A Random Walk Along Blockchain Avenue | Section 1
This article is contributed by Lamia Liang, PM at ARPA and Bella Protocol.
Section 1: Inception & Fundamentals
As you must have noticed, Bitcoin, crypto, and blockchain have been the most trending topics and the ultimate buzzwords for the past few years. If you are wondering why blockchain and crypto are getting the spotlight, you have to understand the behind-the-scenes catalysts driving the market. Unlike most articles on Bitcoin and blockchain, which usually begin right away with trying to define several points, we want to walk you through the history of blockchain and help you understand its charm from every perspective. This section will trace back to the inception of blockchain and help you review some fundamentals to be ready for the further journey in the following sections.
2008: Bitcoin
Bitcoin came into being in 2008 as the first application of Blockchain technology. Satoshi Nakamoto in his whitepaper detailed it as an electronic peer-to-peer system. Nakamoto formed the genesis block, from which other blocks were mined, interconnected resulting in one of the largest chains of blocks carrying different pieces of information and transactions.
2010: Exchanges
Although Bitcoin and blockchain were conceived based on distributed ledger tech and aim at a completely decentralized peer-to-peer exchange network, matchmaking transactions and marketplaces are inevitable, as early-stage trading with random counterparts on forums was not the trustlessness we look for.
Thus, just over a year after Bitcoin Whitepaper and the Genesis block in late 2008 and early 2009, the first cryptocurrency exchange went live in March 2010 — bitcoinmarket.com — not a famous one and was long gone (the domain is invalid already). But it is not meaningless, as it helped significantly on the initial pricing of Bitcoin, which still serves as the origin of any Bitcoin price chart over the following decade and in the future.
Then there were other centralized exchanges. Some were infamous, like Mt. Gox, which was not just fined by the US regulator, but also ran with poor security allowing years of hacking for a total of 844,408 bitcoins. And fortunately, in the wake of the failure of Mt. Gox, some become leading CEXs like Coinbase, Kraken, Gemini, and others.
2011: Altcoins
Nakamoto’s creation of Bitcoin apparently inspired other pioneers of the decentralized web. In two years, the world saw the emergence of several altcoins. By the end of 2013, there were over 50 altcoins being launched, while in another 12 months, the number surged to over 500.
Among the very early batch, these were the most interesting and influential ones back then, and might as well as of today: Litecoin, Namecoin, Dogecoin, and Peercoin.
Litecoin was invented to lower the barrier of mining and improve the efficiency of the network; Namecoin aimed to make components of decentralized internet infra such as censorship-resistant domain; Dogecoin, the great grandfather of hundreds of the “meme coins”, was first designed to make fun of cryptocurrency speculations. All these three earliest altcoins “forked” from Bitcoin, although to a various extent, employed the same consensus protocol.
Peercoin, on the other hand, was slightly different.
2012: Proof of Stake (POS)
Peercoin obviously shares the proof-of-work (POW) genes with Bitcoin and the three other earliest altcoins mentioned above, but it has more than that. The first functioning implementation of a proof-of-stake (POS) cryptocurrency was Peercoin, introduced in 2012.
POS is a consensus protocol that attempts to address issues like energy inefficiency, high hardware requirements and difficulty in scaling, all of which were widely seen in proof-of-work (POW) networks.
(By the way, POW was invented by Cynthia Dwork and Moni Naor in 1993 as a way to deter denial-of-service attacks and other service abuses such as spam on a network by requiring some work from a service requester, usually meaning processing time by a computer. The term “proof of work” was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels. Proof of work was later popularized by Bitcoin as a foundation for consensus in permissionless decentralized networks.)
Interestingly, the second largest cryptocurrency today began with the POW mechanism, and is now in the process of upgrading to a POS blockchain. That’s Ethereum, and its upcoming completion of ETH 2.0.
2013: Ethereum
Ethereum was born out as a new public blockchain in 2013 with added functionalities compared to Bitcoin, a development that has turned out to be a pivotal moment in Blockchain history.
Vitalik Buterin differentiated Ethereum from Bitcoin Blockchain by enabling a function that allows people to record other assets such as slogans and contracts. The new feature expanded Ethereum functionalities from being a cryptocurrency to being a platform for developing decentralized applications as well.
Officially launched in 2015, Ethereum blockchain has evolved to become one of the biggest applications of blockchain technology given its ability to support smart contracts used to perform various functions. Ethereum blockchain platform has also succeeded in gathering an active developer community that has seen it establish a true ecosystem.
2014: Stablecoins
Tether (USDT), the first successful stablecoin and still by far the biggest, was launched in late 2014 by a group called Tether Limited. Tether introduced a relatively simple concept for creating a crypto asset that maintained a stable price. For every USDT issued, the Tether Foundation kept $1 USD in reserve (at least in theory). This kept the USDT price stabilized around $1 since each unit of USDT could be redeemed for one of the US Dollars in the reserve. In this sense, Tether was basically a digital wrapper for a dollar-denominated liability. Tether started off relatively slowly, with little activity in its first year. But when Bitcoin’s price began to rise in 2017, Tether started to take off. Tether supply passed 1M for the first time in January 2016. By January 2017, it was a little under 10M. By January 2018, as Bitcoin’s price peaked at close to $20K, the Tether supply had grown to over 1.4B.
After Tether started taking off in 2017, other stablecoins soon began to launch. While Tether’s reserves were controlled by the relatively opaque Tether Limited group, many of the new stablecoins were backed by larger organizations, including exchanges.
USD Coin (USDC) was launched in September 2018 and managed by a group called Centre, which included Coinbase and Circle. The same month, Gemini announced the Gemini Dollar (GUSD) stablecoin. Paxos Standard Token (PAX) was also launched in late 2018. PAX was created by a company called Paxos which had previously launched Singapore-based itBit exchange.
While USDC and PAX were also backed by USD reserves, different models began to emerge.
In December 2017, MakerDAO launched a decentralized stablecoin called the DAI token (DAI). DAI was also designed to be pegged to $1 USD. But unlike USDT, USDC, and PAX, DAI was not backed by a reserve of USD controlled by a single organization. Instead, DAI is collateralized by other crypto assets like ETH.
Furthermore, the DAI reserve is not controlled by any individual entity. Anyone can open up a Collateralized Debt Position (CDP) on MakerDAO’s platform to mint new DAI, which can later be redeemed to reclaim the original collateral.
About ARPA
ARPA is a blockchain-based solution for privacy-preserving computation, enabled by Multi-Party Computation (“MPC”). Founded in April 2018, the goal of ARPA is to separate data utility from ownership and enable data renting. ARPA’s MPC protocol creates ways for multiple entities to collaboratively analyze data and extract data synergies while keeping each party’s data input private and secure. ARPA allows secret sharing of private data, and the correctness of computation is verifiable using the information-theoretic Message Authentication Code (MAC).
Developers can build privacy-preserving dApps on blockchains compatible with ARPA. Some immediate use cases include: credit anti-fraud, secure data wallet, precision marketing, joint AI model training, key management systems, etc. For example, banks using the ARPA network can share their credit blacklist for risk management purposes without exposing their customer data or privacy.
Team members have worked at leading institutions such as Google, Amazon, Huawei, Fosun, Tsinghua University, Fidelity Investments. ARPA is currently assisting the China Academy of Information and Communications Technology in setting the national standard for secure multi-party computation. ARPA is a corporate member of MPC Alliance and IEEE and is in partnership with fortune 500 companies to implement proofs-of-concept and MPC products. In 2019, ARPA was named the Top 10 most innovative blockchain companies in China by China Enterprise News and China Software Industry Association.
For more information about ARPA or to join our team, please contact us at about@arpachain.io.
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