Blockchains

A blockchain consists of a long series of blocks. Each block usually contains several transactions. It is a decentralized database without a central hub, which makes it difficult to stop or control.

The network consists of x number of nodes, and each node is a computer that validates transactions. The nodes are rewarded for their work (mining) by the system automatically sending money to the first one validating the block. The technology for this is called Proof of Work (PoW).

Each block has a hash value that cannot be calculated, but can only be randomized and the random hashes can then be right or wrong. A miner "guesses wrong" countless times before someone finally guesses correctly. All other nodes can then validate that the result was correct, and if the result is incorrect, it is ignored and never ends up on the blockchain.

Each new block is linked to previous blocks, which makes it impossible to influence the order or content of a blockchain afterwards. This makes it excellent as a currency.

The first decentralized blockchain was created in 2008 by Satoshi Nakamoto, whose identity is still unknown today. He gave life to the largest cryptocurrency today, Bitcoin. Today there are thousands of other blockchains. Some are very similar to Bitcoin, such as Litecoin - while others are totally different in nature, such as IOTA.

Generations

Blockchains have been around for about 12 years, but the creators of blockchains has already started to divide the technology into generations. It is often misleading, and in another ten years' time one can doubt that we will look at the generations in the same way as now.

Generation 1

The first generation blockchains are typically for money transactions only. This is where the early blockchains such as Bitcoin and Litecoin belong. They are typically slow and move with a few transactions per second. They usually use Proof of Work as a consensus model.

Generation 2

This type of blockchain usually handles things other than pure money transactions. They use smart contracts and are application platforms. A typical example is Ethereum. It is a fantastic technology where decentralized networks can create games, applications or move money when certain requirements are met. However, they are still slow, even though they are faster than Generation 1, so it becomes really clear when it comes to applications.

Generation 3

It is still about money transactions and application platforms, but for this generation they have started to focus on scalability, sustainability and communication between different blockchains. To succeed in this, they have usually left Proof of Work behind, and work with Proof of Stake or modern models such as directed acyclic graphs.

Typical examples of these are IOTA, Neo and Nano.

Generation 4

This generation is so new and works so far mostly for marketing purposes where you want to highlight how fantastically modern they are and how much better than everyone else they are. Some players claim that AI plays a major role, or integration with physical reality through so-called oracles.