What is Ethereum?
Ethereum is an open-source, public blockchain and decentralized computing platform featuring Turing-complete smart contract functionality. Proposed in late 2013, by a then 19-year-old Vitalik Buterin, as a platform that could hypothetically leverage the blockchain to store and execute computer programs across an international network of distributed nodes, Ethereum has become the most well-known and established cryptocurrency outside of Bitcoin.
The History of Ethereum
Ethereum has a long, controversial, and highly significant history that has had a major impact on shaping the modern cryptocurrency sphere. The white paper proposed by Vitalik in late 2013 was the beginning of the Ethereum era.
Outlined as a distributed world computer for executing and storing computer programs, the goal was to create a distributed computing platform that took full advantage of the potential afforded by blockchain technology. Vitalik puts it in the introduction of his paper:
“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”
The systems that he “describes above” in the quote refer to common applications (dapps) built on top of the Ethereum blockchain today such as on-chain digital assets (ERC-20 tokens), non-fungible assets, decentralized exchanges, on-chain identity and reputation systems, peer-to-peer gambling, decentralized autonomous organizations (DAOs), and most notably, smart contracts.
Smart contracts are the primary feature of Ethereum and are basically self-executing programs that facilitate the exchange of anything of value on the network, immutably stored on the blockchain. They execute when specific conditions are met and are outside the influence of third parties or censorship and have no downtime, as long as the Ethereum network is functioning.
The general ambition of the project outlined in the white paper as well as the technical expertise of its young founder attracted the attention of many in the cryptocurrency space. The platform’s core innovation became known as the “Ethereum Virtual Machine” (EVM) and is a Turing-complete software that runs on the Ethereum network, enabling anyone to run any program, regardless of the programming language, on the Ethereum blockchain. The result is the potential to create a vast array of decentralized applications all on a single platform.
The early development of Ethereum began in early 2014 with Vitalik and a small team including Anthony Di Iorio, Charles Hoskinson, and Mihai Alisie. The project began through the Swiss company Ethereum Switzerland GmbH and subsequently through the Swiss non-profit Ethereum Foundation.
At the time, Joseph Lubin was the COO at Switzerland GmbH and helped to found the Ethereum Foundation. He remains a prominent figure in the cryptocurrency community as the founder of ConsenSys.
In July 2014, Ethereum underwent a crowdsale where more than $14 million was raised from July-August. In September of the same year, the Ether (the Ethereum currency) was distributed to the investors and development team, while the remaining funding went to the Ethereum Foundation.
In July 2015, the first mainnet, experimental release of Ethereum was launched and labelled the “Frontier” release. The first major upgrade to the Ethereum platform was released in March 2016 as “Homestead” and was the first upgrade to be considered stable, focusing on gas pricing, security, and transaction processing. At the time, critics of Ethereum were still wary about its security and stability as although being a Turing complete platform offers a substantial amount of potential development applications, it also brings with it some serious and potentially fatal security concerns.
How Does Ethereum Work?
The Ethereum Virtual Machine (EVM) is a Turing-complete software that runs on the Ethereum network. It executes scripts across a distributed network of computers and enables the execution and storage of everything from smart contracts to DAOs. Functionally, Ethereum allows developers to build decentralized applications on top of it. This can include games, distributed registries, organizations, and many more.
The design behind Ethereum, based on the white paper, is intended to follow the principles of:
- Simplicity – The protocol should be as efficient as possible, even at the cost of data storage or time inefficiencies.
- Universality – An internal Turing-complete scripting is provided language that a developer can use to program any smart contract or transaction type.
- Modularity – Ethereum protocol should be designed to be as modular and separable as possible.
- Agility – The protocol is not set in stone and any opportunities to improve the protocol architecture or the EVM in scalability or security will be exploited.
- Non-Discrimination/Non-Censorship – The protocol should not attempt to actively restrict or prevent specific categories of usage.
The Future of Ethereum
Ethereum seems invariably placed, alongside Bitcoin, as the centre of the cryptocurrency world. With standards being proposed and implemented on the Ethereum network, a vast and dedicated community of developers and various other contributors behind it, and a vocal, talented leader in Vitalik Buterin leading the way, the Ethereum future looks bright.
Ethereum remains at the bleeding edge of innovation in the industry with developments such as its planned transition to sharding seen as some of the most daunting tasks out there, not just in the blockchain field either, but the larger technical community as well. Ethereum also lists a number of future technologies they are actively or potentially developing that include:
- Saving Wallets
- Crop Insurance
- Decentralized Data Feed
- Multisig Escrow
- Cloud Computing
- P2P Gambling
- Prediction Markets (i.e. Augur)
- Decentralized Marketplaces (i.e. 0x)
Not only is the Ethereum team developing groundbreaking innovations, but the larger community that participates in the network in the form of developing their own projects, within the confines of the Ethereum network, are also making significant contributions.
Is investing in Ethereum worth it?
Investing in Ethereum or any other cryptocurrency, for that matter was a difficult thing to do in 2018. With the prices constantly on the decline, there were some investors who took the chance to invest while the coins were cheap, but not a lot of them wanted to risk losing money. These days, things are starting to turn, and with the growing prices, Ethereum is seeing the return of investors, which is the trend throughout the crypto space.
A lot of people tend to point out that the volume of Ethereum’s ecosystem has gone down significantly from its glory days. However, this is not an indication that there is something wrong with the project, or even that there is a lack of interest. The ‘glory days’ were the days of ICOs — the days when pretty much anyone could come up with their own new coin and launch it.
Coincidentally, the easiest way to do it was on Ethereum’s blockchains. However, while these projects saw a lot of trading in 2017, thus contributing to the ecosystem’s volume, the situation turned in 2018 when the crypto winter struck.
Clearly, Ethereum is seen as a worthy investment by investment experts, and its importance for the crypto space cannot be denied. As such, Ethereum does remain a safe investment and is more than worthy of considering, even in 2019.