Ethereum blockchain - history, present and prospects

Kosmonavt
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Kosmonavt
8 MIN READ
Cryptocurrency
12 June 2023
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Ethereum blockchain

Ethereum is a decentralized blockchain platform that allows the creation of dApps - decentralized applications. It was created by Vitalik Buterin in 2013 and launched in July 2015. Ethereum is known for introducing the concept of smart contracts, which are self-executing agreements.

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Brief History

The Ethereum blockchain has gone through several upgrades and changes since its launch. The first version of Ethereum was called Frontier and was a bare-bones version of the platform that allowed for the development and testing of decentralized applications. It was followed by Homestead, which made significant improvements in security and stability.

In 2016, the controversial hard-fork of the Ethereum blockchain occurred, resulting in the creation of two separate blockchains: Ethereum and Ethereum Classic. 

The Ethereum platform continued to evolve, and in 2017 the network experienced a surge in popularity due to a booming ICO. This led to network congestion, and the platform developers responded with a major update called Metropolis, which made a number of improvements, including faster transaction speeds and enhanced security.

Today, Ethereum remains one of the most popular and widely used blockchain platforms in the world.

ethereum blockchain

Technology

Ethereum used a consensus algorithm called Ethash, which is a modified version of the Proof of Work algorithm used in Bitcoin. However, it switched to the Proof of Stake algorithm.

One of the key features of Ethereum is its ability to support a wide range of programming languages, making it more flexible and versatile than many other blockchain platforms. The most common language for writing smart contracts is Solidity, but other languages such as Vyper and LLL are also supported.

Ethereum also has its own cryptocurrency, ETH, which is used to pay for transactions and to incentivize miners and validators on the network. Ethereum is also seen as an investment asset.

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Funds and investments

  • The Ethereum Foundation, created to support the development of the Ethereum platform, received a total of 31,529.1 BTC (about $18.3 million at the time) in a crowdsale held in 2014. This provided initial funding for the development of the platform.
  • Venture capital firms invested more than $15 million in Ethereum in 2015, including investments from Andreessen Horowitz, Union Square Ventures and Digital Currency Group.
  • In 2017, the price of Ether skyrocketed, reaching an all-time high of more than $1,400 in January 2018. This attracted a lot of attention from individual investors, who invested billions of dollars in the cryptocurrency.
  • In 2018, the Ethereum Foundation received a $5 million grant from Coinbase to support the development of Ethereum 2.0, a major update to the platform.
  • In 2021, institutional investors began to show increased interest in Ethereum: companies such as Grayscale Investments and Bitwise Asset Management launched investment trusts and ETFs, on Ethereum.
  • Among the world-renowned investors who have shown interest in Ethereum are Mark Cuban, Elon Musk and many others.
Ethereum

Roadmap

  • July 30, 2015 - the Ethereum minnet was launched, marking the official release of the platform.
  • July 2016 - DAO (decentralized autonomous organization) launches on the Ethereum blockchain and raises over $150 million in crowdsales.
  • June 17, 2016 - DAO undergoes a hacking attack resulting in the loss of over $50 million of Ether. This event leads to the controversial hardforcing of the Ethereum blockchain, resulting in the creation of Ethereum Classic.
  • October 2017 - the Byzantium hardfork was implemented, which brought a number of new features and improvements to the Ethereum blockchain, including support for an improved programming language.
  • January 2018 - The price of Ether reaches an all-time high of over $1,400, driven by speculation and increased interest in the platform.
  • December 2018 - the Constantinople hardfork was announced, aimed at improving the efficiency and scalability of the Ethereum blockchain.
  • July 2019 - The Istanbul hardfork is being implemented, introducing several new features and improvements to the Ethereum blockchain, including enhanced privacy and security measures.
  • July 2020 - Ethereum 2.0 update begins with the launch of Beacon Chain, which introduces the Proof of Stake consensus mechanism to the Ethereum blockchain.
  • The August 2021 London hardfork introduces several new features and enhancements to the Ethereum blockchain, including the EIP-1559 offering to improve efficiency and reduce transaction fees.
  • 2021 - transition to Proof-of-Stake consensus mechanism, which significantly reduced the energy efficiency of the project.
  • November 2022 - Vitalik Buterin will present a new Ethereum roadmap, one element of which is increasing the decentralization of the ecosystem through a new phase of The Scourge. 
ethereum (ETH) blockchain

Social activity and community

  • Ethereum Sabreddit has over 2 million members and is considered one of the most active communities in the cryptocurrency space. Updates, project launches, and market analysis are discussed here.
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  • Vitalik Buterin, the creator of the project, has 4.7 million followers on Twitter.
Vitalik Buterin
  • The Ethereum Community Conference (EthCC) is an annual event where developers, investors, and other community members from around the world gather to discuss the latest developments and trends in the Ethereum ecosystem.

Tokenomics

  • ETH is the native cryptocurrency of the Ethereum blockchain and is used to pay transaction fees and incentivize miners to process transactions on the network.
  • Ether has a limited supply, with a maximum of 18 million per year. 
  • The Ethereum protocol has a built-in mechanism for reducing the rate of Ether issuance over time, which helps make it a deflationary asset.
  • Ethereum blockchain allows the implementation of decentralized applications (Dapps). These Dapps can have their own economy, which can interact with the Ethereum ecosystem through smart contracts.
  • Smart contracts are self-executing programs. They can be used to create custom tokens, automate financial transactions, and enforce complex rules and conditions.
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Market condition

As of February 2023, Ethereum is capitalized at $196 billion.

Ethereum, like other top currencies, cannot recover from the significant drop in value after last year's peaks. It is also affected by the events surrounding the FTX crash and the constant talk about the need to control the cryptocurrency industry.

Does Ethereum have any competitors?

While Ethereum remains the leading platform for decentralized applications and smart contracts, there are several competitors that have strengths and weaknesses.

  • Bitcoin, being primarily a digital currency, has limited functionality for smart contracts and decentralized applications. Compared to Ethereum, Bitcoin has a more limited scripting language and less flexibility for developers.
  • Another competitor, EOS, emphasizes transaction throughput. Although EOS is faster than Ethereum, it is criticized because of its centralized management structure and potential security vulnerabilities.
  • Cardano is a blockchain platform that emphasizes academic research and peer-reviewed development. Although it has some technical advantages over Ethereum, such as a more scalable consensus algorithm, it is still in the early stages of development and is not yet widespread.

What is Ethereum 2.0 (Eth2)?

Ethereum 2.0, also known as Eth2 or "Serenity", is an ambitious update to the existing Ethereum platform aimed at improving its scalability, security and sustainability. The main goal of Eth2 is to migrate from the computationally and power-intensive Proof of Work (PoW) consensus mechanism to the more efficient and greener Proof of Stake (PoS) mechanism through the introduction of sharding and second-tier scaling solutions. This upgrade is divided into several phases, starting with the launch of the Beacon Chain, which implemented PoS in December 2020, and subsequently, through sharding, will significantly increase transaction throughput and data availability.

This approach will allow Ethereum to scale, serving many more transactions at low fees, while increasing decentralization and security. Eth2 is a key step in the development of the Ethereum ecosystem, offering solutions to existing problems and opening up new opportunities for blockchain developers and users.

Ethereum: conclusion from Cryptology experts

Overall, Ethereum has had a significant impact on the blockchain industry and has established itself as a leading platform for applications and smart contracts. With a rich history, Ethereum has shown impressive growth in terms of market share, developer friendliness and transaction volume.

The upgrade to Ethereum 2.0 opens a new chapter in the history of this platform, promising even greater scalability, security and efficiency, which will undoubtedly strengthen its position as a foundational technology for the future of the decentralized internet.

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Frequently asked questions about the Ethereum blockchain

What is Ethereum?

Ethereum is an open blockchain platform that allows users to create and run decentralized applications (DApps) and smart contracts without centralized management or an intermediary.

How does Ethereum work?

Ethereum uses blockchain technology to provide security and decentralization. Each transaction is recorded in a block, and blocks are linked into a chain. The network is backed by miners who use their computing power to validate and record transactions.

What are smart contracts?

Smart contracts are programs that automatically execute specified contract terms without the need for intermediaries. They run on the Ethereum blockchain and execute exactly as programmed, without the possibility of censorship, fraud, or third-party interference.

What is Ether (ETH)?

Ether (ETH) is a cryptocurrency used on the Ethereum network to pay for transactions and computing services. It is the network's primary token required to use and interact with DApps and smart contracts.

What is a gas in Ethereum?

A gas is a unit of measurement used to determine the amount of computing work required to perform operations, such as transactions or the execution of smart contracts. Users pay for gas in ETH when performing transactions on the Ethereum network, which helps prevent network congestion and provides compensation to miners.

What is decentralized finance (DeFi)?

Decentralized finance (DeFi) is an ecosystem of financial applications built on the Ethereum blockchain that provides access to a wide range of financial services, including lending, borrowing, insurance, and trading, without the need for intermediaries such as banks or other traditional financial institutions.

How does Ethereum scale?

A number of solutions are being developed to address Ethereum's scalability and performance issues, including the transition to the Proof-of-Stake (PoS) consensus mechanism as part of the Ethereum 2.0 update, as well as the implementation of second-tier technologies such as sidechains, plasma, and state channels.
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