Ethereum is a decentralized platform for building and running decentralized applications (dApps). The platform was created in 2013 by Vitalik Buterin, a programmer and cryptocurrency enthusiast. Here is everything you need to know about the world’s largest altcoin.
Ethereum’s history
Inception
The term altcoin refers to alternative currency and Ethereum was created as an alternative to Bitcoin, the first decentralized cryptocurrency. While Bitcoin was created as a peer-to-peer electronic cash system, Ethereum was designed to be a platform for decentralized applications that would run on blockchain technology. The goal was to create a platform that would allow developers to build applications that could interact with each other, without the need for a central authority.
The launch
The Ethereum network went live on July 30, 2015, with 11.9 million ETH coins (Ethereum’s native cryptocurrency) pre-mined for the crowd sale. The crowd sale was a success, raising over 31,000 Bitcoins (approximately $18 million at the time).
Homestead
In 2016, the first version of Ethereum, called Homestead, was released. This version included several improvements to the network, including a new programming language for developing smart contracts, called Solidity.
The DAO
The year 2016 also saw the launch of the first decentralized autonomous organization (DAO) on the Ethereum network. A DAO is a decentralized organization run by a set of rules encoded as smart contracts on the blockchain. The first DAO was a huge success, raising over $150 million in its initial coin offering (ICO).
The hack
Unfortunately, in June 2016, the DAO was hacked and $50 million worth of ETH was stolen. This led to a controversial decision to perform a hard fork on the Ethereum network, which effectively reversed the hack and returned the stolen funds to their rightful owners. This decision caused a rift in the Ethereum community, with some members opposing the hard fork and others supporting it.
The growth
Despite this setback, Ethereum continued to grow and evolve. In 2017, the second version of the Ethereum network, called Metropolis, was released. This version included several improvements to the network, including the introduction of smart contract wallets and the ability to perform atomic swaps between different cryptocurrencies.
The same year, Ethereum experienced a massive increase in popularity and value, with the price of ETH rising from $8 in January 2017 to over $1,400 by December. This increase in value was largely due to the growth of the initial coin offering (ICO) market, which allowed startups to raise funds by selling tokens on the Ethereum network.
Ethereum now
However, the rapid growth of the Ethereum network put a strain on its infrastructure, leading to slow transaction times and high fees. To address these issues, the Ethereum community has been working on a major upgrade to the network, called Ethereum 2.0. This upgrade will bring several new features to the network, including a switch from a proof-of-work consensus mechanism to a proof-of-stake mechanism, which happened in September of 2022 and has significantly increase the network’s speed, scalability, and security. As of February 2023, Ethereum remains the second-largest cryptocurrency in the world.
How Ethereum works
The Ethereum blockchain is a public ledger of all transactions that have ever taken place on the network. Each block in the Ethereum blockchain contains a number of transactions, and every node on the network has a complete copy of the blockchain. When a new transaction is initiated, it is broadcast to the network and added to the next block in the blockchain after it has been validated by the nodes.
In order to validate transactions and add them to the blockchain, nodes on the Ethereum network compete to solve a complex mathematical problem known as a proof of work. The first node to solve the problem adds the next block to the blockchain, and is rewarded with a small amount of Ether. This process is known as mining, and it helps to secure the network by making it difficult for any single node to manipulate the blockchain.
In addition to validating transactions, nodes on the Ethereum network also execute the code of smart contracts. Smart contracts are self-executing programs that run on the Ethereum blockchain and can be used to automate a wide range of processes, from financial transactions to voting systems.
How Ethereum is different from Bitcoin
- Purpose and use cases: Ethereum was designed as a platform for decentralized applications, while Bitcoin was created primarily as a digital currency.
- Blockchain: Ethereum has a more robust and flexible blockchain, allowing for smart contracts and decentralized applications to be built on top of it, while Bitcoin’s blockchain is primarily used for transaction recording.
- Token: Ether (ETH) is the token used to pay for transactions and computational services on the Ethereum network, while Bitcoin (BTC) is the token used for transactions on the Bitcoin network.
- Supply: Ethereum has a flexible supply, with the potential to create new tokens through mining, while Bitcoin has a limited supply of 21 million tokens.
- Speed: Ethereum’s average block time is faster than Bitcoin’s, allowing for more transactions to be processed in a shorter amount of time.
- Token Standardization: Ethereum supports multiple token standards, such as ERC-20 and ERC-721, making it easier for developers to create and manage custom tokens, while Bitcoin does not have standardized token support.
- Governance: Ethereum has a decentralized governance structure, allowing for proposals and changes to be made through voting by its stakeholders, while Bitcoin has a more centralized decision-making process.
- Smart Contract Language: Ethereum has its own programming language, Solidity, specifically designed for writing smart contracts, while Bitcoin does not have a dedicated programming language.
- Interoperability: Ethereum is designed to be interoperable with other blockchain networks, allowing for seamless transfer of data and value, while Bitcoin’s interoperability is limited.
- Upgradability: Ethereum has a built-in mechanism for upgrades and changes to its protocol, while changes to the Bitcoin protocol can only be made through hard forks, which can lead to disagreements and chain splits.
Is Ethereum better than Bitcoin?
Comparing Ethereum and Bitcoin is not a matter of “better or worse” as they serve different purposes and have distinct features. If you’re looking for a secure store of value and a way to transfer funds quickly and cheaply, Bitcoin might be the right choice. It’s like a digital version of gold, and has become synonymous with the term “cryptocurrency”. Bitcoin has a clear and simple mission: to be a decentralized form of money that operates on a global scale. On the other hand, if you’re looking for a blockchain platform that can run decentralized applications and automate complex financial transactions, Ethereum might be the better choice. Ethereum is like a toolbox that developers can use to build a wide variety of applications and financial products.
Both Bitcoin and Ethereum have the potential to change the world, and both have their own unique strengths and weaknesses. But like the cello and flute in a symphony orchestra, they work together to create a rich and complex musical landscape that inspires and delights audiences.
Conclusion
Ethereum has come a long way since its inception in 2015. From a humble beginning as a simple blockchain platform, it has now evolved into a decentralized computing powerhouse with endless possibilities. The history of Ethereum is a testament to the power of innovation and the resilience of the human spirit. With its focus on smart contracts and its commitment to an open, decentralized future, Ethereum has the potential to revolutionize the way we interact with technology and shape the future of the world. As we continue to explore and harness the full potential of Ethereum, one thing is clear: the history of Ethereum is still being written and the best is yet to come.
