“Blockchain” is a term thrown around a lot in the crypto space, and you might not even fully understand what it is. It’s commonly used along with the explanation of how Bitcoin works, but did you know there were different generations of blockchain technology? Throughout the years of cryptocurrency development, there have been three distinct generations of blockchain technology introduced. Let’s go over what they all are!
First, What’s a Blockchain?
To put it simply, a blockchain is a public ledger that is run by a network of computers that validate the information on it. For cryptocurrencies, the computers validate transactions. The information on the blockchain is decentralized, meaning it’s not owned by a single entity – you can actually download the entire Bitcoin blockchain onto your computer! Security is a mainstay of blockchain technologies, as well as cutting out a middleman to facilitate transactions. It all began with Bitcoin – the first generation of blockchain technology.
First-Generation Blockchain Technology
Bitcoin is the best example of a first-generation blockchain. Utilizing peer-to-peer transactions and miners solving blocks to validate transactions, it was the first successful blockchain and continues to be one of the most popular cryptocurrencies.
Second-Generation Blockchain Technology
After Bitcoin’s success, it was time for the next generation of blockchain, which was brought about by Ethereum. Second-generation blockchain technology does more than just document transactions. Using self-executing agreements between two parties, called smart contracts, transactions are faster and more secure than first-generation blockchain technology. Another advantage of second-generation blockchain technology is that it acts more like a digital ecosystem instead of a system solely for transactions. Ethereum, for example, is a network that DeFi applications, games, and NFTs can run on. But with the advent of “The Merge”, Ethereum is shifting towards the next generation of blockchain: the third generation!
Third-Generation Blockchain Technology
Even though Bitcoin and Ethereum are successful in their own ways, they will run into some issues in the future. As crypto is more readily adopted, the issue of scalability in blockchains becomes more prevalent. When too many people make transactions at a given time, fees can skyrocket and transactions take longer. With third-generation blockchains like Cardano and Polkadot, they automatically scale with demand, leading to lower fees overall. Another issue that third-generation blockchains solve is interoperability, or the sharing of data across different blockchains. While this is still being worked on, the idea is that multiple blockchains will be able to interact with each other. This is the cutting-edge of blockchain technology at the moment, and older blockchain networks are innovating to keep up, like with Ethereum’s Merge.
What’s the Future of Blockchain Technology Look Like?
Since blockchain technology is still relatively new, it is difficult to predict where it will go. However, blockchain and web3 technologies are starting to be widely adopted into many industries, and continue to innovate to bring users into the new age. Bitcoin and Ethereum will be viewed as the original pioneers into the blockchain space, but others may rise and take their place. As always, stay tuned to the RockItCoin blog for the latest in cryptocurrency news and remember to do your own research!