Bitcoin, Ethereum, Solana, these three currencies correspond to three different generations of cryptocurrencies. Each generation tries to correct the imperfections of the previous one: exponential electricity consumption, excessive costs and transaction times…
The three generations of cryptocurrenciescryptocurrencies are as follows: the bitcoinsbitcoinssmart contracts e blockchainblockchain optimized.
1st generation: Bitcoin
For cryptocurrencies, it all started with the appearance of Bitcoin, as defined in a White Paper written by a man named Satoshi Nakamoto and posted on October 31, 2008 on the forum Encryption mailing list.
Among the principles Nakamoto enunciated regarding Bitcoin was the absence of a central bank. This is replaced by a trust mechanism called the blockchain, the equivalent of a timestamped ledger. Every bitcoin transaction ever made is forever recorded on the blockchain. And it’s shared among all Bitcoin users, which makes it tamper-proof, as everyone has a copy, whether on their own computercomputer personal or onexchange (marketplace) where your Bitcoins are stored.
Nakamoto has also envisaged a blockchain validation mechanism (mining) by special users called “miners”, who have the task of verifying that each transaction is valid, through calculations based on cryptography. Once a miner does this, he updates the blockchain. So it provides what is called a ” proof of workproof of work “.
The blockchain as defined by Nakamoto experienced its first limits in 2017. When the demand for this cryptocurrency exploded, it led to a huge slowdown in transaction management and very high mining fees. A development called SegWit it was carried out with the aim of increasing the size of the Bitcoin blockchain.
Despite this development, the size of the Bitcoin blockchain has continued to grow. It measured nearly 360GB in early October 2021, and it takes an average of ten minutes to validate a transaction. This results in a huge electricity consumption, close to the total electricity consumption of a country like Belgium or Chile at the same time. Among the solutions that have been found is the Lightning network which makes it possible not to validate transactions one by one but a series of transactions between two users.
2nd generation: smart contracts
In late 2013, Vitalik Buterin released the White Paper for a new cryptocurrency called Ethereum. The main factor that he then introduced was that of smart contractor the ability to make a programmable change.
Ethereum was offered to the cryptocurrency enthusiast community in January 2014, then officially went online on July 30, 2015. It thus materialized what could be a currency associated with a smart contract.
In the wake of EthereumEthereuma large number of tokens (currencies) have appeared, each based on the Ethereum blockchain, the specifics of which are defined by a smart contract: Bancor (BNT), Augur (REP), Status (SNT)…
Even better, Ethereum has spawned a whole host ofappapp innovative and grouped under the term DeFi (decentralized finance) which, once again, exploit the Ethereum blockchain. Thus, applications such as Aave (loans and loans), Uniswap (decentralized exchange), Sushiswap (financial investments) appeared.
However, in a sense, Ethereum has become a victim of its own success. Transactions on its blockchain have become so numerous that fees charged by miners have “exploded”. It is common to pay several tens of euros for processing a transaction, and sometimes this number has risen to one hundred euros. Also, the transaction processing time easily takes five minutes and could be counted in hours. As for the size of the Ethereum blockchain, at the end of September 2021 it was already 991.56 GB.
Clearly, these Ethereum blockchain concerns have caused many cryptocurrency enthusiasts to migrate to 3And generation, involving more agile blockchains. Ethereum has also begun its transformation. A V2 has started to be rolled out and aims to fix the issues mentioned above.
3rd Generation: Optimized Blockchains
Therefore, Bitcoin, Ethereum and the currencies that have emerged in their wake have experienced similar problems related to their growth. The third big step is represented by the appearance of new currencies based on a more flexible validation system. One of the solutions found was the replacement of “proof of work” with “proof of stake”.
Proof of stake implies delegating the management of a coin to a very limited number of delegates elected by the community built around this coin. For example, currency EOSEOS it is based on 21 participants who are responsible for the blockchain. If the validation work isn’t done as it should, these delegates are disowned by the network and replaced by other delegates.
The second big news of this 3And generation is the appearance of more agile and therefore faster to manage blockchains.
Among these size-limited blockchain currencies is Mina, with the smallest existing blockchain (22 KB).
Other recent currencies take the side of making the blockchain easier to exploit with internal innovations. Therefore, Iota relies on a different validation system than the blockchain: each user validates two other users, each of them validates two others, etc. Polkadot, for its part, uses a blockchain partitioning system to speed up processing.
Similarly, some newer blockchains such as Solana and Polygon are designed to be able to handle one-to-one transactions. speedspeed in milliseconds, with one charge (commissions) of the order of one euro cent. The result is a whole range of new DeFi applications with extremely low performance and cost.