Blockchain background: Part 1
Blockchain technologies have boomed in the past twelve years since Satoshi Nakomoto released his seminal paper on Bitcoin in January 2009, leading initially to the growth of bitcoin, and other cryptocurrencies. These cryptocurrencies took fundamental building block from cryptography — cryptographic hash functions, proof of work protocols, public/private key pairs, hash chains — and created a system of use where multiple players could store and exchange values. These cryptocurrencies excited the world because they had three properties that previously had existed only in physical value offerings (such as gold or paper money):
- Final: Once payment was made, it could not be reversed. This included if money was stolen or lost.
- Immediate: While not instantaneous, value could change hands without any built-in delay, beyond what was required for the system to function, and
- Anonymous: Value was transferred between private keys, without anyone knowing who was in possession of the key.
These properties were made possible without any third party (such as a bank, financial institution, government) and provided incentives for necessary actors to take part in the overall system and make it ever more secure.
Initially, one of the most popular use cases was as a store of value, similar to gold. People could purchase, or mine bitcoins, and know that they possessed something of value that they could sell at a market rate in the future. This strategy has worked quite well, with the exponential increase in value of Bitcoin.
Other currencies, such as litecoin and ripple/XRP additionally were created, with varying technical differences, and achieved varying levels of success. At their core, all of these technologies created a system whereby multiple parties or nodes could freely join or leave the system. In addition, the nodes would create a ledger, which would be agreed upon as authoritative with various cryptographic techniques — and finally there would be incentives for nodes to exist.
The common structure of these technologies is to continually write agreed upon blocks of transactions on top of each other, and then to cryptographically ensure that the blocks cannot be altered in any way once they are on top of each other. Once the past blocks have been agreed upon, new ones are added on top. This never-ending ledger of transaction blocks on top of each other, is called the blockchain and is a common part of cryptocurrency transactions.
The blockchain itself excited many people who imagined offerings beyond a store of value in Bitcoin and other cryptocurrencies. Several such use cases included colored coins, coins that represented assets (such as stocks, or property certificates) and writing to the ledger for time-based needs (such as proving invention by a certain date).
While there was excitement and efforts that achieved varying levels of success, the early crypto technologies made adoption of uses beyond store of value challenging, and difficult to implement and use.
Partly recognizing this challenge, in early 2015, Ethereum launched, led by Vitalik Buterin. Ethereum was built from the ground up to enable not only store of value, but also smart contracts, or entire distributed applications, called Dapps to run on a full virtual machine. And, to ensure that this computing capacity was not wasted, it has a currency called ether, which is required to run the virtual machine. These apps allow for the creation of tokens, which then can be used for various forms of utility.
Concert is based on Dapp technology and as such, we are Ethereum blockchain developers — going deep on everything that has to do with the Ethereum platform.
More on this in the next blog post