The dynamo bootstraps itself using leftover magnetism in its own iron
Early generators relied on permanent magnets, which capped how much power they could make. The dynamo replaced them with electromagnets fed by the machine's own output. A faint trace of magnetism left in the iron starts the current, the current strengthens the magnets, and the machine builds itself up to full power.
It began with Michael Faraday, who found in 1831 and 1832 that a changing magnetic field drives current through a conductor. His copper disc spinning between the poles of a horseshoe magnet was the first electromagnetic generator, but it gave only a tiny voltage and wasted energy as current swirled backward through parts of the disc. Winding wire into coils raised the voltage, which in turn demanded a way to keep the current flowing in one direction.
That solution came in 1832 from Hippolyte Pixii, a French instrument maker. His hand-cranked magnet produced pulses that flipped direction, so he fitted a split metal cylinder on the shaft with springy contacts, the first commutator. Around 1860 Antonio Pacinotti smoothed the jerky output with a ring wound continuously and tapped at many points, and Zénobe Gramme refined that ring in 1871 for the first commercial power plants in Paris.
Self-excitation was the big leap. Ányos Jedlik described it around 1856 but never patented it, believing someone had beaten him. Henry Wilde's design was presented to the Royal Society in March 1866, and Wheatstone, Siemens and Samuel Varley reached the same idea independently within months. Swapping permanent magnets for electromagnets vastly boosted output, and by the 1870s Siemens was running arc furnaces for metal production on dynamo power.
Its weakness was the commutator: brushes wear, spark and waste power, and very large machines cannot use them at all. Direct current also had to be used near where it was made, because only alternating current could travel economically, thanks to the transformer. After power grids switched to AC in the 1890s, alternators took over and dynamos became almost obsolete. Faraday himself coined the name, from the Greek dynamis, meaning power.
Source: Dynamo