Ethereum is a decentralized open-source blockchain system that features its own cryptocurrency, Ether. ETH works as a platform for numerous other cryptocurrencies, as well as for the execution of decentralized smart contracts.
Ethereum was created in 2013 by Vitalik Buterin, a software developer who was inspired by the potential of Bitcoin. Buterin envisioned Ethereum as a more powerful and versatile platform than Bitcoin, capable of supporting a wider range of decentralized applications.
The Ethereum network was officially launched in 2015, and it has since grown to become one of the most popular blockchain platforms in the world. Ethereum is now home to a vast ecosystem of decentralized applications, including decentralized finance (DeFi) platforms, non-fungible tokens (NFTs), and gaming applications.
Ethereum has indisputably shaped the landscape of blockchain technology since its inception.
This post aims to dive into the history of Ethereum, unravel its origins, notable events, and significant updates. We'll also take a look at how it gained popularity, the major forks, and its blockchain.
The Genesis of Ethereum
Ethereum was created to address some of the limitations of Bitcoin. Bitcoin is a powerful and secure blockchain platform, but it is not very versatile. It can only be used to create simple applications that track the movement of money.
Ethereum, on the other hand, is designed to be a more powerful and versatile platform. It can be used to create a wide range of decentralized applications, including:
- Decentralized finance (DeFi) applications that allow users to lend, borrow, and trade money without the need for a central authority.
- Non-fungible tokens (NFTs) that represent unique digital assets, such as artworks, collectibles, and in-game items.
- Smart contracts that allow users to program the terms of an agreement into a blockchain.
About the Founder, Vitalik Buterin, and His Vision
Ethereum was founded by Vitalik Buterin, a software developer who was inspired by the potential of Bitcoin.
Buterin is a brilliant and visionary thinker. He has a deep understanding of blockchain technology, and he is passionate about the potential of Ethereum to change the world. He is also a gifted communicator, and he has been able to rally a large and dedicated community around Ethereum.
The Founding Team and Early Contributors to Ethereum
The founding team of Ethereum included Gavin Wood, Mihai Alisie, Anthony Di Iorio, and Joseph Lubin. These individuals were all early adopters of Bitcoin, and they were all passionate about the potential of blockchain technology.
The early contributors to Ethereum included a large and diverse group of developers, entrepreneurs, and enthusiasts. These individuals helped to shape the early development of Ethereum, and they continue to play an important role in the project today.
Details about the Ethereum Initial Coin Offering (ICO)
The initial funding for Ethereum's development was raised via an Initial Coin Offering (ICO). The Ethereum ICO was a huge success. It raised over $18 million in ETH, which was a significant amount of money at the time. The ICO helped to solidify Ethereum's position as a major player in the blockchain space and significantly contributed to the rise of Ethereum's price. To participate at the time all investors needed was an Ethereum wallet, associated with an Ethereum address.
Ethereum's Blockchain Architecture
At its core, Ethereum is an open software platform based on blockchain technology. It enables developers to build and deploy decentralized applications (DApps) on its blockchain. However, Ethereum's blockchain stands distinct from others, especially Bitcoin's blockchain. This distinctness boils down to their purpose and capability.
Purpose and Capability
Bitcoin was designed as a digital currency to undertake financial transactions without requiring a trusted third party. Its blockchain serves as a public ledger for all Bitcoin transactions.
On the other hand, Ethereum extends beyond just being a cryptocurrency. Ethereum's purpose is to become a platform on which smart contracts and DApps can run. The Ethereum blockchain doesn't just track transactions; it programs them.
Understanding Smart Contracts
The concept of smart contracts is crucial to understanding Ethereum. A smart contract is a self-executing contract with the agreement between the buyer and the seller directly written into code. The contract exists across a distributed, decentralized Ethereum blockchain network.
Smart contracts permit trusted transactions and agreements to be executed among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. These transactions are transparent and irreversible.
These smart contracts also consume Ethereum gas - a measure of computational effort in Ethereum, providing an incentive for miners to validate transactions and add them to the blockchain.
Decentralized Applications (DApps)
Decentralized Applications (DApps) are applications that run on a peer-to-peer network of computers rather than a single computer. They are a type of software program designed to exist on the Internet in a way that is not controlled by any single entity.
On Ethereum, you can write DApps in a programming language called Solidity, which is then compiled down to Ethereum's bytecode and deployed to the Ethereum blockchain. These DApps can interact with smart contracts on the blockchain, opening up a myriad of possibilities for decentralized computing and Internet technologies.
Ethereum vs. Bitcoin Blockchain
While Bitcoin introduced the concept of cryptocurrencies to the world, its blockchain primarily serves the purpose of tracking the ownership of the digital currency (Bitcoin).
In contrast, Ethereum's blockchain is more flexible and general-purpose. It was designed to support Smart Contracts and DApps, providing a platform where anyone can build decentralized applications that harness the power and security of the blockchain. It's this capability that truly sets Ethereum apart in the blockchain ecosystem.
Ethereum's Rise to Prominence
Key Milestones in Ethereum's Journey
Ethereum has had quite the journey since its inception, with various key milestones punctuating its path to prominence. Here are a few:
- Ethereum's Creation and the Founding of the Ethereum Foundation (2014): Ethereum was proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer. Development was crowdfunded in 2014, and the network went live on July 30, 2015.
- The DAO and the Split to Ethereum Classic (2016): In 2016, an autonomous organization called The DAO, a set of smart contracts developed on the platform, raised a record-breaking $150 million in a crowdsale. Soon after, it was hacked for $50 million. This event sparked a debate in the Ethereum community, which eventually resulted in a hard fork, creating two separate blockchains – the new one became Ethereum (ETH), and the original continued as Ethereum Classic (ETC).
- The Emergence of ICOs and ERC-20 Tokens (2017): 2017 marked the year of the ICO boom, with Ethereum being the platform of choice for this new fundraising mechanism. The creation of the ERC-20 standard, which laid out the functions that an Ethereum token contract has to implement, paved the way for a multitude of new tokens, all interoperable on the Ethereum network.
- The Rise of Decentralized Finance (DeFi) (2020 - Present): The next significant wave in Ethereum's history is the rise of decentralized finance or DeFi. These are financial applications built on top of the Ethereum blockchain, aiming to disrupt traditional finance by cutting out intermediaries.
Ethereum's Popularity Among Developers and Investors
Ethereum gained popularity for several reasons. From a developer's perspective, Ethereum's real appeal is its ability to execute smart contracts, allowing developers to build a wide range of applications from games to decentralized exchanges, lending platforms, and more. The creation of the ERC-20 and ERC-721 standards has also spurred a wave of token creation and the rise of NFTs (non-fungible tokens), respectively.
Investors, on the other hand, are attracted by the potential of applications built on Ethereum, its strong developer community, and the investment opportunities it presents. The rise of DeFi, in particular, has been a significant draw for investors, with the total value locked in DeFi projects skyrocketing.
Case Studies of Early Successful Projects and DApps built on Ethereum
Several projects have found great success on the Ethereum platform. One of the most famous is CryptoKitties, a game of breeding and collecting digital cats, which went viral and congested the Ethereum network at its peak in late 2017.
Uniswap, a decentralized trading protocol, stands as a testament to Ethereum's power. Its unique automated liquidity protocol has allowed it to become one of the largest projects in the DeFi space.
MakerDAO, the project that developed Dai, a stablecoin pegged to the US dollar, is another prime example. It demonstrated the power of smart contracts and DeFi by creating a decentralized stablecoin that isn't backed by any central entity's promise.
These projects are just a glimpse of what's been built on Ethereum, illustrating the platform's potential to revolutionize various sectors.
Earlier in 2023, Ethereum completed its Shanghai update and migrated to Ethereum 2.0, transitioning from a proof-of-work model to a proof-of-stake model, it continues to evolve, inviting more developers, investors, and users into its network. Its journey, filled with both challenges and triumphs, is a testament to Ethereum's robustness and adaptability, qualities that solidify its spot in the heart of the blockchain revolution.
Major Ethereum Updates and Forks
Overview of Major Forks and Protocol Upgrades
Throughout its history, Ethereum has had numerous forks and protocol upgrades, each with its unique impact. Here are some significant forks:
- The DAO Hard Fork (2016): As mentioned earlier, this fork occurred following the DAO hack. The community voted for a hard fork to refund all the DAO investors' funds, leading to the split into Ethereum (ETH) and Ethereum Classic (ETC).
- Byzantium (2017): Byzantium was one part of the larger Metropolis update. It included improvements like adding 'REVERT' function, which gave the ability to stop faulty smart contracts without much expense, and increasing the anonymity of the Ethereum Blockchain.
- Constantinople (2019): The second part of the Metropolis update, it reduced the block reward from 3 ETH to 2 ETH and made optimizations to the state storage, leading to lower transaction fees.
Ethereum Serenity or Ethereum 2.0
Ethereum 2.0, also known as Serenity, is the next significant upgrade to the Ethereum blockchain. Ethereum 2.0 switched the consensus mechanism from Proof of Work (PoW) to Proof of Stake (PoS), which promises to be less energy-intensive and more scalable.
In Ethereum 2.0, validators replaced miners, and now are chosen to create blocks based on the amount of ETH they hold and are willing to 'stake' as collateral. Ethereum 2.0 also introduced shard chains, which are smaller chains that run alongside the main Ethereum chain (now called the Beacon Chain), further improving scalability.
Impact of These Updates on Scalability and Transaction Speed
These updates have had a significant impact on Ethereum's scalability and transaction speed. The shift to Ethereum 2.0 and the PoS consensus mechanism aims to drastically improve Ethereum's scalability and transaction speed, with shard chains expected to increase the network's capacity and reduce transaction fees. It's estimated that Ethereum 2.0 could handle up to 100,000 transactions per second (TPS), a significant jump from Ethereum 1.0's 15-30 TPS.
Ethereum gas fees, a pain point for many Ethereum users during high-traffic times, are also expected to become more predictable with Ethereum 2.0. While these improvements won't be overnight - Ethereum 2.0 is being implemented in stages - they represent a substantial step forward for the Ethereum network.
Analyzing Ethereum's Blockchain
Ethereum's Blockchain Size and Growth
The size of Ethereum's blockchain is significantly larger than Bitcoin's, with the full node exceeding 1TB. The exact size can vary depending on the Ethereum client used (Geth, OpenEthereum, etc.) and whether a full archive node or a default node is being run.
This substantial size is due to Ethereum's more comprehensive role as a platform for DApps, smart contracts, and ERC tokens, leading to larger and more complex data stored on its blockchain. As Ethereum continues to evolve and add more functionalities and applications, its blockchain's size and growth are expected to increase correspondingly.
Impact of DeFi and NFTs on Ethereum's Network Congestion and Gas Fees
Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) have been major contributors to the surge in Ethereum's popularity. However, this has also resulted in network congestion and high gas fees, as the network has struggled to keep up with the sheer volume of transactions.
In the DeFi space, projects like Uniswap, Compound, Aave, and LiFi (Which we partner with to bring you BrainSwap) have seen explosive growth. Similarly, NFT platforms like OpenSea have witnessed unprecedented volumes. Each transaction on these platforms, whether it's a trade, loan, or NFT sale, occurs on Ethereum's blockchain, taking up block space and adding to the network's congestion.
During periods of high demand, users must offer higher gas fees to prioritize their transactions, leading to skyrocketing costs. However, with the ongoing upgrade to Ethereum 2.0, the network's scalability is expected to improve drastically, which should help alleviate these issues.
Insights on Ethereum's Hash Rate and Mining Difficulty
Ethereum's hash rate represents the computational power of the Ethereum network. When the hash rate is high, the Ethereum network is considered more secure against double-spending attacks.
Ethereum's mining difficulty is a measure of how hard it is to find the next block in the Ethereum blockchain. When more miners join the network, the difficulty increases to ensure that blocks aren't produced too quickly. Conversely, if miners leave the network, the difficulty decreases.
Throughout its history, Ethereum's hash rate and mining difficulty have seen several peaks and valleys, often aligned with the cryptocurrency's price. For example, when Ethereum's price reached all-time highs in 2021, both the hash rate and mining difficulty saw significant increases as more miners were incentivized to join the network.
However, with the shift to Ethereum 2.0 and a Proof of Stake consensus mechanism, traditional mining will be phased out, making hash rate and mining difficulty less relevant in assessing network security and value.
The Future of Ethereum
Ethereum and the Future of Governance
The concept of decentralized autonomous organizations (DAOs) made possible by Ethereum could revolutionize how organizations operate and make decisions. DAOs are organizations governed by smart contracts, where decision-making powers are distributed among token holders. This allows for greater transparency and inclusivity, potentially leading to fairer decision-making processes.
Ethereum is also pioneering the concept of on-chain governance, where protocol upgrades and changes are decided by the community of token holders. This democratic process could have profound implications for how systems and protocols are managed in the future.
Ethereum and the Future of Digital Ownership
With the emergence of NFTs, Ethereum has begun to redefine the concept of digital ownership. By tokenizing digital assets on the blockchain, Ethereum allows for unique digital items to be owned, bought, and sold, much like physical objects. This has created a new digital economy, with applications ranging from digital art to virtual real estate. As our lives become increasingly digital, the role of Ethereum in shaping how we interact with digital assets will likely continue to grow.
Ethereum 2.0
Ethereum's future is also intrinsically linked with its ongoing development. The Ethereum 2.0 upgrade is set to address many of the platform's current limitations, particularly concerning scalability and energy consumption. With the introduction of sharding and the switch to a proof-of-stake consensus mechanism, Ethereum 2.0 has already begun to significantly increase the network's capacity and speed, potentially leading to broader adoption.
Ethscriptions: Innovating Ethereum's Capabilities
Ethereum's community never ceases to innovate. The latest novel idea stirring interest among Ethereum enthusiasts is Ethscriptions, a protocol that further broadens Ethereum's application beyond the financial realm. Ethscriptions, the brainchild of Tom Lehman, co-founder of Genius.com, utilizes Ethereum's calldata to enable users to inscribe non-financial data directly onto the Ethereum main chain. This innovative approach offers a more decentralized and economical alternative to conventional contract storage methods.
Beyond Ethereum 2.0 and Ethscriptions, further upgrades and improvements are anticipated to continue to drive Ethereum's growth and impact across various sectors.
The Decentralized Future
Ethereum's potential for future disruption is immense. As we've discussed, the concepts of decentralized finance and governance that Ethereum has introduced are in the early stages but have the potential to revolutionize traditional systems. Ethereum's influence is set to grow as these concepts mature and more people begin to understand and appreciate the benefits of a decentralized world.
Ethereum’s Influence on Other Blockchains
Not only has Ethereum paved the way for its own future but it has also influenced the design of other blockchain platforms. Smart contract functionality, in particular, has become a standard feature of many new blockchain networks, highlighting the groundbreaking nature of Ethereum's original design.
More Than Just a Cryptocurrency
Lastly, it's important to reiterate that Ethereum is more than just a cryptocurrency. While Ether, the native token of Ethereum, does play a crucial role in the network, Ethereum's true value lies in its platform, which has become a foundation for decentralized applications. Its potential to transform industries and systems is what makes Ethereum an influential force in the blockchain world and beyond.
