- Bitcoin was the foundation stone of cryptocurrencies.
- Ethereum revolutionized blockchains by introducing smart contracts.
Generations of Cryptocurrency
The foundation stone of cryptocurrency was laid by a person called Satoshi Nakamoto. But, Interestingly, Satoshi Nakamoto is just a pseudonymous person who built Bitcoin. 9 January 2009 was a historic day on which he laid the genesis block of Bitcoin.
When Bitcoin was released, it gained little popularity. But in 2020 and 2021, cryptocurrencies gained immense popularity. The price of Bitcoin skyrocketed. It was the time when the most trusted assets, such as gold and oil, were depleting. But Bitcoin was escalating.
This took the attention of the common people and what Satoshi Nakamoto predicted once. That cryptocurrency will revolutionize the financial system. Was not started becoming a reality.
In this article, we will discuss, in detail, how cryptocurrencies evolved by knowing about the first, second, and third generations of cryptocurrencies.
The first generation of crypto
Bitcoin is the first and most popular blockchain. It is a public transaction ledger. This is a decentralized currency which means no central authority operates it.
Unlike the US Dollar, which is under the control of the government.
Bitcoin uses peer-to-peer transfer technology. With the help of this, all the digital transactions are recorded.
It is a blockchain. Blockchain is made up of blocks. These blocks are designed to store the data about the transactions.
These blocks are created with the process of mining. Mining includes solving complex mathematical equations. Sophisticated devices are used for it.
The minors get Bitcoin as a reward. Currently, bitcoin miners get 6.25 bitcoins for adding the block to the blockchain.
The other examples of the first generation of Cryptocurrencies are litecoin and dogecoin.
The Second Generation of Crypto
Ethereum is often called the second generation of Crypto because it revolutionized cryptocurrency by introducing Smart Contracts.
Smart contracts are self-executing programs. It just automates all the actions which occur in a contract. This makes the transactions trackable as well as irreversible.
It contains codes that execute the transaction only when some specific conditions are made. Ethereum was founded by Vitaly Dmitrievich Buterin. Ethereum got a lot of popularity because it made transactions more secure with the technology of smart contracts.
It’s the only reason most NFTs run on the Ethereum blockchain.
This is still not the end of the evolution of cryptocurrency. There are still many improvements that were introduced in the upcoming generations of it, which made it more effective. This improved form of it is called the third generation of cryptocurrency.
The third generation of crypto
The next revolution in the field of cryptocurrency was introduced by Cardano.
Earlier blockchains were facing a lot of issues, which were regarding scalability, interoperability, and even sustainability.
As Ethereum was introduced, the new technology was smart contracts. Similarly, Cardano introduced a unique and effective technology called proof-of-work. Earlier, all the cryptocurrencies were working on the technology called proof of stack.
Cardono studies the algorithm called Ouroboros, which is a proof of stake algorithm.
Another popular cryptocurrency of the third generation are
Polkadot and Ethereum 2.0