Ethereum has truly revolutionized the entire cryptocurrency world. Created to function as a decentralized environment, Ethereum also ranks as one of the leading cryptocurrencies.
Vitalik Buterin stands out among the creators of Ethereum as a platform. Aiming to design an improved version of Bitcoin, the created asset can hardly be called Bitcoin 2.0. They are somewhat similar, but there are a number of conceptual differences between them.
Ethereum is a blockchain-powered platform designed to fulfill a wide range of functions. As a popular comparison: if Bitcoin is mail, then Ethereum is the entire Internet. There are many contrasts that make Bitcoin and Ethereum distinct from each other, but they can coexist as both are working towards cryptocurrency adoption.
Who is Vitalik Buterin?
Ethereum is the brainchild of Vitalik Buterin. Unlike Bitcoin, Ethereum has a real leader behind its back. Buterin is a Russian-Canadian programmer and journalist, best known for his work on Ethereum. In 2011, he became a co-founder of Bitcoin Magazine. He also created the cryptocurrency trading website Egora.
Anyhow, it was Ethereum that glorified Buterin. Vitalik developed the concept of the platform at the age of 19. He received a $100,000 Peter Thiel scholarship, dropped out of university while taking up a degree in Computer Science, and began to develop this project.
He continuously leads the Ethereum research team in upgrading the platform. Because of his great influence in the cryptocurrency industry, Forbes included Buterin on the list of people under 30 influencing global cash flows. He travels around the world to broadcast about Ethereum’s capabilities in various speaking engagements and conferences, attended by fellow innovators and world leaders.
Ethereum Smart Contracts
Working for a Bitcoin-focused publication in 2013, Buterin drew attention to the fact that this blockchain does not have its own language for writing scripts. He came to the conclusion that this is a big inadequacy that is worth fixing. Without receiving widespread support for this idea initially, he started to work on his own.
At the end of 2013, Ethereum’s whitepaper was released. In this whitepaper, Buterin described his goal to provide blockchain with an integrated and full-fledged programming language that can be used to create smart contracts.
Smart contracts control the transfer of digital currencies or assets between the parties if certain conditions are met. Written in software code and stored on the blockchain, these contracts make transactions traceable, transparent, and irreversible.
Smart contracts made Ethereum famous as they made it possible to carry out reliable and confidential transactions without the involvement of external intermediaries such as banks or government agencies.
These contracts not only contain information about the obligations of the parties and sanctions for their violation, but they automatically ensure the fulfillment of all conditions of the contract.
By introducing smart contracts to the public, the scope of blockchain significantly expanded as Ethereum made the use of smart contracts known to developers all over the world.
Moreover, smart contracts perform operations by setting ‘if-then’ conditional statements. For example, if a smart contract is used to control a vending machine, every time a person puts a dollar in the machine, it will give out a can of Coke.
Furthermore, Ethereum provides the basis for these contracts and, at the same time, has a level of functionality that is not available to other cryptocurrencies. Notably, all of this is possible because of smart contracts that effectively support transactions and compliance in a fully-digital environment.
Early Days of Ethereum
In January 2014, Buterin officially announced Ethereum at the North American Bitcoin Conference held in Miami. He expected people to point out his shortcomings and mistakes quickly. Despite his expectations, many people unconditionally supported the new project.
Ethereum managed to gain public confidence and to proceed with its development, which leads to the creation of the non-profit organization, Ethereum Foundation. Furthermore, the initial coin offering (ICO) of the project was launched in July 2014, providing the necessary funds needed.
Read Also: What Is An ICO?
During the ICO event, Ethereum issued its own token, Ether (ETH). ETH is the currency that governs everything in the Ethereum ecosystem. Prior to this, the Ethereum Foundation conducted an initial distribution of ETH through a public pre-sale, collecting 31,591 bitcoins (worth $18,439,086 at the time) in exchange for 60,210,216 ETH.
At the end of 2014, the Ethereum network was formed with a large number of nodes (computers) that are responsible for running the Ethereum protocol.
Ethereum attracted many developers who took up the underlying technology and created their own applications on the top of the blockchain. According to the State of the DApps, thousands of projects are currently running on Ethereum.
The ETH token, which cost only a few cents in the beginning, rose in price to $250. In addition to that, countless ICOs have been conducted on the Ethereum platform. Anyhow, there were problems, and one of them nearly drowned the entire project.
Hacking of DAO
Decentralized autonomous organizations (DAOs) operate according to the rules encoded in a blockchain’s smart contract. One of these organizations, founded by Christoph Jench in 2016, caused a severe commotion in the community. The DAO was a complex smart contract designed to manage the creation of a decentralized venture capital fund. This fund could invest in various decentralized application (DApp) development projects.
As its vision, The DAO code was supposed to eliminate the need to trust people and ensure the autonomous functioning of the project.
The principle of DAO was simple. If someone would like to influence the activities of a decentralized venture fund, he would have to buy DAO tokens using ETH. Those wishing to receive financing on their projects submit proposals that would be subject to approval. To move forward, it was necessary to get 20% of the votes of all DAO token holders. The greater the amount of DAO purchased by a holder, the greater his voting power is.
Investors rushed to buy DAO tokens, spending a record amount of $150 million. However, after collecting the investments, The DAO attack happened. On June 17, 2016, someone used the vulnerability in the standard code of a smart contract and stole one-third of the funds ($50m) held by the said project.
Hard Fork and Ethereum Classic
A hard fork is a radical change in the protocol that makes previously invalid blocks and transactions valid (or vice versa), requiring all nodes and users of the network to update to the latest version of the protocol software.
Hacking DAO led to a hard fork as a part of the community voted to roll back the blockchain back to the way it was before the attack had occurred. This was a major change, and not everyone has agreed to it.
The controversial proposal caused a split that led to the emergence of two branches of Ethereum; both are running under the same source network. Ethereum, which we know today, adopted a modified transaction history. A minority that did not like the idea created Ethereum Classic (ETC).
Ethereum Classic is a decentralized computing platform that executes open-source smart contracts. It is a Turing-complete blockchain protocol utilizing the Ethereum Virtual Machine to deploy programs on public network nodes.
ETC may not have reached the heights of the ‘original’ Ethereum, but it still exists and stays among the top 100 cryptocurrencies.
Notably, at the end of Q2 2020, an average of 463,000 ETH transactions is recorded daily worldwide. This secured its rank as the crypto with the second-largest market capitalization.
Released on February 29, 2016, many people underestimated Homestead, the full version of the Ethereum network. This triggered the entire cryptocurrency market’s boom from 2016 to 2017.
Since then, the Ethereum platform allowed the development of decentralized projects in a distributed registry using smart contracts. In fact, it has become a catalyst for investment inflow (ICO) in the crypto world. As a result, the exchange rate of major currencies has increased.
Some experts suggest that ETH has the potential to overtake Bitcoin. Yet, the Ethereum team does not pursue the status of being the leading cryptocurrency on the market. Their main goal is the development of the platform and the creation of mechanisms to combat the inflation of its internal token.
This token, according to Buterin, should carry a real value, and not be the subject of speculation. This is the direction that Ethereum is going for in making enhancements for its platform.
Users and developers meet their demands as Ethereum becomes constantly updated and improved. This makes it revolutionary in the cryptocurrency market.
The Ethereum blockchain with its smart contract feature is the prospect that makes ETH attractive from an investment point of view. The future will show how powerful the platform will become. Corporate giants such as Microsoft, JP Morgan, Intel, and Sberbank have started to believe in it. All of them are members of the Enterprise Ethereum Alliance. They actively explore options for using blockchain in their line of business.
Read More: In CoinQuora’s Ethereum 101 section, we discuss more topics regarding Ethereum.