Bitcoin is soaring, Elon Musk’s Tesla

has joined a growing group of corporate hodlers and the global cryptocurrency market now has more than $1 trillion in market capitalization. While a good deal of that value is held in so-called “altcoins” of dubious worth, it is clear that the decentralized future of money is gaining momentum. 

The roots of the current crypto revolution can be traced back all the way to the 1970s. We’ve compiled a list of the 10 most important developments underpinning the rise of the digital economy. It is worth noting that the first four are fundamental to the development of not only digital assets but concepts and technologies exploring applications far beyond fintech and decentralized governance. 

Previously, researchers Arvind Narayanan and Jeremy Clark published an article shedding light on the academic origins of bitcoin. The success of these and other academics led to a wellspring of low-quality copycats, who made billions in the heyday of ICOs with little more than a half-baked idea.

To arrive at our top ten, Forbes identified 22 early candidates and consulted with Dr. Neha Narula, director of MIT’s Digital Currency Initiative; Dr. Emin Gun Sirer, associate professor at Cornell University and the founder and CEO of Ava Labs, which is developing the shortlisted Avalanche consensus mechanism; Amiti Uttarwar, bitcoin’s first known female core developer, and Dr. Andrew Miller, Assistant Professor at the University of Illinois, Urbana-Champaign and chair of the Zcash Foundation, developing the protocol of the privacy-focused Zcash cryptocurrency (listed below)

Besides our ten selections, mentioned below, there are numerous honorable mentions including Wittfield Diffie, Martin Hellman’s “New Directions in Cryptography”, Tether and MakerDAO white papers. 

Author: Ralph C. Merkle

Date of publication: 1979

Breakthrough: more efficient and secure data encryption

Relevance: Merkle is rightfully named as one of the fathers of cryptography. His Merkle Trees, or certified digital signatures, allowed for efficient and reliable encryption of data by converting blocks of information into strands of unique code. 

Newly added blocks of information could be compared to leaves that are strung together to form “branches”, which track down to a “root”, a single string of numbers and letters containing all the previously recorded information. This method of converting, or hashing, blocks of information enabled space-efficient encoding of blockchain data.

Author: David Chaum

Date of publication: February 1981

Breakthrough: digital anonymity 

Relevance: Chaum’s seminal contributions to digital privacy and invention of digital cash led to the creation of the Cypherpunk movement, which advocated for widespread use of cryptography as a route to progressive social change. Among the notable cypherpunks are Julian Assange, founder of WikiLeaks, Wei Dai, the creator of the b-money system, cited by Satoshi Nakamoto in the bitcoin white paper, and smart contracts inventor Nick Szabo.

Authors: Stuart Haber, W. Scott Stornetta

Date of publication: January 1991

Breakthrough: time-stamping of digital data

Relevance: Stornetta and Haber’s work on time-stamping digital documents practically gave birth to blockchain technology. Concerned with the problem of data tampering, they proposed a solution called “a digital safety deposit box” that could record the date and time a certain document was created and retain a copy of it for safekeeping. The accuracy of these records would be guaranteed by an unalterable chain of time-stamp requests. 

This primitive time-stamping scheme did not only serve as a prototype for the bitcoin network and all the ones that followed but found applications practically anywhere the distributed ledger technology is used today. For many enterprises utilizing blockchain the timestamping component is crucial in supply chain management and bookkeeping.

Author: Nick Szabo

Date of publication: 1994

Breakthrough: self-executing digital contract

Relevance:  Critical to many existing blockchain-based platforms and applications, smart contracts were first proposed by computer scientist Nick Szabo as “computerized transaction protocols that execute the terms of a contract” with the goals of minimizing transaction costs and the need for trusted intermediaries. 

These self-executing contracts of transparent, traceable, and irreversible nature later defined one of the most widely used blockchain platforms Ethereum, which currently supports more than 2 million such contracts with a wide range of applications ranging from banking and financial services to gaming and gambling.

In 1998, 10 years before the invention of bitcoin, Szabo invented a virtual currency called “Bit Gold” centered around the proof of work mechanism nowadays realized in the form of cryptocurrency mining.

Author: Satoshi Nakamoto

Date of publication: October 31, 2008

Breakthrough: the first blockchain-based cryptocurrency

Relevance: Invented by the mysterious Satoshi Nakamoto and released as open-source software in early 2009, bitcoin took the world by storm, spurring an entire new body of scientific research and business developments related to blockchains, digital assets (including those developed by sovereign governments) and decentralized economies. 

Nakamoto pieced together previously developed concepts of cryptography and digital signatures, proposed by Haber, Stornetta, and Merkle, among others, in a design of a purely peer-to-peer electronic payment system. 

Over the next decade, bitcoin’s narrative shifted to reflect its emergence as a rival to gold due to its deflationary nature, while the cryptocurrency became the herald of asset digitization around the world. Increasing attention from institutional investors and publicly listed companies, including PayPal

and Square

, sent bitcoin on a record price rally. According to analytics firm Messari, at the time of publication bitcoin has a market capitalization of $882 billion.

Author: Vitalik Buterin

Date of publication: 2013

Breakthrough: incorporation of a Turing-complete programming language to enable the development of various applications on a distributed ledger

Relevance: In 2013, a 19-year-old Russian-Canadian programmer Vitalik Buterin proposed a blockchain with a built-in fully fledged Turing-complete programming language that would allow anyone with coding experience to write smart contracts and decentralized applications for various types of transactions. Transaction fees—or the cost to move funds and run distributed applications—would be facilitated with “ether”, Ethereum’s internal crypto-fuel. 

Buterin envisioned multiple applications that could be built atop the Ethereum blockchain: cloud computing, decentralized prediction markets and marketplaces, online voting, and decentralized governance—essentially a world computer that couldn’t be shut down.

Now Ethereum is one of the the most actively used blockchains hosting more than 2,500 decentralized applications for games, exchanges, and decentralized finance (DeFi), and its native cryptocurrency ether is the second most valuable digital asset with a $205 billion market capitalization.

Authors: Eli Ben Sasson, Alessandro Chiesa, Christina Garman, Matthew Green, Ian Miers, Eran Tromer, Madars Virza

Date of publication: May 18, 2014

Breakthrough: the first widespread application of ZK-SNARKs, a novel form of zero-knowledge cryptography

Relevance: Zerocash was initially conceived by scientists at MIT, Johns Hopkins, and a few other universities as an extension of bitcoin with stronger privacy guarantees, allowing users to hide information that might later identify them.

The Zerocash privacy model pioneered the application of the zero-knowledge succinct non-interactive argument of knowledge (“ZK-SNARK”) cryptography, which allows one party to prove to another possession of certain information without revealing that information. Zerocash uses ZK-SNARKs to prove that the conditions for a valid transaction have been satisfied without revealing any crucial information about the addresses or values involved. Thus Zerocash ensures that transaction data is posted to a public blockchain, but unlike with Bitcoin, users gain control of their information. They can remain completely anonymous or opt to disclose transaction details for regulatory compliance or audits. 

According to CryptoSlate, currently 82 cryptocurrencies worth a total of $8.85 billion encrypt their transactions with zero-knowledge proofs or similar private technology.

Author: Robert Sams

Date of publication: October 24, 2014

Breakthrough: first non-collateralized stablecoin

Relevance: Cryptocurrencies have historically traded with high levels of volatility. Increasing demand for stability led to the creation of stablecoins, cryptocurrencies designed to remain stable in value against some pegged external asset class. Total market cap of stablecoins currently exceeds $43.12 billion.

Unlike the well known fiat-collateralized Tether and crypto-collateralized Dai, Sams’ seigniorage stablecoins wouldn’t use any external reserve as a collateral and instead rely on algorithms to maintain price stability. Modeled after central banks’ management of their countries’ monetary supplies, the algorithm utilizes the smart contract technology to increase and/or decrease the supply of coins in circulation.

In 2015, Robert Sams founded a blockchain company Clearmatics, which focuses on building decentralized financial platforms. In 2018, the firm partnered with the Bank of England on a research into support of blockchain interfaces by BoE’s real-time gross settlement system.

Authors: Joseph Poon, Thaddeus Dryja

Date of publication: January 14, 2016

Breakthrough: solution to bitcoin’s scalability problem

Relevance: Despite the original intent of becoming the electronic payment system of the future, bitcoin has been struggling to establish itself as a fully-fledged alternative to existing online payment infrastructures. While Visa

processes thousands of transactions per second, the bitcoin blockchain usually processes less than 10.

The Bitcoin Lightning Network was designed as a potential solution to this very problem. It adds another layer to the bitcoin blockchain, on which any two parties can create payment channels for low-value bitcoin transactions. By moving the transactions off the main ledger, the Lightning Network enables decongestion of the bitcoin blockchain and reduction in associated transaction fees.

In 2016, Bitcoin payments startup Lightning Labs, backed by Square founder Jack Dorsey and Robinhood co-founder Vlad Tenev, among others, set out to bring the idea to life and is currently building a platform similar to the Visa network on the open-source Lightning Network codebase. Lightning Labs’ CEO Elizabeth Stark contributed to the original white paper.

Authors: Hayden Adams, Noah Zinsmeister, Dan Robinson

Date of publication: March 2020

Breakthrough: popularized automated market maker exchanges (AMMs) 

Relevance: Unlike traditional exchanges that use an order book to derive the price of an asset and execute trades, Uniswap prices assets according to a deterministic algorithm known as an automated market maker (AMM). The AMM removes the need to have a counterparty to make a trade and enables essentially anyone to create a market by simply interacting with a smart contract. While not the first AMM, Uniswap has popularized the creation of such protocols facilitating the decentralized exchange of digital assets. 

Uniswap v1, the first version of the protocol, launched in November 2018 as a decentralized open-source protocol for automated token exchange on the Ethereum blockchain. The second version of the protocol, outlined in the white paper, introduced upgrades and loosened liquidity provision requirements, making it easier to participate in the economy. 

According to DeFi Pulse, a site that tracks the total value locked in the smart contracts of popular decentralized finance applications and protocols, Uniswap is the fifth most valuable DeFi protocol with $3.77 billion locked. While Maker and Aave have higher amounts of total value locked in their protocols, Uniswap remains one of the most widely used decentralized applications with the highest number of transactions initiated.