Ethereum is a digital platform based on blockchain technology and Distributed Ledger Technology. It is the platform on which the Ether cryptocurrency (ETH) and also thousands of distributed applications run.
Behind the Ethereum project, there is the idea of Vitalik Buterin, a developer born in 1994 in Kolomna, Russia, but raised in Canada.
Bitcoin and Ethereum
In 2013, Vitalik Buterin was a university student with a strong passion for cryptocurrencies. Buterin first became interested in blockchain technology when he was involved in Bitcoin as a programmer and co-founder of Bitcoin Magazine. However, he began to envision a platform that could go beyond the financial use cases allowed by Bitcoin. Although Vitalik was a supporter of Bitcoin, Ethereum was born out of the idea that it had limitations. Therefore, he began to devise his own decentralised system. The vision was still that of a context in which every process could take place without intermediaries, but which could go beyond that. Bitcoin had made it possible to send money around the world without banks, but Buterin considered the potential of blockchain technology to be much broader. The key differentiator of Ethereum from Bitcoin is that it is a decentralised platform that also allows Smart Contracts and Dapps, based on its own blockchain.
Smart Contracts and Dapps
Smart contracts are programs that operate directly in the blockchain network. They make it possible to create systems that integrate the automatic execution of contracts that are programmed into the system.
This technology also enables the development of systems that can be revolutionary in economic, social and governance terms. They give rise to new generations of organizations in which the founding principle is collaboration between autonomous entities, the so-called Decentralized Autonomous Organizations (DAO).
Dapps, on the other hand, are applications that operate in an environment such as the Ethereum network. The main feature is it’s decentralized code, i.e. code hosted on thousands of computers and executed in parallel.
Permissionless and permissioned
Another of Ethereum’s key features is that it can operate in a permissionless mode, like Bitcoin, but also in a permissioned mode:
- Permissionless mode allows any computer to join the network with the ability to confirm its transactions.
- In a permissioned mode, only a selected group of computers can validate transactions.
The Ethereum project
Buterin took action in 2014. To raise adequate funds, he and the other co-founders relied on a crowdfunding operation: selling millions of Ether (Ethereum’s future currency) to those interested in supporting the initiative. In July 2014, he launched the largest and most successful ICO ever, raising $18.4 million for giving life to his ambitious project. Vitalik Buterin is therefore to all intents and purposes the founder of Ethereum and in 2014 received the World Technology Award for co-creating and inventing the platform.
The first live version of Ethereum known as Frontier was launched in 2015 and 72 million coins were minted. These first virtual coins were distributed to people who funded the initial project and still accounted for about 62% of the money in the system as of March 2021. In just a few years Ethereum has become one of the most widely used cryptocurrencies in the world with a market capitalisation of over 200 billion (second only to Bitcoin).
Changes to the Ethereum protocol
Since its creation, the platform has grown rapidly and today there are hundreds of developers involved. As with Bitcoin there have been youthful problems, often related to security. For example, in 2016, $50 million in Ether was stolen by an anonymous hacker. This led to questions being raised about the security of the platform. Some members wanted to change the protocol to make the stolen money useless, while others wanted to stick to the original protocols. This caused a split in the Ethereum community, which led to a fork, resulting in two blockchains: Ethereum (ETH) and Ethereum Classic (ETC). Ethereum Classic (ETC) is based on the original protocol and is managed by a community that tries to remain faithful to the original version of Ethereum. Ethereum (ETH) has community group called the Ethereum Foundation that continues to advance and develop the platform.
The Ethereum ICO still represents an innovative fundraising model that has inspired numerous projects and entrepreneurs. Its currency has grown exponentially, which makes it attractive to many investors.
Ethereum is a constantly developing platform and its infrastructure has been improved in recent years making its applications potentially limitless.
Indeed, the possibilities offered by Ethereum have enabled the development of countless decentralised applications, giving rise to the now thriving Decentralised Finance (DeFi) industry.