The Rise of the Ethereum Blockchain

History of ETH: The rise of the Ethereum blockchain

Ethereum is an open-source utility that uses blockchain technology to enable smart contracts and cryptocurrency trading without the involvement of a middleman, but where did it come from? The cryptocurrency world is a young industry that basically started with the creation of Bitcoin (BTC) in 2009. Bitcoin came into play as an experiment offering two components – an internet-based asset and blockchain technology underlying on which this asset operates. From there, people used the concepts of online currency and blockchain to come up with other projects and assets.

Ethereum is a blockchain that hosts a notable amount of functionality for developers building solutions on Ethereum as a base. The Ethereum blockchain has a native coin known as Ether (ETH), which is used to pay for activity on the Ethereum blockchain. The coin also trades on crypto exchanges and fluctuates in value. Other assets built on the Ethereum blockchain, such as ERC-20 tokens, for example, require ETH as payment for fees associated with any transaction of those assets. The Ethereum blockchain was written in the Solidity programming language. A non-profit entity, the Ethereum Foundation, is one of the supervisors of the Ethereum project.

Unlike Bitcoin with its inception and mysterious creators, Ethereum’s story is simpler. Vitalik Buterin and several others co-created Ethereum, but the details surrounding the massive blockchain’s backstory warrant further explanation.

For more information on the beginnings of BTC, read – The History of Bitcoin: When Did Bitcoin Start?

The beginnings of Ethereum

Although the Ethereum blockchain has a number of founders, it was Vitalik Buterin who originally published a white paper explaining the concept of Ethereum in November 2013. Following Buterin’s initial work, other masterminds jumped on board at various titles to help carry out the project. . Vitalik Buterin, Gavin Wood, Charles Hoskinson, Amir Chetrit, Anthony Di Iorio, Jeffrey Wilcke, Joseph Lubin, and Mihai Alisie are all considered co-founders of Ethereum.

Ethereum first became aware in early 2014 when Buterin presented the concept of the blockchain project to the public eye at a Bitcoin conference in Miami, Florida. The project raised capital via an initial coin offering (ICO) later that same year, selling millions of dollars worth of ETH coins in exchange for funds to be used for the development of the project. Between July 22 and September 2, 2014, the asset sale sold over $18 million worth of ETH, paid for in Bitcoin.

Although ETH coins could be purchased in 2014, the Ethereum blockchain did not go live until July 30, 2015, meaning ETH buyers had to wait for the blockchain to launch before they could move or use their ETH.

Why create the Ethereum blockchain in the first place? One reason would be that the Ethereum blockchain allows for more versatility in terms of building on the blockchain and the surrounding ecosystem.

To learn more about Ethereum, check out Cointelegraph’s Ethereum guide for beginners.

Ethereum Progression Stages

Although the birth of the Ethereum blockchain in July 2015 gave life to the project, its development would be a long process spanning years. Called Frontier, the first iteration of the Ethereum blockchain simply kicked off the chain and got it going, hosting smart contracts and proof-of-work mining. The initial launch gave people the ability to set up their mining devices and start growing the network.

Since the initial launch of Ethereum, the blockchain has taken many other updates as part of the progression of the blockchain, such as updates called Byzantium, Constantinople, and the Beacon Chain. Each update changed certain aspects of the blockchain. Beacon Chain, for example, initiated the transition of the Ethereum blockchain to Ethereum 2.0 (Eth2) – a move from a proof-of-work (PoW) mechanism to a proof-of-stake (PoS) consensus mechanism. Byzantium and Constantinople each made a number of changes to the Ethereum blockchain, including a reduction in mining payouts to three ETH from five (after Byzantium and preparing for the PoS transition during Constantinople).

A significant change in the Ethereum blockchain is the move to PoS initiated to scale the blockchain. Many projects have built applications on the Ethereum blockchain over the years. Still, the network struggled when traffic spiked dramatically, such as during the days of CryptoKitties — collectible digital cats backed by the Ethereum blockchain — in 2017.

In 2020 and 2021, decentralized finance (DeFi) projects built on Ethereum received significant attention, bringing Ethereum’s scalability issues to the fore as high network fees plagued participants. The transition from Ethereum to Eth2 and PoS aims to bring scalability to the well-known blockchain, although the change is happening in stages.

DAO Hacking

Some of the Ethereum blockchain updates over time were integral to Ethereum’s progress, although others were event-based adjustments or factors that required blockchain changes. The Decentralized Autonomous Organization (DAO) fork, for example, was used to circumvent a hack.

DAOs are a general concept in the crypto industry, whereas DAO was a specific DAO from the early days of the crypto industry.

For a better understanding of DAOs in general, see – What is a Decentralized Autonomous Organization and how does a DAO work?

A project launched in 2016, the DAO served as a decentralized autonomous organization fund based on Ethereum that essentially democratized the fund’s asset allocation. Users don’t have to trust anyone else in the group with DAOs, they just need to trust the code of a DAO that is completely visible and verifiable by anyone. In short, interested parties sent ETH to a pool of funds within the DAO and received DAO tokens in return. These tokens could, at the time, be used to vote on where the DAO would allocate its capital pool. The DAO attracted around $150 million worth of ETH in 2016, considering the US dollar price of ETH at the time.

In 2016, however, the DAO suffered a hack that took over 3.6 million ETH from the DAO’s asset pool. The Ethereum community disagreed on how to handle the ordeal.

Part of the community wanted to modify the Ethereum blockchain to essentially negate the hack. Members of the opposing community disagreed, expressing that such a game would go against the overall concept of blockchain technology’s immutability.

A majority of the Ethereum community agreed with the game changing the blockchain in response to the hack, leading to a hard fork of the network. The hard fork resulted in two separate blockchains and two separate native assets on those chains. The Ethereum blockchain has forked to recover assets lost to the hack. The resulting asset and blockchain are those that now carry the Ethereum name. What is now called Ethereum Classic (ETC) is the original version of the Ethereum blockchain.

The price of ETH over time

Ethereum’s price history reveals a bumpy ride over the years. In the early days of ETH, the coin would sometimes trade below $2.00. The Ethereum price chart shows the price history of ETH on Cointelegraph’s Ethereum price index. ETH traded below $15.00 per coin in early 2017 and spiked to around $1,400 per ETH in January of the following year.

After this high, ETH continued to drop to near and below $100 at times over the following months and years. The asset eventually resumed an upward trend, breaking above the $4,000 mark in 2021.

The future of Ethereum

Ethereum is a significant player in the crypto space, as evidenced by its market capitalization and the wide range of solutions that entities have built on the Ethereum blockchain. However, the network has encountered difficulties in scaling up. Its transition to Eth2 aims to solve its problems. Only time will tell on the results, however, and the transition should take some time to unfold.