Summary

There are two aspects to Ethereum. There is the network, which functions as an open source, blockchain based platform calibrated for the creation of decentralized smart contracts, and an operating system. Like transaction based state transitions, the Ethereum network is a modified version of the Nakamoto consensus. Then there is Ether the cryptocurrency, which exists on the Ethereum blockchain. Ether the token is transferrable across accounts on the Ethereum blockchain, and is used to accommodate participant mining nodes for performing proof-of-work.

Distribution

Available circulating supply is around 98 million Ether as of 2018. Of the current circulating supply, around 11.9 million Ether were pre-mined during the crowd sale in 2013.

Company

Mission

Vitalik Buterin proposed Ethereum because he argued that Bitcoin had no common scripting language to develop applications. He failed to gain majority agreement so he proposed an entirely new project with a scripting language. The goal is to provide a Turing-complete virtual machine, the Ethereum Virtual Machine (EVM). This system functions by executing scripts by leveraging public nodes across the world. ‘Gas’ which functions as an internal pricing mechanism is used to move resources across the network and prevent/reduce spam.

Early Development

Ethereum was first proposed in 2013 by Vitalik Buterin in Bitcoin magazine as a goal towards building decentralized applications. The white paper was released in late 2013. In 2014, the core team consisted of Vitalik Buterin, Anthony Di Iorio, Mihai Alisie, and Charles Hoskinson.

The Ethereum Foundation was set up in 2014 through a Swiss company, Ethereum Switzerland GmbH (EthSuisse). This was followed by the Ethereum foundation not long after. The crowd sale went live in 2014, with people buying-in to the Ethereum project with Bitcoin.

Team

Ethereum is currently run by Vitalik Buterin, Gavin Wood, and Jeffery Wickle as the three directors of Ethereum Suisse. The permanent development arm of Ethereum Suisse is ETH DEV.

Ethereum Founders

Source: medium

Growth

2013

Vitalik Buterin proposed the Ethereum project and attempted to gain consensus through his contacts at Bitcoin Magazine. He released the Ethereum white paper not long after.

2014

The Ethereum project is formally announced at the American Bitcoin Conference in Miami, Florida. Vitalik worked closely with Dr. Gavin Wood, who published the Ethereum yellow paper, which works out in detail the technical specifications that comprise the Ethereum Virtual Machine. The Ethereum based Swiss company Ethereum Switzerland GmbH and the Ethereum foundation were set up in 2014 to deal with the legalities of crowd-funding for the project. The crowd sale was conducted over 42 days starting in July of 2014. After the crowd sale, permanent development management was set up under a non-for-profit called ETH DEV. The ETH DEV team organized DEVCON-0 in November 2014 in Berlin, Germany.

2015

In April 2015, the DEVgrants program was announced offering bug-bounties for stress-testing the Ethereum network. The 9th proof-of-concept (POC) test net called Olympic was released in 2015. Ethereum’s security audit, which began in 2014, carried over into the first half of 2015. Developers started to create and launch decentralized applications on the Ethereum blockchain in 2015 through the Ethereum Frontier network. DEVCON-1 took place in London, United Kingdom in November 2015. Large scale enterprise companies like Microsoft and UBS were in attendance. The Microsoft announcement that it would launch Ethereum as a feature of its proposed blockchain-as-a-service platform brought the technology to the mainstream.

2016

A decentralized autonomous organization called The DAO raised $US 180 million in 2016 during its crowd-sale conducted on the Ether network. In June 2016, the DAO was breached, with $US 50 million in Ether was claimed by an anonymous entity. The Ethereum network forked and split into two – Ethereum, and Ethereum Classic. Ethereum forked two more times in 2016.

2017

Metropolis 1: Byzantium was launched in 2017 to provide greater flexibility to smart contract developers and reduce the overall complexity of the Ethereum Virtual Machine. Byzantium supports zk-SNARKs (zcash), and the first zk-SNARK transaction occurred on the test-net in 2017. The price of Ethereum soared to a record close of $US 1300/Ether as the cryptocurrency enjoyed price inflation along with Bitcoin and other key movers in the crypto market. Vitalik and developer Joseph Poon announced plans for a ‘child blockchain’ scaling system called Plasma which is proposed to attach smaller blockchain applications to the ‘parent blockchain.’ Further developments and plans to improve and maintain the Ethereum blockchain were further announced at DEVCON-03 in 2017.

ICO

The Ethereum initial coin offering (ICO) took place between July 20-September 2 2014, lasting a total of 42 days. The ICO raised a total of 31.5 BTC (Bitcoin) or $US 18.4 million, making it one of the top 10 highest grossing ICOs to date.

Ethereum Crowdsale 2014

Source: coindesk

Specifications

Initially, the price of ether was discounted to the sum of 2000 ETH = 1 BTC (Bitcoin). This went on for 14 days until the rate decreased gradually to a final rate of 1337 ETH/BTC.

Distribution Model

Over 50 million Ether were sold during the initial crowd sale internationally.

Technical Design

Ethereum is designed to provide enterprise level scalability in the construction of decentralized applications (DApps). This is conducted on a consensus-based virtual machine called the Ethereum Virtual Machine. This protocol handles the internal state and required computation. The Ethereum network supports two types of accounts. Externally Owned Accounts (EOAs) and contract accounts. Externally owned accounts have their own private key, and control of this private key allows the user to send Ether messages. Contract accounts have their own code, and are governed by code.

Algorithm

Ethereum uses Ethash, a variant of the Keccak-256 proof-of-work algorithm. Ethereum operates using state transitions, which does not rely on unspent transaction outputs (UTXOs) the way Bitcoin or other ledgers do. These transitions are not stored on the blockchain, but in a separate Merkle Tree.

Differences between Ethereum and Bitcoin:

• Ethereum has a block time of 14-15 seconds compared to 10 for Bitcoin
• Ethereum mining generates coins at a consistent rate, where Bitcoin’s rate halves every 4 years
• Ethash vs SHA-256 algorithm
• Fees for transactions are based on required computing power, bandwidth and storage needs. They are measured in gas, whereas for Bitcoin they are measured in bytes.
• Gas units of Ethereum can be priced according to transaction specifications, measured in Gwei, whereas Bitcoin measures in Satoshis.
• Ethereum has lower transaction fees

Ethereum Virtual Machine

The EVM is the runtime environment for Ethereum smart contracts. The EVM is isolated and runs separate from the rest of the network or file systems. All nodes in the Ethereum network run the same EVM implementation and execute the same instructions. The EVM is scalable across scripting languages, implanted in C++, Haskell, Go, Java, Java Script, Python, WebAssembly, Rust, and Ruby.

Simple EVM Flow Diagram

Source: coindesk

Smart Contracts

Different computer languages can be used to input functionality on Ethereum smart contracts. They act as a collection of code (functions) and data (state). Contracts communicate by passing messages between themselves as well as performing nearly Turing-Complete computations. They exist on the Ethereum Virtual Machine in bytecode. Aside from JavaScript, Serpent, or C languages, there is also a research based development language called Viper planned for smart contract compatibility. Smart contracts can be public or private.

Applications

Decentralized applications permissioned on the Ethereum network cover a wide array of topics and proposed designs. Because they are interoperable with the EVM and smart contract compatibility, they can be used for everything from finance and transactions, to produce management solutions, and electricity pricing. Some suggested use-cases are also impossible. The Ethereum network led the 2017 initial coin offering (ICO) wave with over 50% of ICOs launched on the Ether blockchain. 250 DApps are live as of January 2018.

Different use-cases for decentralized Ethereum applications include:

• Digital assets pegged to the value of fiat currencies like stablecoin
• Digital assets pegged to the value of gold like Digix
• Digital rights management for musicians
• Predictive market platforms like Augur, Gnosis, and Stox
• New wave of social media platforms that leverage economic incentives
• Online gambling platforms like Etheroll
• Video games, notably the 2017 CryptoKitties

Fungibility

All DApps projects released on the Ethereum network are referred to as Ethereum tokens. The interoperability of the EVM, smart contract compatibility, and the gas required to conduct transactions and relay messages across the network is self contained on the Ethereum blockchain. Ether the main token of the Ethereum network is also hot or cold wallet compatible and the token is tradable across different cryptocurrency exchanges like Binance or Coinbase.

Economics

Ether, the token fungible across the Ethereum network is a digital currency with the second highest market capitalization today. Because there is no formal recognition of cryptocurrencies as legal tender, Ether remains tradable as a form of cryptographic stock, or commodity on exchanges, similar to Bitcoin. Tokens launched on the Ether network during initial coin offerings carry a different definition since the majority of these tokens offer passive-dividend paying potential, or depend on the issuing company’s board to develop the use-case based on the crowd fund sale. These forms of tokens are classified as securities instruments under varying jurisdictions include the US through the Securities Exchange Commission (SEC) , the Ontario Securities Commission (OSC), the UK Financial Conduct Authority (FCA), and other jurisdictions like Japan, the European Union, Singapore, and the Philippines.

Adoption

Since inception, Ethereum has earned its place as the second highest grossing cryptocurrency by market capitalization, with its permissioned ledgers attracting interest from major financial and technological institutions around the world.

Financial Institutions

Ethereum is attracting interest from financial institutions like JP Morgan Chase, Credit Suisse, and UBS. JP Morgan and Banco Santander unveiled their Blockchain-as-a-Service platform for securities settlement and trading solutions through the Ethereum Enterprise Alliance in 2017. The JP Morgan platform is called Quorum. IBM is testing its Hyperledger project, utilizing the Ethereum blockchain to simplify supply-chain management. Innovate UK, a British-based start-up received almost 280 000 pound sterling for its cross-border payments prototype to be launched on the Ethereum network. In 2017, the Royal Bank of Scotland unveiled its plans to launch an Ethereum-based clearing house and settlements platform.

Pop-Culture / Community

Ethereum has a huge online community, especially because it is the second highest ranking cryptocurrency.

Social Impact

Ethereum’s mission to position itself as the backbone of internet 3.0 means that it its social impact is yet to be determined. A lot of the proposed projects on the Ether test-net and DApps that have already been launched in beta could fundamentally change the way people do business and their relationship towards the internet, social media, supply chain, energy source pricing, gaming, and online gambling.

Forks

In the case of Ethereum, the first hard fork occurred due to the DAO incident of 2016. All tokens launched as part of ICO’s on the Ethereum blockchain are also considered Ethereum tokens, but do not constitute forks.

All Ethereum forks are listed below:

• EthereumFog (ETF)
• Ethereum Modification (EMO)
• EtherZero (ETZ)
• EtherInc (ETI)
• EtherBTC (ETHB)
• Ethereum Classic (ETC)