Throwback Stories #10: Origins of Ethereum
Although the leading position on the crypto market belongs to Bitcoin, Ethereum proudly holds the second place. What is the story of this cryptocurrency?
In previous Throwback Stories, we mostly focused on Bitcoin genesis, which was seen from different perspectives. We took a look at Bitcointalk’s beginnings and the story of Hal Finney. This time, however, we put the Nakamoto’s currency aside to thoroughly examine the origin of Etereum – currently the second leading cryptocurrency, at least according to its market cap. How did Vitalik Buterin’s creation manage to succeed on the market?
Whenever we hear about Ethereum (or, to be more specific, about Ether – a cryptocurrency generated on Ethereum platform), it usually comes with one name: Vitalik Buterin. This Russian-Canadian programmer is considered a father of this cryptocurrency, who proposed the idea of it and conducted the whole development process.
When we look at Buterin’s biography, we will see that he is a suitable person for being a cryptocurrency developer. Both his parents, Dmitry Buterin and Natalia Ameline, are computer scientists, which surely has influenced him to some extent. When Vitalik was six, his family emigrated from Russia to Canada to get better employment opportunities.
Young Buterin appeared to be a whiz-kid. In elementary school, he was placed in a class for gifted children. That’s when he found out about his knack for computer programming. He kept developing in that direction, which resulted in achievements like a bronze medal in the International Olympiad in Informatics or winning the Thiel Fellowship. However, the real breakthrough in his life occured when he met Bitcoin. Cryptocurrencies quickly became an essential element in his life, leading him to co-found Bitcoin Magazine in 2012. He also spent some time traveling the world and meeting with other crypto developers.
The new player on the market
It was in Bitcoin Magazine, where Buterin, for the first time, proposed the idea for Ethereum. The reason why this young programmer decided to start working on his own platform was the lack of scripting language for Bitcoin’s blockchain, suitable for creating decentralized applications. Finally, his dedication to blockchain resulted in issuing the white paper of Ethereum in January 2014 at the North American Bitcoin Conference in Miami.
Although Vitalik Buterin is usually considered to be the sole founder of Ethereum, he initiated the project alongside Gavin Wood, Charles Hoskinson (who left the project half year later), and Anthony Di Iorio. The team decided to finance it via crowd sale procedure, which later on became widely known as the initial coin offering. The initiative, held from July 20th to September 2nd, 2014, proved to be a huge success, with about 50 million tokens sold. Ethereum raised 31,500 Bitcoins through this initial sale – and it was just the beginning.
Another key point in Ethereum history was founding the Ethereum Foundation in July 2014. The primary goal of this non-profit organization is to conduct and govern the blockchain project- and over all these years it handles that task perfectly. It also diverges the Ethereum development process from Bitcoin, with a clearly deliberate plan for the future. Moreover, Ethereum Foundation goals don’t focus only on technological aspects, but also on creating a community.
Four stages of development
Probably the most brilliant move from the perspective of the development of the blockchain project was preparing a clear roadmap for goals to be achieved for the Ethereum. Four stages were determined: Frontier, Homestead, Metropolis, and Serenity. It doesn’t only provide the necessary transparency in the development process but also keeps the community involved in it.
For instance, at the initial stage, users were rewarded for each bug detected in the system. Such bounty program not only allows for efficiently eliminating flaws in the project, but also involved more people in working on it actively, and eventually increased its popularity even more. The second stage introduced Ethereum Improvement Proposals – a system of introducing new features to the Ethereum community, giving users a sense of commitment and involvement in the development.
When Ethereum managed to create a stable and devoted community, the project went into the third stage, focused on scalability, security, and other improvements. The last and final part of the roadmap is going to move the platform from proof of work (PoW) to proof of stake (PoS). In addition to the technological progress achieved by Ethereum, thanks to an organized development process, the four-stage plan contributed to building a stable community. However, not everything from Buterin’s plan went perfectly fine.
Not a flawless diamond
Although the Ethereum history lacks more significant turmoil and crisis, there were some events which to a large extent affected the project. The most critical concerns the Decentralised Anonymous Organisation (DAO), which was some sort of decentralized board of directors on Ethereum blockchain, consisted of anonymous participants.
In June 2016, an anonymous hacker exploited the DAO, stealing about $50 million in Ether assets. Although the attack came from the vulnerability of DAO rather than the Ethereum Foundation, it was up to Buterin to clean up the mess. Stolen funds could be recovered thanks to the hard fork procedure. However, this resulted in a split in the Ethereum community, leading to the formation of a faction that decided to stay with an old blockchain, now known as Ethereum Classic.
From more up-to-date events concerning the Ethereum, we should mention here the case of Virgil Griffith. He is a developer of the Ethereum Foundation, who was recently arrested on charges of providing the North Korean regime with vital information to facilitate the fight with United States sanctions.
Besides those particular incidents, Ethereum is rather a popular project among the cryptocurrency community. Although there are still some noticeable flaws, which might be worrying. First concerns the scalability of the network, which is still not great enough to meet the expectations of becoming a leading platform for online financial system.
There is also a question of centralization. Although the project is aiming to build an internet “on neutral, open-access infrastructure, controlled by no company or person,” as we may read on Ethereum’s official website, the character of it is rather focused around the Ethereum Foundation. Sure, it integrates well with the community, providing many ways to share the opinion about the project. But after all, the final shape of the Ethereum remains in the hands of Vitalik Buterin.
The event, which clearly shows the dependence of the network on its founder, took place on June 25, 2017. It was then when some anonymous individuals shared information about the alleged death of Buterin in a car accident. The rumors, of course, quickly appeared to be a hoax, with Vitalik himself denying it via Twitter, but it was enough to cause a major price crash for the Ethereum.
Nevertheless, Buterin appears to be a genius. At such a young age, he created the second leading cryptocurrency. Ethereum Foundation managed to develop a devoted community in a different way than the unorganized Bitcoin movement. How will this rather centralized structure perform in the next years? Apparently, it depends mostly on Buterin himself.
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