Recognized in the cryptocurrency ecosystem for being the second most popular according to its market capitalization. Ethereum ( ETH ), more than a currency, is an ambitious Blockchain project that, after Bitcoin , has revolutionized the world of finance and decentralized applications.

Since its arrival on the scene in 2015, Ethereum has caused great impact and repercussion in the ecosystem for being the cradle of revolutionary technological trends such as decentralized crowdfunding ( ICO ), crypto-collectibles, decentralized applications (DApps) and decentralized finance ( DeFi).

In this new installment we address the history of Ethereum , making a brief review of its technical aspects, the most representative events in its history, the challenges it has faced and the prospects for its evolution in the coming years.

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History of Ethereum

Ethereum itself, more than a cryptocurrency, is a multipurpose Blockchain platform with features such as the creation of smart contracts , tokens , and decentralized applications.

With slightly more ambitious goals than being a form of digital money, Ethereum pursues the idea of ​​being “ the world computer ” on which people can freely and decentrally create applications, assets, and more. But then, how did Ethereum manage to become the second largest cryptocurrency after Bitcoin in just five years?

The birth of the project

The initial germ of Ethereum arose in the brilliant mind of the young Russian-Canadian programmer Vitalik Buterin, who in 2013, when Bitcoin had already been running successfully for four years, decided to try Bitcoin programming to see if he could build decentralized applications. Failure in that mission would lead him to write and publish, that same year, the first Ethereum white paper .

In January 2014, Buterin announced the project during the North American Bitcoin Conference in Miami, and after that, it didn't take long for Ethereum to assemble a sizable team of developers and enthusiasts willing to work and push the idea forward.

A team consisting of Gavin Wood, Mihai Alisie, Amir Chetrit, Jeffrey Wilke, Joseph Lubin ( ConsenSys ), Charles Hoskinson ( Cardano ), and Anthony Di Iorio, was the first to discuss and support the project. However, Ethereum officially took off in August 2014, after raising $16 million in an initial coin offering (ICO).

The launch of  Ethereum 's open testnet , dubbed  Olympic , occurred in May 2015. Frontier , version 1.0 of the  blockchain , was later launched in July of that year . The first Ethereum block was finally mined with that version on July 30, 2015, ushering in the now popular Blockchain platform .

Early Years: Attack and Fork

While the Ethereum network has been upgraded several times throughout its history, no event has generated as much controversy on the platform as the hard fork following The DAO attack . Less than a year after the launch of Ethereum , an unfortunate event would split the community in two.

In 2016, a hacker exploited a flaw in the code of Ethereum 's decentralized application , The DAO , causing a theft of $50 million worth of ether. The event sparked a debate that would mark a before and after for the  Ethereum community . One group advocated reverting the stolen transactions to DAO and restoring the lost ethers ; while another group was in favor of preserving the integrity of the transaction history and balances of the original blockchain (even with the losses).

As a result of this dispute, Ethereum Classic (ETC) was born on July 20, 2016, another network with its own cryptocurrency cloned from the original Ethereum code base . The upgrade caused Ethereum to fork in two, those who advocated rewinding to before the attack continued with the upgraded original network, while the other group split off keeping the network without upgrade under the name Ethereum Classic .

In order to strengthen the network, Ethereum announced in 2016 a transition phase called Metropolis , to change the consensus mechanism from Proof of Work ( PoW ) to one of Proof of Participation (PoS). In November of that year, the network activated a difficulty bomb starting at block 200,000 to encourage the transition from one protocol to another.

Ethereum sets the standard

Throughout its evolution, Ethereum has been the cradle of various technological trends that have not only led the platform to gain great popularity, but have also led to technical limitations that have forced it to be updated to overcome multiple challenges.

One of its big trends was initial coin offerings (ICOs), which saw the Blockchain platform raise a total of $7.8 billion for more than 1,000 projects during 2017-18. The truth was that more than 80% of all ICOs , which were ultimately decentralized crowdfunding mechanisms , relied on the Ethereum blockchain to create their tokens and issue them to investors.

On the other hand, in 2017 Ethereum saw the birth of the first decentralized application that gained great traction among users and that would mark a before and after for collectibles. Developed by DapperLabs , CryptoKitties were the “ digital kittens ” that would revolutionize the tokenization of collectible figures . Although it seems somewhat banal, the project required great innovation and even led to the development of a new token standard on Ethereum : “ non-fungible tokens ” called ERC-721 .

Between the heyday of the kittens, which were traded for up to $200,000 and sparked a high volume of users, the Ethereum network experienced a major clog with a significant increase in transaction fees. But these challenges were for the developers a wake up call about the limitations of Ethereum and the future performance of the platform.

More recently, as the Blockchain advances a more robust infrastructure with the Ethereum 2.0 upgrade , the trend gaining popularity strongly is the DeFi (decentralized finance) movement . The DeFi ecosystem, which is made up of dapps built on traditional finance instruments such as lending services, exchanges, and derivatives markets, is worth $4.6  billion for assets locked in various protocols.

Technical characteristics

Ethereum: A Global Open Source Platform for Decentralized Applications .

Given the energetic evolution of Ethereum , the technical characteristics of this project have changed since the publication of its first whitepaper in 2013. An example of this is that one of the main technical characteristics of Ethereum is currently in the midst of a great change.

Like Bitcoin , Ethereum was built on the Proof-of-Work (PoW) consensus protocol, using the Ethash algorithm . Although, with the upcoming release of the Eth 2.0 update, that is about to change, becoming a cryptocurrency based on the Proof-of-Stake protocol or proof of participation (PoS).

Ethereum , the second largest cryptocurrency platform by market capitalization behind Bitcoin , is a decentralized open source blockchain that features many functionalities. Here are some of its technical characteristics and most relevant details:

• The development of the Ethereum platform is decentralized (it does not depend on a central entity).

• The Ethereum Foundation is the non-profit organization that serves as the voice of the Ethereum developer community .

• The emission of ETH tokens does not have a total limit like Bitcoin , but rather an annual one: at the moment it has a maximum emission of 18 million ethers per year.

• 'Gas' is the unit of measurement for work within the Ethereum Blockchain .

• The calculation of the size of the blocks in Ethereum is limited to a specific amount of Gas. The Ethereum block size limit is 1,500,000 Gas .

• The average time to create a new block is 13 seconds .

• The main way to mine ethers is with  GPU (Graphic Processing Unit) equipment.

• The multiple functionalities are a fundamental base of Ethereum: creation of smart contracts , ICOs, DApps, tokens.

• Ethereum serves as a platform for more than 260,000 different cryptocurrencies.

• Ethereum provides a decentralized virtual machine, the Ethereum Virtual Machine ( EVM ), that can run scripts using an international network of public nodes.

• More than 100 well-known companies use the Ethereum platform and are members of the Enterprise Ethereum Alliance (EEA).

Ethereum 2.0

With all its potential, the Ethereum project sees a promising future. Currently, the next changes that the platform will experience are part of a series of developments and updates called Ethereum 2.0 . The first step of Eth 2.0 is expected to launch sometime in 2021 or early 2022.

While the main implementations that distinguish the Ethereum 2.0 update include the transition to the proof-of-stake (PoS) mechanism and an increase in transaction performance using sharding technology, this new phase of the platform involves many other innovations.

The update, which has featured extensive research by developers over the last five years, promises to radically transform the world's largest smart contract platform and move it towards that initial goal of being the great "world computer ." For example, it is expected that after the upgrade, the Ethereum network can support up to 2,000 transactions per second.

The promises of Eth 2.0 also include increased security, a massive increase in efficiency, as well as increased scalability and usefulness of the entire network. Within the Blockchain ecosystem , Ethereum has set the tone for many projects, such as EOS , Tezos , and  Cardano , which are currently following some of their initial purposes of facilitating a solid ground for decentralized application development.

Market behavior

Throughout its history, the price of Ethereum ( ETH ) has seen a dynamic trajectory within the cryptocurrency ecosystem. Although ether has long led the second place ranking of coins by market capitalization, the value of the asset has not been one of the highest.

For the first year of the coin, its market value witnessed a significant development nearing highs of USD $20. According to the first records of Coinmarketcap , Ether marked a price of USD $2.77 for August 7, 2015. That same year, for the month of September, it would also experience its lowest historical price at 50 cents on the dollar.

While Ether closed its first year around USD $12 (July 30, 2016), just under two years later it would register its highest historical price. With the rise of ICOs and motivated by a general bullish trend in the crypto market, Ether set a record price slightly above $1,330 on Jan 14, 2018.

Ethereum (ETH) historical price record – source: Coinmarketcap

However, after that spike, the second cryptocurrency witnessed a major price reversal that saw new all-time lows below $100 by December of the same year. Since then, Ethereum has remained stable, reflecting a progressive recovery.

This 2020, the coin marked a significant improvement nearing the USD $400 barrier, possibly related to the rise of DeFi and the launch of the Medalla testnet  , a previous step before the launch of Eth 2.0.

Ether is traded on at least 340 exchanges around the world, though Huobi , OKEx , and Binance are some of the ones that handle the largest trading volume of the coin .