Before gaining a clear understanding ethereum and its rise to digital fame, it is better that we first understand the technology ethereum is based on — blockchain.
A blockchain is a public ledger initially used to record and confirm anonymous transactions and shared between many parties. Since it is a shared service, transactions run on decentralised nodes. All data or transactions aren’t stored in just one server or database. It does not rely on a centralised network, which lowers the risk of losing data compared to transactions only run in one central system.
In the blockchain system, a transaction is recorded into what is called a block. Once a block is filled with recorded transactions, it joins a permanent ‘chain’ of blocks. Then, the system generates another block to record digital transactions.
Bitcoin vs. Ethereum
In recent years, blockchain has become synonymous with bitcoin. Bitcoin, after all, is purely a digital currency and can only be transferred from one owner to another by creating a record in the blockchain.
Ethereum also shares the same principle. The difference between bitcoin and ethereum, however, is that while bitcoin is a digital currency, ethereum is a platform. More particularly, it is an open software platform that allows developers to build and deploy codes, programs, and applications.
Bitcoin uses blockchain to record the transfer of ownership, while ethereum uses blockchain technology to allow it to record and store codes or programs. What also makes ethereum unique is that it allows applications to be “built and run without any downtime, fraud, control or interference from a third party.” For users to run a program on ethereum, they need to mine ether, the currency used in the platform.
Ethereum started in 2013 with programmer Vitalik Buterin. Buterin, who worked with bitcoin that time, wanted to make the digital currency more customisable. He especially wanted bitcoin to have smart contract features so it can automatically determine payments, and since bitcoin did not take it up, Buterin decided to create his own platform which soon became ethereum.
Facts in Brief
1. Year 2014 –
- Buterin started working with Dr. Gavin Wood who developed the Ethereum Virtual Machine, the runtime environment for the platform’s smart contracts. Buterin and Wood co-founded Ethereum.
- Swiss company Ethereum Switzerland GmBH owned and developed the first Ethereum software project. Buterin and Wood launched a pre-sale of ether to kickstart the Ethereum network, and sales reached more than $14 million.
- Investors received more than 60 million ether, while 12 million ether was allocated to the development group formalised under a non-for-profit organization called ETH DEV. Buterin, Wood, and Jeffrey Wilcke became the three directors of ETH DEV.
- ETH DEV brought together Ethereum developers from around the world in an event, DEVCON-0, to discuss various Ethereum technology topics and innovations.
2. Year 2015 –
- ETH DEV, with the participation of various developers, launched the Ethereum Bounty Program to help improve the security and reliability of Ethereum.
3. Year 2016 –
- The Ethereum Frontier network was launched, finally allowing developers to write and deploy smart contracts and decentralised applications.
- Homestead, a protocol upgrade to the Ethereum network, was launched.
- Ethereum reached more than $150 million worth of sales, making it famous. Its fame also brought a lot of dispute in the crypto-community market, which led to the split of the network into two groups: Ethereum (ETH) and Ethereum Classic (ETC).
- The foundation, miners, developers, and business partners decided to detach themselves from ETC.
4. Year 2017 –
- Ethereum further increased its distributed denial of service attacks and deflated the blockchain to improve its defence against spam attacks.
- Social trading and brokerage company eToro included Ethereum trading, which helped the platform reach a daily volume of $450 million.
By late 2017, some already predicted that ethereum is set to surpass bitcoin by 2018. As of this year, the highest price for an ether already reached $1,440.
Ethereum’s unique advantage is its ability to create and run smart contracts, and more developers and investors are seeing this as a factor that would boost the platform’s demand. By 2020, most have the following early predictions:
- The price of an ether may reach the benchmark of $2,000 — even as high as $5,000.
- Only main cryptocurrencies like ethereum — especially those with something more unique to offer — will survive by 2020.
- Ethereum will help fully decentralise digital exchanges as its demand continues to surge.