The Bluetooth specification was first developed by Ericsson, and was later formalized by the Bluetooth Special Interest Group (SIG). The SIG was formally announced on May 20, 1999. It was established by Sony Ericsson, IBM, Intel, Toshiba and Nokia, and later joined by many other companies as Associate or Adopter members. Bluetooth is also known as IEEE 802.15.1.

Bluetooth 1.0 and 1.0B

Versions 1.0 and 1.0B had numerous problems and the various manufacturers had great difficulties in making their products interoperable. 1.0 and 1.0B also had mandatory Bluetooth Hardware Device Address (BD_ADDR) transmission in the handshaking process, rendering anonymity impossible at a protocol level, which was a major set back for services planned to be used in Bluetooth environments, such as Consumerium.

Bluetooth 1.1
In version 1.1:

many errata found in the 1.0B specifications were fixed.
added support for non-encrypted channels.
Received Signal Strength Indicator (RSSI)

Bluetooth 1.2

This version is backwards compatible with 1.1 and the major enhancements include

Adaptive Frequency-hopping spread spectrum (AFH), which improves resistance to radio frequency interference by avoiding using crowded frequencies in the hopping sequence
Higher transmission speeds in practice
extended Synchronous Connections (eSCO), which improves voice quality of audio links by allowing retransmissions of corrupted packets.
Host Controller Interface (HCI) support for 3-wire UART
HCI access to timing information for Bluetooth applications.

Bluetooth 2.0

This version is backwards compatible with 1.x. The main enhancement is the introduction of Enhanced Data Rate (EDR) of 2.1 Mbit/s. This has the following effects (Bluetooth SIG, 2004):

3 times faster transmission speed (up to 10 times in certain cases).
Lower power consumption through reduced duty cycle.
Simplification of multi-link scenarios due to more available bandwidth.
Further improved BER (Bit error rate) performance.

The Future of Bluetooth

Rumors of the next step in bluetooth technology are floating in the air. This next-gen bluetooth technology allows even faster transfer speeds and a much improved range. The increased bandwidth and improved data rate may threaten to make WiFi technology obsolete, although some would argue that the opposite could be true as WiFi chips become cheaper and power consumption is reduced.

However, since both technologies are constantly increasing in penetration, it is very hard to predict what will happen. Since bluetooth penetration is largely driven by phone headsets and WiFi penetration amost purely driven by internet access, it's quite possible that they continue to coexist for different purposes.

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