Evolution of cryptoassets

Blockchain technology led to the creation of the Bitcoin network in

2008 by the anonymous group identified as Satoshi Nakamoto.
Nakamoto’s blockchain version was a completely decentralized
distributed ledger of financial transactions in Bitcoin (the world’s
first cryptocurrency).
the three generations of blockchain technology:

 Blockchain 1.0: The Origin of the Modern Blockchain

 Blockchain 2.0: Smart Contracts
 Blockchain 3.0: Decentralized Enterprise Level Applications

Blockchain 1.0: The Origin of the Modern Blockchain

blockchain 1.0 can be defined as the first generation of blockchain

technology that basically focused on decentralization and
cryptocurrency.

Blockchain 1.0 was the first application of the Blockchain

technology implemented by Nakamoto. This version is the
simplest form of a decentralized ledger for recording transactions
and storing the data across several computers.

This version of Bitcoin is essentially an electronic cash transfer

system that is automated and functions without the need for
human intervention between transactions as a trusted authority.
Another distinguishing feature of cryptoassets during this period
was that they had to be created through the process of mining.
Bitcoins could only be gained by taking part in the mining process.
Even the founder satoshi nakamoto was subject to the rules of the
protocol. The early technology also allowed miners to gain
rewards through the Proof of Work mechanisms built into the
protocols. For these reasons, blockchain technology has become
the backbone of cryptocurrency trading platforms.
The features that make this blockchain version unique are its
decentralized architecture, cryptographic security, and ability to
facilitate peer-to-peer transactions.

Examples of blockchain 1.0 implementations include

cryptocurrencies such as Bitcoin, Dogecoin, Litecoin, and
Monero. There are now hundreds of cryptocurrencies available
today.

Cryptocurrency is a digital currency that is decentralized and not

backed by any governmental body, thanks to its trustless system
that allows the transactions to be quicker while being recorded
publicly on the blockchain as they are verified.

It’s the level of transparency and efficiency that have helped them
raise to such popularity, as this digital currency is created to be
accountable and preventing double-spending.

Cryptocurrencies work by being bundled up in a ‘block’ that then

gets connected to the previous block to form a ‘chain’, exactly like
the name says. It then gets verified in two ways, either Proof of
Work, or Proof of Stake. For the first one, the miners involved
have to solve the complex cryptographic hash that allows
verification, and once it gets solved the new block containing
newly verified transactions allows the miner to then be awarded
with recently minted Bitcoin. 

Blockchain 2.0: Smart Contracts

Blockchain 2.0 can be defined as the second generation of

blockchain technology that is focused on smart contracts.

The new Version of BlockChain come because there was a

problem in version 1.0 which was Mining of BitCoin was Wasteful
and there was also lack of Scalability of Network in it. So
problem is improved in Version 2.0. In this version, the
BlockChain is not just limited to Cryptocurrencies but it will
extend up to Smart Contracts.

In BlockChain 2.0,  BitCoin is replaced with Ethereum. Thus, it

was successfully processing high number of Transactions on
Public network rapidly. It is apparently an upgraded version of
Blockchain 1.0 represented by Ethereum (ETH).

That’s when Ethereum was born, a platform where the developer

community can build distributed applications for the Blockchain
network, something also known as ‘smart contracts’. smart
contracts are a set of codes that are automated when certain
conditions are met. These contracts enable two users or
organizations to do more than just simple cryptocurrency
transactions.
Therefore, smart contracts allow two parties to automatically
execute complex tasks while facilitating the exchange of digital
currency. As a result, Blockchain 2.0 introduced several new
opportunities that were not possible before due to the limited
scope of the first-generation blockchains.

The main difference between this and other versions is that it

enables developers to create autonomous “smart” contracts that
can store data on a distributed ledger without relying on third
parties for enforcement. These contracts can be self-enforcing,
reducing the need for costly dispute resolution processes.

Smart Contracts reduce the cost of verification, exceution,

arbitration and fraud prevention and allow transparent contract
definition overcoming the moral hazard problem.

This technology has triggered the innovation of decentralized

finance (DeFi), decentralized autonomous organizations (DAOs),
initial coin offerings (ICOs), and non-fungible tokens (NFTs).

Examples of Blockchain 2.0 technologies include cryptocurrency

platforms (Ethereum, Lisk, and Neo,quotum,nemand stellar.

Quickly it successfully gathered support and interested,

processing a high number of daily transactions on a public
network, millions were raised through Initial Coin Offerings (ICO)
and the market cap increased rapidly.
Blockchain 3.0: Decentralized Enterprise Level Applications

The third generation of blockchain technology is often referred to

as Blockchain 3.0 or “distributed ledger technology (DLT)”.

The second generation of blockchains still had its flaws.

For example, smart contract code could include bugs and
security vulnerabilities. The latter can have serious
consequences as they leave the blockchain open to attacks
by hackers. Moreover, due to the ever-increasing traffic on
the Ethereum blockchain, the ecosystem suffered from
delayed transactions and high gas fees.

Blockchain 3.0 was created in 2016 and has been continuously

improved upon, allowing it to become the most advanced form of
blockchain available today. The main features of this version are
its scalability with faster transaction speeds, improved privacy
with enhanced security protocols, and greater flexibility with the
addition of new programming languages.

It also allows for interoperability across multiple blockchains so

that users can easily access services or assets from different
networks without going through a third-party intermediary. This
version of the blockchain is now being used in various industries
and applications such as voting, healthcare, supply chain
management, and more.

After Version 2.0, new version was introduced which includes

DApps which is known as Decentralized Apps. DApp is an
abbreviated form for decentralized application avoiding centralized
infrastructure. It uses decentralized storage and decentralized
communication.

Blockchain 3.0 is an upgraded version of blockchain 2.0, built to

improve the capabilities of the technology while using
decentralized applications. It focuses on solving the existing
problems of blockchain technology. It also aims to facilitate
speedier, cost-effective, and efficient transactions.
Traditional vs cryptoassets
 A cryptoasset is a digital asset with ownership records stored in a computerized
database using cryptography. A financial asset is a liquid asset that gets its value
from a contractual right or ownership claim.

 Crypto assets are purely digital assets that use public ledgers over the internet to prove
ownership. A financial instrument is a real or virtual document representing a legal
agreement involving any kind of monetary value.

 Cryptoassets do not generally have equivalent physical

manifestations. financial assets do not necessarily have inherent physical
worth or even a physical form.

 They use cryptography, peer-to-peer networks and a distributed ledger technology (DLT) – such
as blockchain – to create, verify and secure transactions.
 Crypto assets generally operate independently of a central bank, central authority or
government. But traditional is dependent on central bank, central authority or gov.

 The most well-recognized cryptoasset is bitcoin, but there are other digital assets

such as digital art, also known as nonfungible tokens, or NFTs. Cash, stocks, bonds,
mutual funds, and bank deposits are all are examples of financial assets.

 Cryptoassets typically fluctuate more in value than government-

issued currencies.
 it is not currency because it is not issued by any country or central bank.
 transactions need to be expressed in currency form and that the currency value
remains constant over time. This consistency does not presently exist with
cryptoassets, as we have seen recently with bitcoin's high valuation volatility.
Comparative less volatile in traditional.
 cryptoasset transactions and investments require different accounting and tax
treatment.
  is open, public and unpermissioned. Traditional is private , permissioned and
regulated.
 Several areas of risk associated with crypto assets exist, including high volatility, liquidity risk,
and heightened potential for fraud. Credit risk, liquidity risk, asset-backed risk, foreign
 investment risk, equity risk, and currency risk are all common forms of traditional
financial risk.
 Prices of crypto assets rise and fall dramatically, often driven by media or social media hype, and
few constraints on price manipulation exist.  In traditional market supply and
demand influence its value .
 Crypto asset service providers and intermediaries may exist anywhere in the world.  It can be
difficult or even impossible to identify or locate the service provider or intermediary and take
any action if you have a problem. 

Cryptoassets
Crypto assets are purely digital assets that use public ledgers over the internet to prove ownership. They
use cryptography, peer-to-peer networks and a distributed ledger technology (DLT) – such as blockchain
– to create, verify and secure transactions. They can have different functions and characteristics: they
may be used as a medium of exchange; a way to store value; or for other business purposes. Crypto
assets generally operate independently of a central bank, central authority or government.

A cryptoasset is the native asset of a blockchain (or more broadly, a distributed ledger), which
is open, public and unpermissioned. Cryptoassets are native to their own blockchain in that
they cannot cross over to another blockchain and can only work within the confines of their own
blockchain.