Blockchains – evolution, generations, and hype

We live in exponential times. As mere mortals, we normally perceive time in a linear way.

For example, one of the greatest inventions of mankind, the landline telephone, took about half a century to establish itself as a mainstream consumer appliance from a symbol of luxury, whereas smart phones crossed that barrier within a decade.

Blockchain is a disruptive computing paradigm. It has been positioned as fifth after mainframes, personal computers, the World Wide Web, and social networking. Melanie Swan, a blockchain educator and visionary, has segregated the existing and potential activities in blockchain evolution into three phases: blockchain 1.0, 2.0, and 3.0:

• Blockchain 1.0: It includes currency, the deployment of cryptocurrencies in applications related to cash, such as currency transfer, remittance, and digital payment systems.
• Blockchain 2.0: It includes contracts (the entire slate of economic, market, and financial applications using blockchain) that are more extensive than simple cash transactions: stocks, mortgages, titles, bonds, futures, loans, smart property, and the Internet of Things.
• Blockchain 3.0: It includes blockchain applications beyond currency, finance, and markets. This includes the areas of government, health, science, literacy, culture, and art.

Interestingly, Robert-Reinder Nederhoed, an industry practitioner and grass-roots level blockchain implementer, has classified blockchain technology into three distinct generations. Figure 1.11 summarizes the three generations the blockchain has experienced since its inception in 2009 by Satoshi Nakamoto (an unknown entity; the word Satoshi translates as wisdom, Naka as central and Moto as origin, so it roughly translates to central intelligence). These are money, assets, and contracts.

As linear thinkers, we must accept the bitter truth that technology life cycles are becoming shorter. Gartner, a market research group, traces this using a famous graph called the hype cycle.

A generic representation of such a graph is shown in Figure 1.12:

As of July 2017, the blockchain has entered the trough of the disillusionment phase. This is the reality check phase for any innovative technology, when the general interest wanes as experiments and implementations fail to deliver. Producers of the technology shake out or fail. Investments continue only if the surviving providers improve their products to the satisfaction of early adopters. Smart contract technology is one such hope which can take the blockchain out of this trough into enlightenment.