summary: Ethereum is an open-source, decentralized blockchain network powered by the Ether (ETH) token, enabling users to make transactions, earn interest, use and store...
content: Ethereum is a decentralized open-source blockchain network powered by the Ether (ETH) token that enables users to make transactions, earn interest on their holdings through staking, use and store nonfungible tokens (NFTs), trade cryptocurrencies, play games, use social media, and more. In late 2013, Vitalik Buterin published his whitepaper outlining the idea of Ethereum. In January 2014, Ethereum was first announced at The North American Bitcoin Conference in Miami. By the end of 2014, Ethereum had its first crowdfunding, raising more than $18 million by selling the native token, Ether. Ethereum went live in 2015 and enabled the smart contracts and applications built on its blockchain to run without any third-party interference. Ethereum’s development was released in several main stages. Each stage represented a necessary system-wide upgrade of the network, at which point old versions were no longer supported. On September 15, 2022, Ethereum transitioned its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS) in an upgrade process known as "the Merge". After the Merge, Ethereum's energy consumption rate was reduced by about 99.95% and the upgrade required no actions from Ethereum's users. As of April 2022, ETH is among the most popular cryptocurrencies and ranks second only behind Bitcoin. Overview Ethereum was launched in 2015 by Vitalik Buterin, Gavin Wood, Charles Hoskinson, Amir Chetrit, Anthony Di Iorio, Jeffrey Wilcke, Joseph Lubin, and Mihai Alisie. Ethereum is not controlled by any one entity. It exists solely through the decentralized participation and cooperation of the community. Ethereum makes use of nodes (a computer with a copy of the Ethereum blockchain data) run by volunteers to replace individual servers and cloud systems owned by major internet providers and services. These distributed nodes, run by individuals and businesses all over the world, provide resiliency to the Ethereum network infrastructure. It is therefore much less vulnerable to hacks or shutdowns. Since its launch in 2015, Ethereum has never suffered downtime. There are thousands of individual nodes running the Ethereum network. History Early Beginnings (2014-2015) Ethereum gained awareness in early 2014 when Buterin brought the concept of the blockchain project into the public eye at a Bitcoin conference in Miami Florida. The introductory paper was published in 2014, before the project's launch in 2015. In April 2014, The Yellow Paper, a technical definition of the Ethereum protocol, was released authored by Dr. Gavin Wood. !imageThe project raised capital via an initial coin offering (ICO) selling millions of dollars' worth of ETH coins in exchange for funds to use for the development of the project. Ether officially went on sale on July 22, 2014. The sale lasted for 42 days. The price of ether was initially set to a discounted price of 2000 ETH per BTC and stayed this way for 14 days before linearly declining to a final rate of 1337 ETH per BTC. In total, the asset sale sold over $18 million worth of ETH, paid for in Bitcoin. Although ETH coins were purchasable in 2014, the Ethereum blockchain did not actually 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. Frontier, a barebone implementation of the Ethereum project went live and followed the successful Olympic testing phase. It was intended for technical users, specifically developers. As of September 15, 2015, ETH price was $1.24 USD. Further Development (2016-2021) The DAO Hack A project that launched in 2016, the DAO served as an Ethereum-based decentralized autonomous organization fund. 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 pool of capital. The DAO attracted about $150 million worth of ETH in 2016, given ETH’s United States dollar price 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 was then split into two parts. A majority of the Ethereum community agreed with the idea to alter 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 forked off to regain the assets lost from the hack. The resulting forked asset and blockchain is the one that now holds the Ethereum name. What is now called Ethereum Classic (ETC) is the original version of the Ethereum blockchain. Enterprise Ethereum Alliance In February 2017, blockchain leaders, adopters, and innovators from all over the world formed an Enterprise Ethereum Alliance (EEA), the organization that supports and backs Ethereum and related developments and initiatives. The founding members of the Enterprise Ethereum Alliance rotating board included Accenture, Banco Santander, BlockApps, BNY Mellon, CME Group, ConsenSys, IC3, Intel, J.P. Morgan, Microsoft, and Nuco. Additional founding members included AMIS, Andui, BBVA, brainbot technologies, BP, Chronicled, Credit Suisse, Cryptape, Fubon Financial, ING, The Institutes, Monax, String Labs, Telindus, Tendermint, Thomson Reuters, UBS, VidRoll, and Wipro, among others. In July 2017, EEA added 34 new members and thus had over 150 members of the EEA. In 2017, the Ethereum currency increased by more than 13,000 percent. Since Ethereum’s initial launch, the blockchain has taken on many other updates as part of its progressions, such as updates called Byzantium, Constantinople, and the Beacon Chain. Each update has altered certain aspects of the blockchain. Beacon Chain, for example, launched the transition of the Ethereum blockchain to Ethereum 2.0 (Eth2), a shift from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. Byzantium and Constantinople each brought a number of changes to the Ethereum blockchain, including a mining payout reduction down to three ETH from five (after Byzantium and preparation for the PoS transition during Constantinople). In March 2021, Visa started settling transactions with crypto partners in USDC on Ethereum. Visa is already partnering with 35 digital currency platforms, including Coinbase, Crypto.com, BlockFi, and Bitpanda. In August 2021, the London update went live. It included Ethereum Improvement Proposal ("EIP") 1559, which aimed to change the way transaction fees, or “gas fees,” are estimated. Previously, users had to bid for how much they were willing to pay to have their ether transaction picked up by a miner, which could sometimes be costly. Under EIP-1559, this process is handled by an automated bidding system with a set fee amount that fluctuates based on how congested the network is. Another major change under EIP-1559 is that part of every transaction fee is burned, or removed from circulation, which reduces the supply of ether and can potentially boost its price. In 2020 and 2021, Ethereum faced two main challenges: a congested network that could only handle a limited number of transactions per second with increased gas fees for faster transactions, and the large consumption of energy that comes with the proof-of-work mechanism. To increase the scalability of the chain, reduce its environmental impact, and introduce new features, the developers behind Ethereum started preparations for the Merge, a major upgrade to the Ethereum blockchain. The Merge Originally referred to as Ethereum 2.0, The Merge is an upgraded version of the Ethereum blockchain that uses a proof-of-stake consensus mechanism to verify transactions via staking. The staking mechanism Ethereum replaces the proof-of-work model where cryptocurrency miners use high-powered computers to complete complex mathematical functions known as hashes. The mining process requires an ever-increasing amount of electricity to verify Ethereum transactions before they are recorded on the public blockchain. With proof of work, Ethereum had an annual power consumption roughly equal to Finland, producing a carbon footprint similar to Switzerland. Post-merge, Ethereum reduced its carbon footprint by up to 99.95%, addressing one of the major criticisms of the cryptocurrency. In December 2020, Ethereum began running on two parallel blockchains, a legacy one that operates using proof of work (Ethereum Mainnet) and a new chain for proof of stake (Beacon Chain). The merge combined Ethereum’s Mainnet and Beacon Chain into one unified blockchain operating on a proof of stake protocol. The Ethereum Mainnet and Beacon Chain were originally referred to as ETH1 and ETH2, respectively. Their eventual merge was expected to be called Ethereum 2.0. In January 2022, the term Ethereum 2.0. was deprecated by the Ethereum Foundation. They believed Ethereum 2.0 sounded too much like a different operating system, which is not at all what the merge is intended to implement. The Merge took place on September 15, 2022, integrating the two existing independent chains in the Ethereum ecosystem: the execution layer and the consensus layer (Beacon Chain). Shanghai Upgrade Ethereum has another update planned for March 2023. It's called Shanghai. Nearly five months after "The Merge" upgrade, software developers who work on Ethereum are gearing up for a new upgrade, dubbed Shanghai. It will allow the tokens that are used to order transactions on the blockchain to be withdrawn. Right now, all those tokens are tied up in staking wallets. Ethereum’s Shang