Ethereum is an open-source, decentralized smart contract platform. The protocol has become the blockchain of other chains, providing the foundation upon which thousands of developers build new projects. The cryptocurrency is the second-largest by market cap. This growth is due to introducing novel use cases for blockchain technology.
Ethereum's Beginnings
In November 2013, Vitalik Buterin offered a comprehensive introductory whitepaper on Ethereum and its ability to disrupt the blockchain space. Seven co-founders soon joined Vitalik, pooling resources to make the project a reality. A complete list of the founders of Ethereum includes Vitalik Buterin, Amir Chetrit, Gavin Wood, Jeffry Wilcke, Anthony Di Lorio, Mihai Alisie, Charles Hoskinson, and Joseph Lubin.
In 2014, the Ethereum project had its Initial Coin Offering (ICO), where investors bought $16 million worth of ETH. The ICO funded Ethereum’s development, while rampant speculation of the project’s future drove adoption.
Purpose of Ethereum
“Ethereum is a technology for building apps and organizations, holding assets, transacting and communicating without being controlled by a central authority.” According to Gavin Wood, Ethereum means to serve as “one computer for the entire planet.”
Before Ethereum, it was necessary to trust the person or entity you were interacting with online for complex transactions. Complex transactions would include online lending, gambling, trading, and more.
But with smart contracts, one can leverage computer programs to execute agreements with others. These smart contracts are self-executing and require no intermediary to verify and enforce transactions. Being first to market, Ethereum became the defacto smart contract platform for developers and users looking to build decentralized applications, trade, and leverage the technology to reduce intermediary costs.
Ethereum's Native Token, Ether (ETH)
Ether (ETH) is the native cryptocurrency of the Ethereum protocol. ETH serves to store and transfer value. Additionally, ETH is instrumental in the Proof-of-Stake (POS) consensus mechanism Ethereum uses to validate transactions. Block validators must “stake” or lock up Ether to participate in consensus. These use cases place Ether at the center of the ecosystem.
The DAO Hack
One of the first high-profile projects ever built on Ethereum was The DAO in 2016. The software acted as an automated organization, enabling an investor-driven, decentralized venture capital firm. The DAO raised $150 million worth of ETH from over 11,000 investors in three weeks.
However, programmers began having doubts about The Dao’s smart contract code. A hacker later exploited a vulnerability and took $60 million from investors. The community had to make a hard decision–to either move forward with the hack or roll back the blockchain to an earlier state via a hard fork (and let investors withdraw their funds).
After much contention, the Ethereum blockchain split into the current rolled-back version of Ethereum and Ethereum Classic.
Contributors to Ethereum's Success
Ushering in the 2nd generation of decentralized blockchains, Ethereum has experienced tremendous growth. The development team is majorly responsible for the project’s success. Byzantium, Constantinople, and the Beacon Chain were some of the project’s significant upgrades post-ICO and were crucial to unlocking new use cases for the protocol. These updates have improved various aspects of Ethereum, including its speed, privacy, scalability, consensus, and fees.
Significant features of Ethereum’s ecosystem include decentralized finance (DeFi), decentralized autonomous organizations (DAOs), and Non-fungible tokens (NFTs). These use cases have refined Ethereum’s brand image, making the project a household blockchain platform supporting thousands of applications in multiple sectors, including finance, business, and community platforms. At the time of writing, Ethereum is the second-largest token by market cap.
- Cryptography – A study of secure communications techniques in an adversarial environment
- Metadata – Data that describes some other data. Ex. the caption describing an image
- Whitepaper – Information document used to promote or highlight the features of a solution to a problem, product, or service
Next Steps
If you feel prepared, take our Altcoins and Ethereum quiz:
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- NBCUniversal News Group. (2022, September 9). Explainer: Understanding Ethereum’s major ‘proof of stake’ upgrade. NBCNews.com. Retrieved October 28, 2022, from https://www.nbcnews.com/tech/crypto/explainer-understanding-ethereums-major-proof-stake-upgrade-rcna46998
- Proof-of-stake (POS). ethereum.org. (n.d.). Retrieved October 28, 2022, from https://ethereum.org/en/developers/docs/consensus-mechanisms/pos/
- Reiff, N. (2022, September 30). What are ERC-20 tokens on the Ethereum Network? Investopedia. Retrieved October 28, 2022, from https://www.investopedia.com/news/what-erc20-and-what-does-it-mean-ethereum/
- YouTube. (2016, March 28). “Ethereum – The World’s computer” – gavin wood. YouTube. Retrieved October 28, 2022, from https://www.youtube.com/watch?v=8OLAcUPHuW0
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