Ethereum’s 8th birthday is upon us. As such, Eric Ma, CEO of TIDEX, comments on some of the major milestones reached by the world’s most popular programmable cryptocurrency.
In 2015, Vitalik Buterin and a team of prominent technology figures launched the Ethereum network. Eight years later its currency (ETH) has grown to be the second-largest crypto asset in existence.
“A few minutes ago, many of you generated and loaded the Ethereum Genesis block, marking the inception of Frontier, the first Live release of the Ethereum project,” read a blog post from Ethereum eight years ago.
Ethereum allows developers to make smart contracts to build blockchain-based applications on top of the chain that enables blockchain mainstays such as DeFi and NFTs. This technology was integral to the “DeFi summer” in 2020, which saw an explosion of decentralised finance (DeFi) protocols and development.
Last year, Ethereum merged from a proof-of-work to a proof-of-stake consensus mechanism. This was done to address the long standing criticism of energy consumption of blockchain processes and transactions. This was one of the most significant events in the history of the blockchain and was envisioned from the start of Ethereum’s conception.
Around the same time the network was developing the framework for a proof-of-stake mechanism, they also shifted to Layer-2 solutions. This is when a blockchain is built in parallel with the Ethereum blockchain. Ethereum was split into “shards” to enable more traffic on the blockchain.
Each year Ethereum has made significant changes to stay innovative and competitive in the DeFi space. Going back in time we can see there was a lesson to be learned at each stage in the path, as well as impressive growth in the ETH price in the first week of that year, according to Coinbase.
Commenting, Eric says: “We wouldn’t see today’s level of cryptocurrency adoption if it weren’t for Ethereum. There are thousands of projects built on Ethereum and nearly 85% of all DeFi projects are built on Ethereum. And with its continued development, there’s no doubt it’s one if not the most important blockchain in the crypto ecosystem. Let’s take a look at the highlights over the last 8 years.”
2023 — £1,006 per ETH
This year Ethereum had two upgrades: Shanghai and Capella, or more commonly referred to together as Shapella.
The upgrades were the first “hard fork,” or major upgrade since shifting to a proof-of-stake system. These upgrades allowed validators to withdraw ETH that was staked. Crypto staking is when assets are locked to help maintain the security of that network’s blockchain.
Before this upgrade, some users’ ETH had been staked since late 2020, amounting to a value of roughly £20.2 billion, or 14% of all ETH.
2022 — £2,831 per ETH
Amid market turmoil, in 2022 Ethereum launched its Paris update, or “The Merge”. This saw Ethereum move away from a “proof-of-work” system to a “proof-of-stake” system. Doing this made the network 99% more energy efficient, while also increasing security and processing speeds.
Up until this point, the network’s smart-contract compatible blockchain led to a wave of traffic that slowed down the network. This update saw the network split into 64 “shard” blockchains to increase speed.
Ethereum called this update arguably the most significant upgrade in its history. It has been in the works since 2015, the date of the “difficulty bomb” — or the time where the network’s proof-of-work blockchain begins to degrade in favour of the new blockchain was continually pushed back.
2021 — £534 per ETH
This year saw a number of upgrades to push back the date of the difficulty bomb, and also work out kinks in the Beacon Chain.
Most significantly this year saw a hard fork update called London, due to the increased traffic from the growth of DeFi and NFTs which largely used the Ethereum blockchain.
A significant precursor to this update was the Berlin Protocol, which introduced features such as gas fee optimisations, enhanced security, and a reduction in cost for certain transactions.
The London update stabilised the fee dynamics of the blockchain by “burning” ether coins, and making the way transaction fees work more predictable.
Experts likened the change to adding lanes to a highway to control traffic, and standardising toll prices.
2020 — £102 per ETH
While continuing to delay the difficulty bomb with Muir Glacier, Ethereum launched the Beacon Chain this year after landing 32 ETH to stake the chain.
Following the 32 ETH, the Beacon chain started generating blocks on 1 December that year. This was a crucial step towards The Merge in 2022.
2019 — £121 per ETH
This year saw the significant Istanbul fork implemented in December. Istanbul looked to optimise the “gas” of certain actions. Gas is a fee required to execute a transaction on Ethereum regardless of success or failure. The gas cost could spike if the blockchain is congested
Istanbul also altered the cost of operation codes (opcodes), which allows users to program operations on the blockchain, in an attempt to curb denial-of-service attacks and spamming blocks. The changes to the opcodes also increased scalability performance for solutions based on zero-knowledge privacy tech.
2018/17 — £640/ £9 per ETH
In this period of time stretching from 2017 to 2019, the network implemented a two-part upgrade known as Metropolis consisting of Byzantium and Constantinople. These updates were part of the network’s plan to make the chain more secure and scalable.
Byzantium improved the mining algorithm, enhanced privacy, pushed the difficulty bomb by a year, and reduced block rewards from 5 to 3 ETH. Constantinople helped to ensure the blockchain didn’t freeze before they implemented proof-of-stake. It also optimised the cost of certain actions.
2016 — £0.65 per ETH
This year saw the implementation of the Homestead fork, the second major version of the Ethereum platform including a number of protocol changes and a networking change that laid the groundwork for more network upgrades.
2015 — £2.28 per ETH
Finally, eight years ago Frontier was released which was the initial release of the network. This gave users the option to create and deploy their own smart contracts and decentralised applications, effectively changing the playing field for years to come.
This first version, however, was a beta release, and allowed developers to learn, experiment, and begin building decentralised apps and tools.
The initial release had a gas limit of 5,000, which was called a thawing period. This period gave miners and early adopters a chance to install their clients without needing to rush
The thawing period ended about two months later, at the same time the network introduced the difficulty bomb as incentive to develop the proof-of-stake system in the future.
Facing forward, Ethereum is looking at a major issue with the proliferation of Liquid Staking Tokens (LSTs). These tokens unlock the value of staked tokens, by trading the ‘receipt’ token from staked tokens.
According to Cointelegraph, the LST market is worth approximately £13.2bn. This is because it makes the staked assets liquid, allowing users to earn yield from both ETH and LSTs. For buyers, LSTs offer a lower cost to entry than regular ETH staking, attracting smaller dollar investors.
Concluding, Eric Ma says: “It’s pretty incredible to see how far Ethereum has come since its induction in 2015. Without it, the crypto space would be vastly different. Not considered a security by the SEC, it’ll be really exciting to see what Ethereum will bring next.”
