Blockchain technology is the underlying mechanism behind digital currencies. It is a decentralized database or a growing list of records that cannot be tampered, changed or altered.

What’s especially noteworthy is how quickly the technology became a multi-billion dollar industry. Stemming initially from a strict use case with digital currency, the underlying technology blossomed into its own mega-industry.

Blockchain’s journey is far from linear. Initially starting as a digital currency foundation, it’s now emerged as an innovative tool used by governments, global enterprises, and financial institutions.

Blockchain tied to digital currencies

Satoshi Nakamoto created the original network in 2008. He published his white paper on bitcoin, a peer-to-peer coin that uses blockchain as the underlying technology.

In the early years, blockchain’s growth heavily correlated with bitcoin’s value.

In October 2009, the New Liberty Standard established an exchange rate for bitcoin. $1 USD (~$1.30 CAD) was equivalent to 1,309 bitcoins. At the time, the market calculated bitcoin’s value based on the cost of electricity required to mine a bitcoin. However, when someone paid 10,000 bitcoins for a pizza, it shot up bitcoin’s price by 1,000 percent, to $0.08 for a coin.

Bitcoin gained a bit more momentum from there, steadily growing. However, bitcoin’s value dropped sharply when bitcoin suffered significant cyber attacks. Bitcoin’s value steadily rose again when large not for profit organizations such as the electronic frontier and Wikileaks began to accept bitcoins for donations and new cryptocurrencies emerged.

Tyler and Cameron Winklevoss, famous for their role in allegedly founding part of what would become Facebook, purchased $11 million bitcoin at the rate of $120 per coin. Virgin Galactic announced that they would accept bitcoin for space travel trips.

In June 2013, bitcoin reached a market cap of $1 billion due to growing use and popularity. This growth brought blockchain technology to the forefront, and industry pioneers began to see blockchain’s initial potential beyond bitcoin.

In the same year, Vitalik Buterin, then just a programmer involved with Bitcoin Magazine, proposed the development of a new blockchain platform called Ethereum.

Unlike Bitcoin, Ethereum had a general scripting language for and therefore, could create applications. 2013 quickly became the year where the broader community realized that blockchain technology could work independently from bitcoin.

Becoming an industry

The emergence and potential of blockchain technology ignited the startup community and caused a great rush of retail investors into the trading and initial coin offering (ICO) market.

This began in 2014 when Canadian-based startup Ethereum raised $18 million through an ICO. Ethereum’s use of blockchain as a decentralized database had global enterprises and governments initiating new research and development teams to build pilot projects.

China even went to the extent of forming a team to create their national digital currency. The world’s largest financial institutions also saw blockchain as a technology with great potential. Therefore Barclays, Credit Suisse, Goldman Sachs, JP Morgan, and RBS created the R3 Consortium, a distributed database technology company.

In 2015, NASDAQ launched a blockchain trial. Visa, Capital One, and Fiserv backed $30M for blockchain startup Chain while the world’s first blockchain centric healthcare conference Distributed Health took place in the United States.

In 2017, there was an ICO craze where many companies would raise millions of dollars in a few hours, without any clear product development. 2017 also gave rise to over 1,000 different cryptocurrencies in the market.

The realization that blockchain technology can impact every industry initiated strong responses across the board. From enterprises, to startups, to retail investors, everyone wanted to learn more. With exponential potential came exponential growth. While right now fueled by speculation, the underlying fundamentals of the blockchain industry propelled the market to be worth over $600 billion, a massive jump from its ‘humble’ $1 billion market cap correlation with bitcoin in 2013.

Instead of being just a technology for digital currencies, blockchain became an industry unto itself. As more companies embrace the technology and as service providers pop up, blockchain’s market value will continue to grow.

Exponential growth and unlimited potential

From 2008 to 2018, blockchain technology quickly evolved. From its financial roots, the technology grew into a new disruptive force fuelling a multi-billion dollar industry.

The technology has taken significant steps towards mainstream recognition. Now, governments, global enterprises, and startups invest in its infrastructure and raise large funds to propel new projects. Almost every consulting firm has declared their belief on the potential impact of blockchain technology on a range of industries.

Given these shifts in mainstream adoption, the potential is nearly limitless. It’s possible that blockchain technology could become a trillion dollar industry as the technology matures in the upcoming years.

 

Image credit: Wikimedia Commons

 

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