Ethereum Celebrates Five Years of Success

Ethereum Celebrates Five Years of Success

Published: August 9th, 2020

Ethereum made its official debut on 30 July 2015. Since then the brainchild of University of Waterloo dropout Vitalik Buterin has become the world's second-largest cryptocurrency, as well as a popular platform for blockchain application development.

Ethereum’s story began when a teen-aged Buterin co-founded Bitcoin Magazine in 2012. An early fan of technology decentralization, as editor he made the argument that Bitcoin needed a scripting language for application development.

Finding little traction for the idea in the BTC community, Buterin carried on, submitting a whitepaper in late 2013 that articulated the vision for a new platform.

At the 2014 North American Bitcoin Conference in Miami, Buterin and a group of fellow enthusiasts from Toronto booked a beach house and started fleshing out his ideas. In attendance were Joseph Lubin; who would go on to found ConsenSys; Gavin Wood, who would later become Ethereum’s CTO; and Charles Hoskinson – briefly Ethereum's CEO.

Feeling that he had a viable concept and enough senior backing, Buterin dropped out of the computer science programme at the University of Waterloo and got to work building out Ethereum’s key concepts and code over the next few months.

The group met again in Zug, Switzerland – now known as Crypto Valley – where Buterin cut ties with Hoskinson and another founder over their objections to Buterin’s plan to make Ethereum a non-profit.

The re-constituted Ethereum team raised over ca. USD 18 million in BTC through a crowdfunding initiative and the project formally got underway.

Launch day approaches

Ethereum launched in May 2015 with an open testnet that let developers use and stress test the network. By the end of July, Ethereum’s genesis block was being mined, and its mainnet was launched.

Uniquely in crypto, developers could also use Ethereum to create their own decentralized apps, creating a new category called ‘dapps.’ It marked the first vital step in Buterin’s vision of a world where centralized tech giants like Google or Facebook see their power dispersed amongst the wider technology community.

The inevitable first hack

In March the following year, the Ethereum Foundation undertook a major network upgrade which included ‘Homestead,’ the platform’s first planned hard fork. Along with various step improvements and added features, the upgrade would also give Ethereum users the power to build and use smart contracts.

In a classic display of unintended consequences, an organization outside of Ethereum calling itself The DAO – a set of smart contracts created using the Ethereum platform – launched a crowdsale to fund the project and raised $150 million. On or about 16 June 2016, an unknown hacker found an exploit in DAO’s code and broke in, stealing $50 million in ETH.

The hack kicked-off a furious debate in the crypto community as to whether Ethereum should start a new hard fork and reclaim the stolen ETH. It caused the network to split in two. Today you have Ethereum Classic, which continued on the original blockchain, and its rival ‘Ethereum.’

Fans of the original ‘classic’ Ethereum stuck to first principles, namely that blockchains are meant to be immutable and un-modifiable. Challenger ‘Ethereum’ has gone on to boost its DDoS protection, de-bloat its blockchain, and take other measures to stop future cyberattacks.

From proof-of-work to proof-of-stake

Ethereum’s third stage, dubbed ‘Metropolis,’ has kicked off the blockchain network’s new consensus model, starting a transition from proof-of-work (PoW) to proof-of-stake (PoS).

Ethereum uses the PoW algorithm currently. It requires thousands of crypto-mining devices to run continuously to sustain and secure the network. As with Bitcoin, mining requires expensive technology and uses massive amounts of electricity.

The inefficiencies in that process have spurred Ethereum developers to shift to the less wasteful proof-of-stake algorithm. That process, and the series of hard forks that underly it, is still underway.

Ethereum today: Bring on 2.0

In early 2020 the Ethereum Foundation entered what many see as the final stage of its development, officially called Serenity, or colloquially as ‘Ethereum 2.0’.

The objective of Serenity is to make it easier to address any underlying issues that arise on the Ethereum platform, including changes in transaction processing speeds. Ethereum outpaces Bitcoin in that regard, but can still only process a maximum of 15 transactions per second. Compared to mainstream payment options like Mastercard, which can handle 60,000 transactions a second, Ethereum has some work to do before its likely to gain mainstream acceptance.

Ethereum 2.0 will come with ‘sharding,’ the ability to spread data processing across several nodes and free processing power for parallel transactions running simultaneously. That promises to dramatically accelerate transaction processing speeds, free up storage, and set the stage for a new ETH2 cryptocurrency.

Ethereum 2.0 will also close the transition from the PoW to PoS consensus model. A new virtual machine called eWASM also promises to let Ethereum developers code in multiple languages. Currently, they are restricted to using Solidity.

Ethereum tomorrow: enabling the DeFi revolution?

When the changes inherent in Ethereum 2.0 become a reality – increased efficiency, security, scalability, and utility – a flock of new decentralized finance (DeFi ) applications are expected to take off.

Concerns about scalability when compared to traditional finance have been DeFi’s biggest hurdle in terms of broader adoption. Ethereum 2.0’s added scalability could wipe those worries away.

Several DeFi platforms, which allow users to remain completely anonymous, are already running on Ethereum. Estimates suggest more than $4 billion has already been invested in new DeFi systems.

Buterin has said DeFi could be Ethereum’s route to the mainstream.

“The notion that anyone in the world, regardless of location, could access a system that lets them pay someone else while setting their own level of financial exposure, is hugely inspirational.’

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