Generation of Blockchain

Every new generation of blockchain tries to solve past problems, offer unique solutions, and opens up verticals for innovation. This article will be focused on the three generations (Bitcoin, Ethereum, and Cardano) of blockchain.


11th Aug 2023
Generation of Blockchain
Blockchain is a type of distributed ledger technology, but not all distributed ledgers are effectively blockchains.” — Michela Menting, digital security research director @ ABI Research

First Generation

Bitcoin and Cryptocurrency

The first generation of the Blockchain began with Cryptocurrency. Bitcoin is the first decentralized cryptocurrency that works without a central bank or single administrator. Sent money from user to user on the peer-to-peer network without the need for intermediaries.

The Concession

Every Blockchain works on concussion protocol. Concession protocol is the mechanism that secures and validates the transaction. The consensus protocol ensures that each new block added to Blockchain is the only version of the reality prescribed by all the nodes within the Blockchain.

Bitcoin uses the “proof of work” (PoW) algorithm to add a new block in the Blockchain. The proof of work algorithm works by having all the nodes solve a cryptographic puzzle. The puzzle is solved by the minors, the first one who solves the problem gets the rewards.

This algorithm requires higher computing power. PoW gives more rewards to people with better equipment. The higher your configuration, The higher your chance of getting rewarded. The minors have come together and formed a mining pool to maximize the opportunities.

In mining pools, miners combine their computational power and distribute the rewards evenly. According to digiconomist, bitcoin minors alone uses about 117.11 TWh of electricity, Comparable to the power consumption of the Netherlands.

To sum up, Bitcoin mining is causing minors to use a massive amount of energy. It promotes the use of a mining pool, which makes Blockchain more centralized instead of being decentralized.

Problem with First Generation

  1. Lack of scalability
  2. Higher Energy consumption
  3. the process of mining itself becomes more centralized

Second Generation

Ethereum and Smart Contracts

Ethereum is the second-generation Blockchain. While Bitcoin has been called ‘digital gold,’ Ethereum has been called a ‘digital oil.’ Ethereum came up with the solutions like smart contracts and Distributed Applications (DApp).

It enables SmartContracts and DApps to be created and executed without any downtime, control, or interference from third-party applications.

A smart contract is a small computer program that stores inside Blockchain. Smart contracts are immutable and distributed. Once a smart contract is created then it will be distributed and validated by everyone on the network. Tempering with a Smart Contract is almost impossible.

The Smart contract can be programmed in a particular programming language called Solidity. This language is created explicitly for Ethereum, and Its syntax resembles javascript.

Ethereum Blockchain uses the PoW concession to handle the transaction. Ethereum blocks are validated approximately every 12 seconds on Ethereum as against approximately every 10 minutes on Bitcoin. But In theory, the network can only support around 2,592,000 daily transactions period.

Users can speed up the transaction by providing a higher gas fee. Gas fees are payments made by users to buy the computing energy required to process and validate transactions on the Ethereum blockchain. The higher the gas price, the more incentive a miner has got to include the transaction in their block.

Problem with Second Generation

  1. It improves the scalability somewhat but not enough to be a global currency.
  2. Inconsistency & Higher gas fee.
  3. The gap between the decentralized system with legacy systems
  4. Bad development and governance experience

Third Generation

Cardano and Future

Cardano blockchain is considered to be the third generation of Blockchain. Just like the older generation, Cardano is also an open-sourced and distributed Blockchain. Cardano wants to solve three big problems of the current generation: Scalability, Sustainability, and interoperability.


To achieve Scalability, Cardano has to solve three problems:


How many transactions can get into a block within some finite period? Like Bitcoin has 7 transactions per second, Ethereum has 10 to 20 transactions per second.

Cardano Ouroboros systems solve this by adopting proof of stack (PoS) instead of proof of work (PoW). It is much more efficient; it does not let everyone mine a new block. Instead, the network elects few nodes to mine the following blocks. These are called slot leaders.

To make this work, Cardano divided the time into epochs and epochs split into slots, a short period in which one block can be created. Network elect a slot leader. This is the only person who mines a block for a particular slot.

The slot leader listens for a new transaction, verifies them, and then puts them inside a block. If the slot leader does not complete the task on time or does not show up, he loses the right to produce a block and has to wait until he is reelected by the network.

The slot leader does have to only maintain just a single block and a single chain. They can also maintain multiple blocks and multiple chains.

This technique makes Cardano highly scalable. It can increase the number of slots per epoch, and they could run multiple epochs parallel.

Network Bandwidth:

Blockchains are stored in a P2P network. Each node receives a replica of all new transactions. To handle thousands of transactions per second the node needs a lot of bandwidth to continuously download them all. Which is not scalable.

To resolve the issue Cardano using a new technique called RINA (Recursive interNetwork Architecture). RINA proposes one generic layer with programmable functionality which will be recursively stacked. Inshort they want to split the network into subnetwork. Each node will be part of a specific subnetwork and can communicate with other networks if required.

RINA is a significant step forward that will naturally tune and configure Cardano. As it grows from hundreds to thousands to tens of thousand transactions per second and something that will seamlessly connect and interoperate with TCP/IP.

Data Storage:

Data Storage is amongst the hardest problems. Blockchain stores all the transactions that have ever happened. To handle this ever growing dataset, the cardano team is considering implementing techniques like pruning, compression, and partitioning.


Interoperability is the idea that there will not be one token to rule them all. Currently, there are many networks like Etherium, Bitcoin, Ripple, and legacy systems like Banks working on older protocols and older settlement systems. These systems all work on their own business logic, language, and rules.

Currently, there are many Cryptocurrency but they don’t work together. They have their own rules and protocols. You can just transfer bitcoin into Ethereum without any intermediate.

The Cardano project aims to be the “Internet of blockchain,” or in other words, a blockchain that understands what happens in other blockchains and seamlessly moves assets across multiple chains.

The traditional banks and financial institutes don’t trust Cryptocurrency because they don’t adhere to common banking laws. The primary reason for this lack of trust is that there is no metadata about the transaction in the crypto world. They like to know who made the transaction and for what purpose.

So the problem here is that metadata is private information and all the transactions that happen in Blockchain are permanent, they live on Blockchain, and they are transparent. The moment we attach metadata to a transaction, there will be a situation where the sensitive information will be exposed to the general public.


Right now, there are a lot of people who want to build a company around Cryptocurrency. To raise the money for their company, they launch an ICO or Initial Coin Offering. After an ICO, the team ends up with a lot of capital that they can use to grow or fully start. But after some time, if they run out of money. How can they make sure that the development of their technology continues? They are left with very few options that are not sustainable.

Cardano intends to solve the problem by creating a treasury. A Treasury where Blockchain can print money and put some of that money into a decentralized bank account. The first pioneer of this modal is DASH. The Treasury itself is a unique wallet that isn’t controlled by anyone.

Treasury is a smart contract that can release a part of the fund to developers who wish to improve the Cardano protocol. By submitting an improvement proposal to the community with what they want to change and how much fund they need. The best bid is then selected by community voting, and enough funds are provided to the selected modal.

Treasury modal will keep Cardano sustainable by providing a continuous stream of money that can be used to research and improve the system.


So far, we have seen all the generations of Blockchain. With the high hope with the Cardano, the future of the next generation blockchain would be something that can be highly scalable, robust. It can work across traditional and modern systems. The Cardano project may solve some long-standing and fundamental issues.


[1] An_Overview_of_Blockchain_Technology_Architecture_Consensus_and_Future_Trends