Learning Objectives – after this chapter you will be able to:
- Trace the research that led to blockchain before Bitcoin.
- Explain why and how Bitcoin was launched.
- Describe the major milestones of the Ethereum era up to the switch to Proof-of-Stake.
Blockchain History
- The history of blockchain is incomplete without Satoshi Nakamoto – the pseudonymous person or group who published the Bitcoin white paper, Bitcoin: A Peer-to-Peer Electronic Cash System, on 31 October 2008.
- The white paper itself never uses the single word “blockchain”. It describes a chain of blocks secured by proof-of-work; early Bitcoin code and discussions used the two-word form “block chain”, and the single word “blockchain” became the standard term later as the technology spread beyond Bitcoin.
- The real identity of Satoshi Nakamoto is still unknown. Satoshi stopped participating publicly around 2010–2011 and handed development over to other contributors.
How and when did Bitcoin start?
- Bitcoin appeared during the global financial crisis of 2008, which followed the collapse of the US housing (subprime mortgage) market and seriously damaged trust in banks and financial institutions.
- Bitcoin proposed a form of digital cash that could be sent directly between people without a bank, using a distributed ledger – the blockchain – secured by cryptography and proof-of-work.
- The genesis block was mined on 3 January 2009. Its coinbase transaction contains a newspaper headline from that day about a bank bailout, widely read as a comment on the financial system and as proof that the block was not created earlier.
- The first Bitcoin transaction between two people was from Satoshi to computer scientist Hal Finney on 12 January 2009.
Foundations Before Bitcoin (Open Research)
- 1979 – Merkle trees: Ralph Merkle developed the hash-tree structure that is now used to summarise all transactions in a block.
- 1982 – David Chaum described a system for computers maintained by mutually suspicious groups and later developed eCash using blind signatures (DigiCash, founded 1989).
- 1991 – Stuart Haber and W. Scott Stornetta described a cryptographically secured chain of time-stamped documents so that document timestamps could not be back-dated or tampered with. Their work is the closest ancestor of the blockchain.
- 1992 – Dave Bayer joined Haber and Stornetta to add Merkle trees to the design, allowing many documents to be collected into one block efficiently.
- 1997 – Adam Back proposed Hashcash, a proof-of-work system to fight e-mail spam. Bitcoin’s mining reuses this idea.
- 1998 – Wei Dai (b-money) and Nick Szabo (bit gold) proposed decentralized digital-money designs; both are cited as influences on Bitcoin.
- 2004 – Hal Finney created Reusable Proof-of-Work (RPoW).
Timeline of Major Milestones
| Date | Milestone |
|---|---|
| 31 Oct 2008 | Bitcoin white paper published by Satoshi Nakamoto. |
| 3 Jan 2009 | Bitcoin genesis block mined; the network starts. |
| 22 May 2010 | “Bitcoin Pizza Day” – 10,000 BTC paid for two pizzas, an early real-world purchase. |
| Nov 2012 | First Bitcoin halving – block reward falls from 50 to 25 BTC. |
| Late 2013 | Vitalik Buterin publishes the Ethereum white paper. |
| 30 Jul 2015 | Ethereum mainnet (“Frontier”) goes live with smart contracts. |
| Nov 2015 | ERC-20 token standard proposed. |
| Dec 2015 | Linux Foundation launches the Hyperledger project for enterprise blockchains. |
| 2016 | The DAO exploit leads to an Ethereum hard fork; the original chain continues as Ethereum Classic. |
| Aug 2017 | Bitcoin activates SegWit; the Bitcoin Cash hard fork is created. |
| 1 Dec 2020 | Ethereum Beacon Chain (Proof-of-Stake) launches alongside the PoW chain. |
| Aug 2021 | Ethereum London upgrade introduces EIP-1559 (base fee is burned). |
| 15 Sep 2022 | The Merge – Ethereum moves from Proof-of-Work to Proof-of-Stake. |
| Apr 2023 | Shapella upgrade enables withdrawal of staked ETH. |
| Mar 2024 | Dencun upgrade introduces blob transactions (EIP-4844) for cheaper Layer-2 data. |
| Apr 2024 | Fourth Bitcoin halving – reward falls to 3.125 BTC per block. |
Three Generations of Blockchain
- Blockchain 1.0 – Currency: Bitcoin and other cryptocurrencies used mainly for value transfer.
- Blockchain 2.0 – Smart contracts: Ethereum and similar platforms that run programmable contracts and dApps.
- Blockchain 3.0 – Applications & scale: a commonly used label for enterprise, government and large-scale uses, together with scaling solutions such as Layer-2 networks.
The “1.0 / 2.0 / 3.0” labels are an informal classification used by many authors, not an official standard.
Key Takeaways
- Blockchain combines decades of earlier research: hash chains (1991), Merkle trees (1979/1992) and proof-of-work (1997).
- Bitcoin (2008–2009) was the first working, fully decentralized blockchain.
- Ethereum (2015) added general-purpose smart contracts and moved to Proof-of-Stake in 2022.
Question / Answer (15 questions)
Answer : Satoshi Nakamoto is the pseudonym of the unknown person or group who wrote the Bitcoin white paper (2008), created the original Bitcoin software and mined the genesis block (2009). Nakamoto also designed the first working blockchain database. The real identity has never been confirmed.
Answer : It was published on 31 October 2008 with the title “Bitcoin: A Peer-to-Peer Electronic Cash System”.
Answer : They proposed a cryptographically secured chain of time-stamped documents in which each new timestamp was linked to previous ones by hashes, so that a document’s timestamp could not be back-dated or tampered with.
Answer : They incorporated Merkle trees, so that many documents could be collected into a single block and timestamped together efficiently.
Answer : Adam Back’s Hashcash (1997), a proof-of-work system originally proposed to limit e-mail spam by requiring computational effort.
Answer : The crisis damaged trust in banks and central intermediaries. Bitcoin offered a way to transfer value directly between people without relying on a bank, and the genesis block even embedded a newspaper headline about a bank bailout.
Answer : The genesis block is the first block of a blockchain. Bitcoin’s genesis block was mined on 3 January 2009.
Answer : No. The white paper describes a chain of blocks secured by proof-of-work. The single word “blockchain” became standard later as the technology gained wider attention.
Answer : Wei Dai’s b-money (1998) and Nick Szabo’s bit gold (designed in 1998). David Chaum’s eCash (DigiCash) is another earlier example.
Answer : On 12 January 2009, Satoshi Nakamoto sent bitcoins to Hal Finney, a computer scientist and early Bitcoin contributor.
Answer : A halving is the scheduled 50% reduction in the block reward, which happens every 210,000 blocks (about four years). The first halving occurred in November 2012, reducing the reward from 50 to 25 BTC.
Answer : Ethereum’s mainnet launched on 30 July 2015. It introduced a general-purpose, Turing-complete platform for smart contracts and decentralized applications.
Answer : On 15 September 2022, Ethereum’s original Proof-of-Work execution chain merged with the Proof-of-Stake Beacon Chain, ending mining on Ethereum and cutting its energy use dramatically.
Answer : After The DAO exploit in 2016, the Ethereum community performed a hard fork to recover the drained funds. Participants who rejected the fork continued the original chain, which became Ethereum Classic.
Answer : 1.0 refers to cryptocurrencies such as Bitcoin; 2.0 refers to smart-contract platforms such as Ethereum; 3.0 is a loose label for large-scale and non-financial applications together with scaling solutions. It is a teaching aid, not an official standard.
MCQ Test : Check Your Understanding (5 questions)
Select an option and press Check Answer, or answer all questions and press Submit Test to see your score. Each answer comes with an explanation.
Bibliography/References
The notes, questions and MCQs on this page are original explanations written for this course. The works listed below were consulted and are cited for attribution and further reading. Product names, logos and trademarks belong to their respective owners. Short quotations, where used, are marked and attributed.
- Nakamoto, S. (2008). Bitcoin: A Peer-to-Peer Electronic Cash System. https://bitcoin.org/bitcoin.pdf
- Haber, S., & Stornetta, W. S. (1991). How to time-stamp a digital document. Journal of Cryptology, 3(2), 99–111. https://doi.org/10.1007/BF00196791
- Bayer, D., Haber, S., & Stornetta, W. S. (1993). Improving the efficiency and reliability of digital time-stamping. In Sequences II (pp. 329–334). Springer. https://doi.org/10.1007/978-1-4613-9323-8_24
- Merkle, R. C. (1988). A digital signature based on a conventional encryption function. In Advances in Cryptology – CRYPTO ’87, LNCS 293 (pp. 369–378). Springer. https://doi.org/10.1007/3-540-48184-2_32
- Buterin, V. (2013). Ethereum Whitepaper: A Next-Generation Smart Contract and Decentralized Application Platform. ethereum.org. https://ethereum.org/en/whitepaper/
- ethereum.org. (n.d.). The Merge. Ethereum Roadmap. https://ethereum.org/en/roadmap/merge/
- Narayanan, A., Bonneau, J., Felten, E., Miller, A., & Goldfeder, S. (2016). Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Princeton University Press. ISBN 978-0-691-17169-2.
- Antonopoulos, A. M. (2017). Mastering Bitcoin: Programming the Open Blockchain (2nd ed.). O’Reilly Media.