Ethereum is a blockchain-based decentralized platform that enables the creation of smart contracts and decentralized applications (dApps). Launched in 2015, Ethereum quickly became one of the most popular blockchain platforms, with a market capitalization that peaked at over $400 billion in 2021. But what is the history behind this revolutionary platform? Let’s dive in.
The Origins of Ethereum
Ethereum was created by a Canadian programmer named Vitalik Buterin in 2013. Buterin was heavily involved in the Bitcoin community and co-founded Bitcoin Magazine, but he was frustrated with the limitations of the Bitcoin protocol. Specifically, he felt that Bitcoin’s scripting language was too restrictive and prevented the creation of complex decentralized applications. He began to develop his own blockchain platform with a more flexible programming language.
In late 2013, Buterin released a whitepaper detailing his vision for Ethereum. The paper proposed a blockchain platform with a Turing-complete programming language, which would allow developers to create any kind of decentralized application they could imagine. Buterin’s ideas quickly gained traction, and he began assembling a team of developers to build the platform.
The Early Days of Ethereum
Ethereum’s development was funded through a public crowdsale in 2014, which raised over $18 million. The Ethereum Foundation was created to oversee the development of the platform, and the team began working on the software that would become the Ethereum Virtual Machine (EVM), the platform’s runtime environment.
The first version of the Ethereum software, called Frontier, was released in July 2015. This was a bare-bones version of the platform, designed for developers to experiment with and build on. The development team continued to refine the software and add new features, and by March 2016, the platform had evolved into Homestead, a more stable and secure version of Ethereum.
The Rise of Decentralized Applications
One of Ethereum’s key innovations was the creation of smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. Smart contracts enable a wide range of decentralized applications, from financial instruments to decentralized autonomous organizations (DAOs).
One of the first major dApps built on Ethereum was The DAO, a decentralized investment fund. The DAO raised over $150 million in funding through a crowdsale in 2016, but it was ultimately hacked, leading to a controversial hard fork of the Ethereum blockchain. Despite this setback, the development of decentralized applications on Ethereum continued to grow.
The Popularity of ICOs
In 2017, Ethereum saw a surge in popularity due to the rise of initial coin offerings (ICOs). An ICO is a type of crowdfunding campaign in which a startup issues its own cryptocurrency tokens in exchange for funding. Many of these ICOs were built on the Ethereum platform, using the ERC-20 standard for token issuance.
The ICO boom led to a massive increase in the price of Ethereum, which peaked at over $1,400 in January 2018. However, many of these ICOs turned out to be scams or failed projects, leading to a decline in the price of Ethereum and increased scrutiny from regulators.
The Current State of Ethereum
Despite these challenges, Ethereum remains one of the most important blockchain platforms today. The development of decentralized applications and smart contracts on Ethereum continues to grow, with projects like Uniswap, Aave, and Compound enabling new types of decentralized finance (DeFi) applications.
Ethereum is also underwent a major upgrade called Ethereum 2.0, which improved the platform’s scalability, security, and energy efficiency. The upgrade involved a transition from the current proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) mechanism, which will make the platform more environmentally friendly and allow for faster transaction processing. Many admit that this switch to incentivize users to purchase Ethereum to become a ‘validator’ has created a large centralization issue that goes against what many in the cryptosphere believe in.
The Future of Ethereum
As of March 2023, with this shift to Proof of Stake ( PoS ) the SEC is looking hard at Ether again as a security, the same way some investments pay out in dividends. It has been a toss up since the early ICO days as to whether Ether passed the infamous “Howie Test” which is the litmus test for whether a cryptocurrency is seen as a security or not. With regulation up in the air right now, the price of both Ether will affect investors, stakers, DeFi networks and beyond – when the dust settles – who will be the last alt standing?