is a coupon discount. The whole process is completed solely by the car and the gas station. Applying the Distributed Ledger Technology, the process of exchange of data and funds is also decentralized and unalterable.
The evolution from Blockchain 1.0 to 3.0 is as mentioned above, while the definition of Blockchain 3.0 is still blur. Many projects are trying seize the first to become a Blockchain 3.0 pioneer however there are still many technical challenges waiting to be solved. The so-called Blockchain X.0 is actually marking the important milestones in Blockchain evolution which will bring more decentralized application and make the world a better place.
Article by George, JOYSO