Ethereum: Vitalik Buterin’s Greatest Invention — What Is It And Why Does It Matter?
In July 2015, a developer named Vitalik Buterin and his team launched the Ethereum network. In the years since then, the blockchain network’s native cryptocurrency, ether (ETH), has consistently grown to be among the top three of all cryptoassets. Additionally, the Ethereum network has cemented its position as one of the most used blockchain networks.
In this article, you will learn about the history of the Ethereum network, its contributions to the blockchain ecosystem, and why it is such a big deal.
The Beginnings
When the Bitcoin network went live in 2009, it ushered in a new age of decentralized value transfer and storage. In the years that followed its launch, members of the cryptocurrency community began to experiment with new ways to further grow the sector. Many altcoins came into being during this period. Some, like Dogecoin and Litecoin, are still relatively popular today while most others eventually withered away into near nothingness.
Witnessing these developments, Vitalik Buterin, a nineteen-year-old developer who was at the time acting in his capacity as a founding editor at Bitcoin Magazine, suggested the development of a blockchain-based platform that would go further than bitcoin and its many successors. Buterin envisioned a platform that could support entire ecosystems underwritten by blockchain technology.
Initially, Buterin wanted to include these changes to the Bitcoin code, but because he was unable to garner support form the greater Bitcoin network, he decided to create an entirely new network. Towards the end of 2013, Buterin published a whitepaper, detailing the technical specifications and abilities of his proposed blockchain, which he called Ethereum.
By mid-2014, his idea had captured the imagination of the cryptocurrency community and caught the eyes of the greater financial industry. Buterin however, wanted his platform to have a wider berth than the finance sector. At the time, he said: “When other people came along and started bringing their ideas in, I realized having a more efficient and powerful form of money is almost the least interesting part.”
As the whitepaper continued to attract attention, Buterin went on to incorporate a company in Switzerland. Buterin amassed a number of developers who pledged to work on the development of the network.
To fund the development of the platform, Buterin and his team held a crowdsale. In the summer of 2014, the developers held the initial coin offering (ICO) where they raised $18 million. 11.9 million ETH tokens were sold during the ICO at the price of $0.311. The Ethereum ICO was the biggest at the time and is still considered one of the most successful ICOs to date. Using the funds created from the token sale, the Ethereum project came into life with the first block being mined in 2015.
What is Ethereum?
In the Ethereum white paper, Buterin explained the future he envisioned for the blockchain sector through his project. He stated: “What Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create “contracts” that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code.”
Ethereum, therefore, is a platform that utilizes the capabilities inherent to the blockchain to power the creation of decentralized applications. These applications are made possible by the use of smart contracts. A smart contract is a self-enforcing piece of code.
Smart contracts had existed before their addition to the Ethereum project. However, in combination with blockchain technology, these tools unlocked a new level of blockchain-based infrastructure that was previously inaccessible. This is why Ethereum is referred to as ‘blockcahin 2.0’.
Smart contracts are governed by pre-defined regulations, which allow them to act in the event of any number of scenarios or criteria. The Ethereum network relies heavily on them as they are what make it possible to create decentralized applications (Dapps) that run on the blockchain.
The introduction of blockchain-powered smart contracts catapulted the Ethreum project to the forefront of the distributed ledger technology sector. Additionally, Ethereum provided a platform through which the features of the blockchain could further be explored beyond the much delved into store and transfer of value.
Technically, Ethereum differed largely from its predecessor. While Bitcoin is designed to have 21 million units of its asset, the Ethereum network has no cap on the number of units of its native digital asset. In other words, bitcoin is considered to be deflationary while other digital currencies without a hard cap, such as ETH, are thought to be inflationary.
Moreover, while both Bitcoin and Ethereum utilize a proof-of-work consensus mechanism, Ethereum has its own algorithm named Ethash. However, due to security concerns, the Ethereum network is currently in the process of moving to a hybrid POS/POW mechanism called Casper.
The Significance of the Ethereum network
The Ethereum network has revolutionized the blockchain sector. There are currently over 2000 decentralized applications (DApps) based on the platform ranging from gaming, gambling and prediction markets to lending, collectibles and even employment market applications.
Additionally, due to the streamlined nature of the smart contract creation pathways, the ICO market has greatly benefited from Ethereum ERC20 token standard to launch their crowdfunding campaigns. Without Ethereum, the ICO boom of 2017 would have likely never happened.
Moreover, reports state that Ethereum continues to be the most active smart contract platform in existence. While there are a number of smart contract-supporting blockchain powered projects that have since come into existence, Ethereum is still the go-to platform for blockchain developers.
Lastly, Ethereum supports many of the top tokens in the digital currency market. “Of the top 100 tokens by market cap, 94% are built on top of Ethereum. Of the top 800 tokens, 87% are built on Ethereum. Most of these tokens are “ERC-20 tokens,” which made possible the majority of the $5.5 billion raised through token sales in 2017 and the $6.5 billion raised in just the first quarter of this year.”
The contribution of Buterin’s Ethereum is inarguably significant, both within the blockchain sector as well as the greater financial markets. Moreover, the project is poised to perform even better as it works towards fixing its scaling and security issues, which is planned for the near future.
