A Brief History of Ethereum

A Brief History of Ethereum

Early days of Ethereum

Ethereum began as an idea of a platform to build decentralized applications. Vitalik Buterin, the founder of Ethereum, started working on the idea behind Ethereum around 2013. In 2014, he founded the company in Switzerland where he funded the project with an ICO. Vitalik and his team were able to raise around $12 Million from the ICO, with which they funded the project.

With the Ethereum ICO however, there were investor concerns about security and scalability in the long run. Fortunately, the startup was successful and is now one of the leaders in the cryptocurrency market.

Ethereum is now an open source platform which allows users to build the next generation of decentralized applications. It’s an abstract idea that the governing authority in a company or financial institutions can be eliminated. By building trust due to the high visibility of the workings rather than having to trust companies blindly.

The essence of the project is using the blockchain technology which works in a peer to peer fashion, thus eliminating the need for a middleman or the central authority

Most applications today are centralised and you need to trust the central authority which is in charge of the privacy or safety of your information. In a blockchain based service, your private information, funds, and content all belong to you and therefore they’re as secure as they can be.

Why Ethereum is different

Not only that, you can actually carry out an ICO on the internet for your next big idea! An ICO is like an initial public offering where companies who would like to raise funds generate tokens that represent a share in the company. Remember initial public offering?

It’s the same concept but the company that wants to raise funds just creates a specific token which represents a share. The company then sells this token to the people who would like to buy them. The token will represent a share and their investment will grow if the project is successful.

There’s a project that very recently raised over $150 million in an ICO. And remember, it’s a token that’s based on the Ethereum blockchain. So people trust the platform enough to raise $150 million, you can be confident to invest.

The banking industry is another one of the markets which will get affected by the Ethereum blockchain revolution. The Ethereum blockchain method of payment reduces post-trade processing time thus increases efficiency and saves a lot of money. In an interview, Thomas Olsen claims that the global financial markets could save over $15 billion and $30 billion a year by adopting blockchain payment methods. It’s one of the best ways for consumers to transfer, send and receive money. The banking sector is well established today and is starting to understand how they can provide higher value to customers using blockchains.

The Hard Fork 

The hard fork was a time in Ethereum’s life that was quite rocky, investors were unsure of the company’s success in the long run. So, what is a hard fork?

Think of a hard fork like an implementation of new rules in the blockchain. Some people might resent this change of rules so they would stick with the old way, and some will move on and use the rules. In the case of Ethereum, it’s a hard fork which is an update to the software. People who think that the independence of the blockchain is the most important continue to use the older version. These people also believe that if Ethereum can change some of the rules, why wouldn’t they do so much more often?

The hard fork happened because of the DAO. The DAO stands for a decentralized autonomous organization and was supposed to be an autonomous VC fund. This fund was supposed to invest in the crypto and decentralized world. When the DAO was started, it was able to raise over $150 million in an ICO at the price of $10 for Ether. At $20 per Ether, the total investment would have been over $250 million.

The Hack

Around June 2016, users started to notice that funds were disappearing from the DAO. They also saw that the overall ETH balance of the DAO smart contract was running low.

Since the DAO is an application on the Ethereum blockchain, the attacker was able to siphon off funds to an account by exploiting a bug in the application. Pretty quickly, the situation was under control and the hacker stopped taking Ether from the DAO.

After this issue, the community realized that it was time to implement some new regulations which would mitigate such issues in the future. The hard fork had widespread support, over 89% of the users voted for it.

A new blockchain was created and thus Ethereum Classic was born. The latter isn’t the new blockchain, it refers to the minority that still stayed on the old block chain because they didn’t accept the change.

Now, due to widespread disagreements, the Ethereum community split. They kept the old blockchain valid and mineable, in order to satisfy the users who didn’t believe in the hard fork.

Crashes, rumors, and losses

Most people hear about Ethereum, or Ether, the currency which is now working wonders in the digital currency market. It’s true, Ethereum has risen from $0.10 to around $400 now and a lot of mainstream media is calling it a bubble. This might be true, but the bubble would never burst because of the advancements that blockchain technology is generating. Since Ethereum is essentially a platform to build applications, the different apps being created are revolutionary and might change the world. That’s why Ethereum, the currency, is one of the safest investments in digital currency today.

Quite recently, there was a rumor of the founder Vitalik Buterin’s death on 4chan. This apparent declaration of death was a strong enough influence to shift the market by over $50. The rumors were dispelled by the founder when he uploaded a selfie to his official Twitter. Since traders were quite reactive to this situation, they became much more easily influenceable. Just two days later, a multi-million dollar trade brought the price of Ethereum down to $0.10 from $380. This resulted in many losses, several traders claimed to have lost over $5000 on Reddit.

Even though the currency experienced a major flash crash, the currency recovered in a few hours. That’s a testament to how strong the community around Ethereum is. So you can be pretty sure that Ethereum is a great investment in the long run.

Expect to see blockchains everywhere!

As you just saw, Ethereum has had its fair share of issues in the past. Even though it almost died several times, the currency stayed strong due to the strong community. In the near future, you can expect to see a lot of applications that choose to work on the Ethereum blockchain. So Ethereum won’t just be the currency, it will be the building blocks for applications of the future. It’s like being on the AppStore, except you’re on the Ethereum blockchain. Unlike the AppStore, anybody on the blockchain can share the applications that they built.

If you’re interested in Ethereum, check out our guide to the best Ether Brokers in 2017.

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About Article Author

Martina Kelowsky
Martina Kelowsky

Currently working on her Master Degree in Economics & Computer Science she lives in Russia. She is a Bitcoin Enthusiast since 2013 and Investor in various ICO since 2014. She aims to democratize a future where money is decentralized and transaction anonymous.

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