The majority of evolutionary steps in the development of basic cellular processes took place in the time interval after the "First Cell" arose until the time of the "Last Universal Ancestor". During this period, life evolved in a monophyletic way in which no stable diversity arose; i.e. although side branches developed, only one survived because of simple "survival of the fittest". The myriad of enzymes and processes developed in this time interval can be grouped in eight qualitatively different categories. In many cases, the evolution of a particular gene was dependent on the concomitant improvement of the cellular machinery generally, including developments in other categories. Eventually several individuals arose (the immediate descendants of the Last Universal Ancestor) that made stable diversity possible because they developed alternative non-competing strategies. These diverse strategies subsequently led to eubacteria, archaebacteria, and eukaryotes (and viruses, plasmids, etc). This paper considers the evolutionary developments in this monophyletic epoch. It depends on three assertions: first, that there is no trivial spontaneous mechanism for the introduction of polynucleotides into a living cell and thus transfer of genes from organism to organism did not occur; second, that the number of accessible habitats and niches was very limited; and third, that the major factor that led to stable diversity was three nearly simultaneous developments. Two were radically different and independent solutions of the problem of overcoming cellular osmotic stress and the third was the development of methanogenesis. Sufficient osmotic pressure could create a high turgor pressure and destructive tension in the wall. However, osmotic stress only became a problem with development of improved metabolism, which resulted in greater success in the accumulation of cellular macromolecules and soluble constituents. One solution preventing osmotic rupture of the cell was the development of mechano-proteins and associated elements of the cytoskeleton by the predecessors of future eukaryotes. The second solution was the development of the murein sacculus (i.e. a covalently closed, cross-linked fabric made of peptidoglycan) by the predecessors of future eubacteria. The former allowed larger cells with flexible cell membranes to evolve and the latter to the development of a strong elastic "exoskeleton" providing ability to survive in extreme environments. Each of these diverse strategies allow both cell types to resist turgor pressure and led to independent non-competing organisms. Interwoven with these developments was the concomitant development of methanogenesis (the third change needed to generate three Kingdoms), which provided the first truly large-scale generation of metabolic energy.(ABSTRACT TRUNCATED AT 400 WORDS)