Blockchain Generations Phase From PoW To PoS Algorithm | Age Of Crypto Coins, Smart Contracts, DApps Projects Explained

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PoW To PoS Phase : Blockchain Generations Explained | Age Of Crypto Coins, Smart Contracts, DApps Projects

You have probably heard of generations of the blockchain. Unsurprisingly, Bitcoin is usually regarded as the first blockchain generation. They are typically used for processing transactions. Blockchains of the first generation are based on Proof-of-Work algorithm. As with the first generation, the second generation also uses Proof-of-Work, but with a wider range of functionality than the first. With Ethereum, for instance, smart contracts can be processed, dApps can be maintained, etc. Neo is another popular example of blockchain technology of the second generation. Third-generation blockchains (like Cardano) are scalable, fast, and energy-efficient. As of now, the fourth generation of blockchain is just a hypothetical technology. There are varying opinions on what will be considered the next generation.

Now, let’s learn the details, and find out if the third generation of the blockchain is the actual blockchain.

Blockchain 1.0 : Generation Of Cryptocurrencies

(currencies: Bitcoin, Litecoin, Dogecoin, Reddcoin, and others)

Blockchain technology was designed to process Bitcoin transactions and keep records. The creator of the blockchain might not have imagined this innovation would move further and become such a sensation apart from Bitcoin.

Blockchain and Bitcoin were created in order to improve the existing monetary system (or to replace it altogether). The blockchain lets people send transactions using cryptography instead of banks. The network is peer-to-peer, decentralized, anonymous, and at the same time transparent. The currencies are deflationary. Taking all these characteristics into consideration, cryptocurrencies are quite different from fiat money.

All cryptocurrencies related to the first generation are written in C++ language and use Bitcoin source code as a basis.

The first generation blockchains use Proof-of-Work. It makes these networks costly — mining requires much electricity. Some people critique ASICs for depriving the home miners of ability to mine effectively while opponents stress that mining farms utilizing dozens of ASICs secure the network better because today one needs to spend an incredible amount of money in order to perform the 51% attack. In fact, as long as people are not capable of confirming blocks via CPU power on their own, the network can’t be called 100% peer-to-peer. Although Bitcoin mining is proved to be incredibly energy consuming it is considered that it’s still much better than the conventional banking system that consumes three times as much as Bitcoin.

It seems that Satoshi Nakamoto didn’t seriously think of possible wider utilization of the blockchain. More than that Bitcoin lacks some important features (e. g. the ability to use smart contracts). The first generation blockchain has limited functionality and that’s the reason why the second generation followed.

Blockchain 2.0 : Generation Of Smart Contracts and Financial Services

(Ethereum, BAT, etc)

Before the appearance of the second generation, the new purposeless coins (Bitcoin clones) were emerging, again and again, making their creators richer. It continued for years, and finally, in 2015, the situation had changed dramatically.

There were creative people who understood that many other actions associated with trust besides monetary transactions can be processed by blockchain and recorded in the distributed ledger.

Ethereum has changed the scenery but first, the Ethereum platform itself had to be different towards the previous crypto projects. Ethereum is based on Javascript and has a very different, much wider functionality than the Bitcoin-based currencies. The Ethereum platform is not just a cryptocurrency, but a digital ecosystem that can be used as a basis for other decentralized projects. Today there are numerous projects and applications (dApps) that are based on the Ethereum blockchain.

Ethereum made it possible and easy to write up an ERC20 token and create a brand new cryptocurrency based on the Ethereum blockchain. That’s what many people did and the rise of notorious Initial Coin Offerings (ICO) began. Of course, most of these projects were useless and were profitable only for the creators of new coins.

Probably the most important innovation brought with Ethereum were smart contracts. Smart contracts provide security to transactions automatically controlling the execution of all conditions by all actors and processing the transaction as the result of this execution. Smart contracts expanded the horizons of possible utilization of the blockchain because now this technology became capable of handling such complex deals as voting, verification of documents/identity, maintaining the healthcare history, real estate deals, and so on — anything you can imagine, all kinds of trust agreements can be processed on the blockchains of the second generation, safely, fairly, quickly, and automatically, without authority of any third party (it is replaced by the code).

Ethereum provides its own Turing-complete programming language, Solidity. Developers wishing to create a decentralized application on top of the Ethereum blockchain have to use Solidity for that purpose.

Ethereum has the same serious problem as Bitcoin — scalability. The necessity to solve this problem is realized by the creators and developers of both networks, so there is ongoing work on solutions (sharding for Ethereum. It should make the network fast and scalable infinitely and the Lightning Network for Bitcoin which should let increase the number of processed transactions per second to the Visa level or so).

Blockchain 3.0 : Generation Of Smart Contracts For Decentralized Apps (dApps)

(Cardano, Nano, IOTA, and others)

It’s fair to say that in many cases the third generation blockchains are the result of working on more efficient blockchain-like solutions. Yes, some projects are using the technology other than blockchain in order to get rid of flaws and limitations of the blockchain (there are Holochain, SidechainHashgraph, etc). Although these technologies are different we can refer them to the third generation of blockchain because they develop some of the blockchain’s characteristics and can be used similarly. Of course, many of the third-gen projects are blockchain-based.

The main features are wider functionality and better design that allows avoiding such problems as poor scalability. Another feature common for the third generation of blockchains is the ability to process crosschain transactions. The rest notable features are inbuilt compliance and governance and improved mechanism of smart contracts (inbuilt formal software verification). The Proof-of-Work is usually replaced by other consensus mechanisms (e.g. Proof-of-Stake).

There are some names to drop here: IOTA (that is going to perform almost an infinite number of transactions per second), Nano (at least 7,000 TPS or more), Holochain (it shifts the data-centric architecture of blockchain to an agent-centric model which allegedly helps to reach millions TPS), Qurakchain (using sharding it’s aimed to process 100,000 TPS), Matrix AI (it promises to reach 1,000,000 TPS via implementation of AI to blockchain).

Blockchain 4.0 : Generation Of ?

Does it even exist? Probably no. But people say that most likely when the third generation meets AI we will have the fourth generation. If these or further projects appear to be revolutionary it will be fair to say about the appearance of the new generation of blockchains. The intriguing projects are DeepBrain Chain and SingularityNet, but it’s too early to say anything particular about them. The time will show if these projects are really significant.


It’s quite accurate to claim that the generations have significant differences, and probably it’s not bad to know how to distinguish them, but still, the most important thing is whether these projects are good enough to remove the burdens of intermediary in all or any spheres of our lives or not. The technologies change our lives and let’s hope that not only blockchain will keep on improving, but the human society will be improving respectively as a result.

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Chris Munch

Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.