History token and send it to the merchant or

History of Blockchain:The concept of Blockchain was first introduced in 2008 with a publication of : “Bitcoin- A peer-to-peer Electronic cash system”, a paper by an anonymous person or group named Satoshi Nakamoto (A pseudonym and till date no one is sure as to who it is). Blockchain was then practically implemented in 2009 as a core component of the digital currency, Bitcoin. It served as a digital public ledger which would store all the transaction data on the network.On January 12 2009, the first Bitcoin transaction took place between Hal Finney and Satoshi Nakamoto and on October 12 2009, #bitcoin-dev is registered as a discussion topic on freenode IRC (an open source project forum) and the conversation grows.The Bitcoin market is established in October 31 2009 and it allows people to exchange paper money for Bitcoin. This is when people begin to recognize it as a digital currency. In May 2010, the first Bitcoin purchase was of 10,000 bitcoins for a pizza. The cost at that time was $25 and today, it is about $ 120000000. By November 210, participation in the Bitcoin marketplace increases the market cap to exceed $1M USD. By Febuary 2011, BTC continued to increase in value and reached parity with USD ($1 USD= 1 BTC) and by March 2013, BTC market surpasses $1B USD. 10 times the growth in less than 3 years!Satoshi claimed to have solved the problem of ‘Double spend’ in digital currency using the blockchain technology in Bitcoin. Double spend is basically the idea of spending digital currency in two places. This is a problem which is unique to digital currencies since it can be replicated or produced again easily. This would not be an issue is case of physical currencies since they cannot be easily replicated and the parties involved in the transaction can easily verify them. In case of digital currency, there is a risk that the holder of the currency could make a copy of the digital token and send it to the merchant or someone else while retaining the original.Bitcoin became the first digital currency to have solved this problem of double spend without requiring a third party or a trusted administrator.Satoshi Nakamoto disappeared from public (that is from Bitcoin forums, papers and code contributors) in 2011. Bitcoin however continued to be developed and marketized by the community which was focused to address various other issues in the code, even in his absence.  Bitcoin is used by millions of people for payments, including growing remittances market and its market capitalization hovers between $20-$25 Billion US Dollars.It was in 2014, that people realized Blockchain can be separated from the currency and can be applied to various other use-cases. This is when the attention shifted from Bitcoin to Blockchain. Almost every major financial institutions in the world is researching on blockchain now and some 15-20% of banks are expected to be using blockchain in the current year.·         Smart ContractsThe next innovation embodied in the second generation blockchain system called Ethereum was the “Smart Contracts”.In December 2013, a person named, Vitalik Buterin releases a white paper on what would become the “Ethereum project” – a blockchain platform with the ability to build decentralized applications (i.e. Smart contracts). Ethereum is a blockchain based distributed computing, public, open-source platform featuring smart contract facility.Vitalik was a prominent Bitcoin enthusiast for several years and was a co-founder of the Bitcoin magazine in 2012. He tried to update the original Bitcoin protocol and failed to gain agreement within the Bitcoin community, post which he gathered a team of super programmers to develop a completely new blockchain protocol featuring ‘Smart contracts’ that would allow programmers to build scripts into the blockchain which would act as contractual agreement and execute when the mentioned conditions are met. He named this new blockchain ‘Ethereum’.Smart contract is a piece of code which is stored on the blockchain network. Anything of value, like money, property or shares can be exchanged with the help of smart contract in a conflict-free , transparent way while avoiding the services of a middleman. It defines the conditions to which all parties using the contract would agree, so certain actions are executed if the required conditions are met. A smart contract is saved on each computer on the network and all of them must execute it to get the same result. In this way users can be sure that the outcome is correct.Let us try to understand Smart contracts with the help of an example:Let’s say you want to ship some goods to your friend Alice. You trust Alice, however you do not trust the trucker Bob , who will carry your pallet of goods. On the other hand, Bob does not trust you as well, may be you won’t pay him?Hence, you sign an agreement with Bob stating you would do the payment in a few days after the goods are shipped. Normally, in this process, legal papers, contracts are scanned, printed, signed for which a third party is involved.With the help of smart contracts, this can be made simpler and the rules can be added in the code.You can make a payment for shipment to smart contract on a day of loading and it would not process the payment till shipment delivery is confirmed by Alice. Then smart contract would then release the payment and the money would be transferred to Bob automatically. Let’s move a little bit forward. What if we would have a GPS tracker attached to the pallet? Then we simply could eliminate Alice from this process and just release the payment automatically, when the location rule is met.To use a smart contract on Ethereum blockchain , mini payments of Ether, the cryptocurrency for Ethereum were required. Since smart contracts are stored on Ethereum blockchain, anyone can access or inspect the contract for an bugs or irregularities since its contents are public. Additionally, no one can access the funds on the smart contracts, not even the developers.This innovation of smart contract in the blockchain system ethereum, built small computer programs directly into blockchain that allowed financial instruments, like loans or bonds, to be represented, rather than only the cash-like tokens of the bitcoin. The ethereum smart contract platform has a market capitalization of billions of dollars and has hundreds of projects heading towards the market.Ever since its launch in 2014, Ethereum has grown significantly and is now considered the second largest cryptocurrency after Bitcoin. By June 2014, the Ethereum project was funded by a crowd sale. Investors realized how Ethereum could unlock a new level of functionality for blockchains and were keen on investing in the same. It has been growing ever since.·         Proof of StakeThe next major innovation in the blockchain world was “Proof-of-stake” (POS). A cryptocurrency blockchain network aims to achieve distributed consensus by the Proof-of-stake algorithm. It can also be considered as an alternate process for transaction verification on the blockchain.Proof-of-stake was first introduced by Sunny King and Scott Nadal in a paper in 2012 and it intended to solve the problem of Bitcoin mining’s high energy consumption. The average cost of maintain a bitcoin network at that time was around $150,000 a day. Today this cost would be around $6-7M USD.In order to understand Proof-of-stake, it is important to have a basic idea about Proof-of-work.A mining process wherein a user installs a powerful computer or a mining rig to solve complex mathematical problems/puzzles called as proof of work problems is ‘Proof of work’.   The verified transactions of several successfully performed calculations of various transactions are stacked together and stored on a ‘new’ block on the distributed ledger or public blockchain. Mining creates new currency units after verifying the legitimacy of a transaction.The work would be difficult for the miner to perform, however it would be considerably easy for the network to check. Each miner on the network attempts to solve the mathematical puzzle first, so as to receive a cryptocurrency as a reward. As more power is added to the network, more coins are mined and the number of calculations required to create new block increases, thus increasing the difficulty level for miners. Miners need to recover electricity and hardware costs in case of Proof-of-work currencies. In case of a proof-of-stake system, the creator of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake, unlike where the algorithm rewards miners who solve mathematical problems with the goal of validating transactions and creating new blocks. Blocks are said to be ‘forged’ or ‘minted’ and not ‘mined’, in the proof-of-stake systems. Here, forgers (users wo create new blocks by validating transactions) are given a transaction fee as reward and not cryptocurrencies, since the digital currencies are created in the very beginning and their number is fixed.So by switching to Proof-of-stake from Proof-of-work in blockchain led to huge energy savings and a safer network as the attacks becomes more expensive. Proof-of-stake systems are said to be the future!

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