Ethereum, a second-generation cryptocurrency that emerged after Bitcoin, was initially described in a white paper by Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, in late 2013 with a goal of building decentralized applications. Buterin had argued that Bitcoin needed a scripting language for application development. Failing to gain agreement, he proposed the development of a new platform with a more general scripting language.
Ethereum was announced at the North American Bitcoin Conference in Miami, in January 2014. During the same time as the conference, a group of people rented a house in Miami: Gavin Wood, Charles Hoskinson, and Anthony Di Iorio, from Toronto, who financed the project. Di Iorio invited friend Joseph Lubin, who invited reporter Morgen Peck, to bear witness. Six months later the founders met again in a house in Zug, Switzerland, where Buterin told the founders that the project would proceed as a non-profit. Hoskinson left the project at that time.
Ethereum has an unusually long list of founders. Anthony Di Iorio wrote “Ethereum was founded by Vitalik Buterin, Myself, Charles Hoskinson, Mihai Alisie, & Amir Chetrit (the initial 5) in December 2013. Joseph Lubin, Gavin Wood, & Jeffrey Wilke were added in early 2014 as founders.” Formal development of the Ethereum software project began in early 2014 through a Swiss company, Ethereum Switzerland GmbH(EthSuisse).The basic idea of putting executable smart contracts in the blockchain needed to be specified before the software could be implemented. This work was done by Gavin Wood, then the chief technology officer, in the Ethereum Yellow Paper that specified the Ethereum Virtual Machine. Subsequently, a Swiss non-profit foundation, the Ethereum Foundation (Stiftung Ethereum), was created as well. Development was funded by an online public crowd sale from July to August 2014, with the participants buying the Ethereum value token (ether) with another digital currency, Bitcoin. While there was early praise for the technical innovations of Ethereum, questions were also raised about its security and scalability. In 2019, an Ethereum foundation employee named Virgil Griffith was arrested by the US government for presenting at a blockchain conference in North Korea.
Launch and Milestones
Several codenamed prototypes of the Ethereum platform were developed by the Ethereum Foundation as part of their Proof-of-Concept series. “Olympic” was the last prototype and public beta pre-release. The Olympic network provided users with a bug bounty of 25,000 Ether for stress testing the limits of the Ethereum blockchain. In July 2015, “Frontier” marked the tentative experimental release of the Ethereum platform. Since the initial launch, Ethereum has undergone several planned protocol upgrades, which are important changes affecting the underlying functionality and/or incentive structures of the platform. Protocol upgrades are accomplished using a hard fork. The latest upgrade to Ethereum was “Muir Glacier”, implemented on January 01, 2020.
How does Ethereum work?
The main feature of Ethereum blockchain is to provide a platform for the development of smart contracts which in turn facilitates the development of decentralized applications on the Ethereum Blockchain.
Ethereum essentially improved upon the Bitcoin blockchain through its ‘Turing-complete’ programming language to allow developers to make applications that run on the Ethereum blockchain.
The essence of how Ethereum works can be explained by throwing light on the following two parts:
- The Ethereum Blockchain
- The Ethereum Virtual Machine (EVM)
The Ethereum blockchain, like any other blockchain, is a chain of blocks that contains some information. Each block contains some data, a hash, and the hash of the previous block. If anyone aims to change the data inside any block, the hashes would not match and the chain would break. Such a discrepancy would be certainly visible to everyone in the network and thus a consensus will not be achieved.
The network here means a connection of nodes. There are two main kinds of Ethereum networks that people use – MainNet and TestNet. There are other private and test networks that are not used widely. The Ethereum TestNet is used to test new developments in the Ethereum protocol and when these tests are successful, the robust developments are then launched onto the MainNet.
Ethereum is more complicated than Bitcoin.
Bitcoin stores a list of transactions on the Bitcoin blockchain. Simply put, all the activities of people that exchange Bitcoin with each other are recorded on the blockchain.
Ethereum, on the other hand, also stores a list of Ether transactions but in addition to that, it stores the most recent state of the Smart Contracts (something like code snippets). This makes Ethereum a programmable blockchain.
So instead of putting only the transactions on the blockchain, Ethereum puts a ‘computer’ on the blockchain which has a series of operations. These operations can be transactions of Ether or votes done by the public through a smart contract or anything else. (This is a very broad overview of how the Ethereum blockchain is different than that of Bitcoin; in its essence, it’s much more complex).
The Ethereum Virtual Machine, Like any other programming language, Ethereum also has its virtual machine called the Ethereum Virtual Machine or the EVM, for short.
The main aim of EVM is to execute a smart contract code. It executes the untrusted code and provides network security. It is worth noting that the EVM is separate from the MainNet and thus it happens to be the perfect testing grounds for developers to test their smart contract code and avoid any catastrophic incidents later. It can easily be used as a means of learning to develop smart contracts too as all the operations done on the EVM do not affect the blockchain.
6 Important Question About Ethereum
- How many ethers are there?
As of February 2020, the total number of ether is approximately 110 million ether.
Unlike Bitcoin tokens, the production schedule of Ethereum tokens was not intentionally specified at launch. Bitcoin aims to preserve value by limiting supply and slowly reducing the presence of a new amount of coins. On the other hand, Ethereum aims to provide a basis for decentralized applications (DApps). Since it is not clear which type of token production schedule would best suit this purpose
2. What is an Ethereum token?
A large part of Ethereum’s appeal lies in the users’ ability to create their assets on the chain, which can be stored and transported like Ether. The rules that govern them are defined in smart contracts allowing developers to set specific factors regarding their tokens. This can include how many to subtract, how to subtract it, whether they are divisible, whether each is fungible, and more. The most prominent technical standard that allows the tokens to be created on Ethereum is called ERC-20 – which is why tokens are commonly known as ERC-20 tokens.
The token functionality provides innovators with ample space to try apps at the forefront of finance and technology. From issuing unified tokens that act as an in-app currency to producing unique tokens backed by physical assets, there is a great deal of design flexibility. It is quite possible that some of the best use cases for creating an easy and streamlined token are not yet known.
3. How do I buy Ethereum?
Quite simply, all you need is an internet connection and your electronic currency wallet
Go on one of the famous currency platforms, Binance, for example, and buy the quantity you want to buy by selecting the payment frequency and transferring the Ether currency that you purchased later to your wallet.
4. What happens if I lose my Ether?
Since there are no banks involved, you are responsible for your own money. You can store your currencies in one of the exchanges or your wallet. It is important to note that if you are using your wallet you should take care of the initial phase. Keep it well because you need it to get your money back in case you lose access to your wallet.
5. Are Ethereum transactions confidential?
No. All transactions added to the Ethereum blockchain are publicly visible. Although your real name is not on your Ethereum address, the observer may be able to link it to your identity through other methods.
6. How do I store my ether?
There are many options for storing your coins
In general, one of the storage solutions could be that you assign your coins to a third party (such as an exchange). In this case, you need to log into the custody platform to perform transactions with your digital assets.
The other solution is the exact opposite – you gain control of your own money by using a cryptocurrency wallet that contains cryptographic keys that allow you to access your assets on the blockchain. Remember it is important to keep a backup copy of your initial statement when using a non-wallet.
White Paper· ethereum/wiki Wiki · GitHub”