Bitcoin is soaring, Elon Muskâs Tesla
The roots of the current crypto revolution can be traced back all the way to the 1970s. Weâve 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.Â
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 MITâs 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, bitcoinâs 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 Hellmanâs âNew Directions in Cryptographyâ, Tether and MakerDAO white papers.Â
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.Â
Newly added blocks of information could be compared to leaves that are strung together to form âbranchesâ, which track down to a ârootâ, 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 anonymityÂ
Relevance: Chaumâs 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 Haberâs work on time-stamping digital documents practically gave birth to blockchain technology. Concerned with the problem of data tampering, they proposed a solution called âa digital safety deposit boxâ 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.Â
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: Â Critical to many existing blockchain-based platforms and applications, smart contracts were first proposed by computer scientist Nick Szabo as âcomputerized transaction protocols that execute the terms of a contractâ with the goals of minimizing transaction costs and the need for trusted intermediaries.Â
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 millionÂ 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.Â
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.Â
Over the next decade, bitcoinâs 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
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 feesâor the cost to move funds and run distributed applicationsâwould be facilitated with “ether”, Ethereumâs internal crypto-fuel.Â
Buterin envisioned multiple applications that could be built atop the Ethereum blockchain: cloud computing, decentralized prediction markets and marketplaces, online voting, and decentralized governanceâessentially a world computer that couldnât 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 (âZK-SNARKâ) 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.Â
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, Samsâ seigniorage stablecoins wouldnât use any external reserve as a collateral and instead rely on algorithms to maintain price stability. Modeled after central banksâ management of their countriesâ 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 BoEâs real-time gross settlement system.
Authors: Joseph Poon, Thaddeus Dryja
Date of publication: January 14, 2016
Breakthrough: solution to bitcoinâs 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
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 Labsâ 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)Â
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.Â
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.Â
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.