The Five Generations of Blockchain: From Bitcoin to Everscale

Blockchain technology was first introduced in 2008 as the distributed ledger behind Bitcoin transactions. Once it gained popularity, the IT community saw value in its utility, which naturally led to its further development. With many sectors focusing on new ways to make waves in this industry, it’s no surprise that multiple generations would be introduced with different focuses in mind. Now that 14 years have passed since the first blockchain was conceived, multiple iterations of this decentralized infrastructure have been developed.

The First Generation of Blockchains: Bitcoin

Starting with the first generation, Bitcoin is probably the most notable project that is still being utilized to this day. This blockchain was developed to process Bitcoin transactions and keep their records saved. The project focused on improving the monetary infrastructure, by offering a payment system that did not require the participation of a mediator or third-party financial institution. It offered transparency, almost instantaneous transactions & low transaction costs—at the time—compared to existing financial infrastructure.

This generation of blockchain operated on the Proof of Work (PoW) consensus algorithm, which lacks in the efficiency department. As a result, it had less-than-ideal effects on the environment, production lines (especially considering the current chip shortage), as well as being expensive to run since it would require the operation of a large number of computers solving complex algorithms.

To put things into perspective, The University of Cambridge estimates that BTC mining network demand amounts to 86.57 TWh. This is more than double Norway’s private household & agricultural energy usage of 43 TWh. This automatically labels the first blockchain generation as inefficient and not viable as a sustainable solution, in its current state, at least. This may be attributed to the fact that Satoshi Nakamoto didn’t think the technology would become as viral as it has, making it difficult to forecast what impact this technology could have on the environment & existing infrastructures.

The Second Generation of Blockchains: Ethereum

The second-generation blockchain appeared with the conception of Ethereum. While it was based on Javascript instead of Bitcoin’s C++, its biggest differentiating factor is its introduction of Smart Contracts, which made the Ethereum network a perfect base for other projects, as they allowed developers to write up an ERC20 Token and create a brand new cryptocurrency based on the second-gen blockchain.

These smart contracts allowed systems to run autonomously while ensuring that all conditions are met by all participants during operation. Additionally, these smart contracts were complex enough to manage any given task, from voting, identity & document verifications, realestate, and so on. This blockchain seemed to be a perfect choice, until we mention its shortcomings. Just like the first-gen blockchain, it’s based on the PoW consensus algorithm, meaning that it is inefficient to say the least. Also as it started gaining popularity, the network started operating at peak capacity. This led to gas prices—Ethereum’s transaction fees—shooting through the roof. According to Bitinfocharts, ETH gas fees reached a high of $196.6 USD for each transaction. This meant that making any financial transactions using ETH wasn’t feasible anymore, completely eradicating its utility for small capital crypto users. This also meant that many crypto holders couldn’t do anything with their tokens if they couldn’t cover these astronomical network fees. Scalability was one of this network’s biggest flaws, especially when you consider that the Ethereum blockchain has a Transaction Per Second (TPS) rate of 17 TPS. With current market demands, this can sometimes render the network unusable.

The Third Generation of Blockchains: Cardano, Solana

One major fix offered by this generation of blockchains would be the introduction of the more efficient consensus algorithm Proof of Stake (PoS). This was a problem expressed by many environmentalists as well as energy experts across the world. Cardano also introduced the ability to perform cross-chain transactions, allowing for crypto holders to exchange unsupported assets across unsupported blockchains. Additionally, one of its newly-introduced features include the improved smart contract mechanism inbuilt formal software verification. While Cardano provides a much improved TPS of 250 over the previous generations, it’s still not enough to meet the crypto community’s heavy demands. Scalability seems to have improved, though not by much.

The Fourth Generation of Blockchains: Polkadot, EOS

The Practical Byzantine Fault Tolerance (PBFT) used in Polkadot requires all participating nodes to communicate with each other, so the network agrees to the state being tested with absolute certainty. A Polkadot-type network has low latency and fast completion rates, but cannot grow by a large number of participants (confirming blocks) in the global network, since the load on each confirming node increases exponentially as the number of verifications increases. As for the number of transactions per second (TPS), the blockchain can handle 1,700 with a theoretical maximum of 100K TPS. While this is a great improvement over previous generations, it still doesn’t offer a practical solution for the crypto market’s needs. If this technology were to be utilized as a standard, there will be bottlenecks leading to network congestion, and thus, requiring greater scalability. One other problem plaguing Polkadot is interoperability. The blockchain—until recently—never had a dedicated bridge with Ethereum. This meant that for the majority of its presence, the blockchain never facilitated a dedicated bridge with one of the world's largest existing networks. One more issue was that hackers previously had exploited code vulnerabilities, causing millions of dollars of damage before they were discovered, raising questions with regards to the network’s security.

The 5th Generation of Blockchains: Everscale

This blockchain is based on the PoS consensus algorithm, meaning that it is more environmentally friendly than the classic PoW algorithm. It also has the capability to process over a million TPS, which in turn leads us to the network’s incredibly low transaction fee of $0.003 USD, which gets lower as the network expands. By utilizing the Proof of Stake model Soft Majority Fault Tolerance (SMFT) protocol, Everscale can ensure that no one is sending any incorrect blocks to the Masterchain. If malicious nodes attempt to corrupt the network by sending invalid blocks, the collator may be looking at having their stake slashed for submitting an invalid block. Validators can also have theirs slashed for not sending the proof of receiving the block, and the verifier could lose part of their stake for not sending a verification message. This means that in order for all participants to keep their stakes in tact, honesty is key.

The Everscale blockchain consists of a collection of blockchains. Furthermore, this collection of blockchains also consists of a collection of blockchains. This was a necessity because no single blockchain—including all 4 previous blockchain generations—can aim to replicate Everscale’s capabilities, which is processing millions of transactions per second. In order to put things into perspective, Ethereum’s TPS is around dozens of transactions per second. This also allows the network to have what could be considered “self-healing properties'', a mechanism specific to Everscale only, eliminating the need to make a fork of all chains involved in order to correct an error.

Web3, Digital Identity, & the Future of the Internet

Everscale doesn’t only offer crypto services. They have a wide range of groundbreaking features, facilitating a better future for vast industries. For instance, they have a decentralized storage solution called Drivechains, through which NFTs can be stored on the blockchain. This doesn’t concern just the metadata, but the image file, too. This allows for the perfect infrastructure for digital identity, contracts, and legal documents, finally offering True Decentralization for NFT lovers all over the world. The current practice uses the blockchain to store NFT metadata while the image (the JPEG file itself) is stored on centralized services such as file hosting websites. The problem is that once the service closes down, the file will be permanently removed, rendering the document useless. Since Everscale developed Drivechains (the project’s own decentralized storage solution), the infrastructure facilitates blockchain storage for NFTs as well as their metadata, making it feasible to implement this technology in the governmental sector.

The financial system also stands to gain from Everscale, with a cheap, fast, and scalable infrastructure built with the goal of building tomorrow’s internet today. We’ve seen centralization’s negative effects over the past few years, with malicious organizations gaining access to billions of sensitive user records. One case worth mentioning is China’s recent 1 billion user data leak, which goes down in history as the world’s largest data breach. Decentralization would make it nearly impossible to falsify or corrupt data. In Everscale, the mere attempt of tampering with information would slash any participant’s stake, meaning that the entire infrastructure needs to be compromised, which isn’t technically possible. This means that Everscale’s Drivechains can cement its web3 utility while providing a higher level of security and data protection.

The Verdict

As cryptocurrency continues to break through the mainstream, its demands change. The first 4 generations of blockchains may offer some of the market’s needs, but older infrastructures cannot withstand the throughput required, which is why the technology had to evolve to fit market needs. Everscale and other Gen 5 networks are built to match current market demands while being governed by the community. With a heavy emphasis on security, scalability, and true decentralization, Gen 5 earned its own ranking as one of the top blockchains in the cryptocurrency industry, making it a sustainable option for the crypto market’s long-term development plan.