With price action that did not catch up to the glorious ‘world computer’ hype, and seemingly failing or dormant development, Ethereum is still number two in terms of market cap of the total crypto space. Not the fastest or the newest tech, but definitely the most trusted, as a lot of capital finds its way and even never leaves the Ethereum mainnet.
Today we take a look at the Ethereum protocol, which serves as a foundation for almost any dApps, web 3 community, and assets known and loved by anyone in crypto.
Ethereum functions as a decentralized platform where individuals can create accounts, explore ‘decentralized’ applications, or develop their own apps without reliance on a central authority. It is the protocol where the first applications in crypto were built on and became popular.
The project was conceived in 2013 by Russian-born programmer Vitalik Buterin, who was only 19 and initially co-founded Bitcoin Magazine but soon recognized the limitations in Bitcoin’s underlying technology.
This led Buterin to publish the Ethereum whitepaper in late 2013, where he propesed a decentralized platform capable of running self-executing smart contracts without intermediaries.
To fund Ethereum’s development, Buterin and a diverse founding team including Gavin Wood, Charles Hoskinson, and Joseph Lubin conducted one of the earliest and most successful Initial Coin Offerings from July to September 2014, raising over $18 million by selling 60 million Ether (ETH) tokens.
Ethereum’s mainnet officially launched on July 30, 2015 with the “Frontier” release, marking the beginning of the operational Ethereum blockchain, which represented a breakthrough moment in blockchain history.
The Ethereum Foundation (EF) recently announced its first-ever public layoffs and a major reorganization of its protocol R&D division, now simply called “Protocol.” Around a dozen team members were let go, and the new team will focus on Layer 1 scalability, data availability, and user experience.
it’s a delayed response to longstanding criticism that EF is too slow, opaque, and centralized for something claiming decentralization. Even with Vitalik taking a backseat, the lines between “visionary” and “decision-maker” remain blurred. Respected researchers like Danny Ryan and Eric Conner have already left, and former Executive Director Aya Miyaguchi has been moved to a more symbolic “Chair” role – viewed by many as a quiet demotion.
The Ethereum Foundation is at a crossroads. What happens next could reshape not just Ethereum’s future, but the governance model for the entire crypto space. Will EF adapt and evolve, or will new, more agile structures emerge to lead the way? Only time will tell.
This review of Ethereum (ETH) was created for informational purposes. This article is not intended for promotion.
Often described as the world’s computer, Ethereum extends beyond traditional computing boundaries. We take a look at its influence of big proportions, its features and the way it works…
First of all, Ethereum is completely open source. This means that Ethereum’s code is publicly accessible. It is not hidden or proprietary, which
allows developers and users to review, modify, and enhance it. This also means anyone can copy the code and make their own versions of it. See the proliferation of the ma
ny layer 2 chains that build on this open source code.
One of the most important features of the ‘world computer’ are the smart contracts that are ‘nothing more’ than self-executing programs that automatically perform actions or transactions when predefined conditions are met, eliminating the need for intermediaries or anyone that needs to press a button.
Although cryptographer Nick Szabo introduced the concept of smart contracts in the 1990s, Ethereum was the first platform built to support complex, programmable smart contracts at scale. But its true innovation was its Ethereum Virtual Machine (EVM), which allows developers to write and deploy Turing-complete smart contracts in a secure, decentralized manner.
While Bitcoin included basic scripting for conditional transactions, it was not designed for general smart contracts.
We can all acknowledge that without the first ‘smart contract blockchain’ Ethereum, Web 3.0 did not happen, or not in the way we saw it happen. At the forefront of this new (financial) internet, Ethereum promoted a different way of building and out of this many ideas followed.”
One of them was Decentralized Finance, or DeFi, which refers to financial services that are available on a public decentralized blockchain network. It allows people to lend or borrow funds from others, speculate on price movements on a range of assets using derivatives, and earn interest in savings-like accounts, also known as yield farming.
Examples of DeFi in Action:
Also DAOs would not be possible if Ethereum was not a thing. As they are fully automated, blockchain-based organizations that operate based on the rules encoded in smart contracts.
Although many questions arise when looking at historical performance of DAOs, the members of a DAO can (in theory) vote on decisions like fund allocation and rule changes without a central management structure. The ‘autonomous’ part is still not there yet, but maybe with the rise of AI, it could be soon.
In 2017, Ethereum founder Vitalik Buterin decided to transition Ethereum from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. This transition is known as “The Merge.”
Under proof-of-work, miners use computational power to validate transactions and create new blocks. But this led to problems like:
Many doubted whether transitioning between consensus mechanisms on a running blockchain was even possible. But Buterin pushed forward firmly in the belief that it was the way to go.
The Merge was successfully activated on the Ethereum mainnet on September 15, 2022 and since then the blockchain is secured by validators who stake ETH instead of miners. This slashed the network’s energy consumption by over 99.95% and made it ready for more updates.
In PoS, ETH holders can become validators by staking coins to secure the network. Validators are chosen to propose and validate blocks based on the total ETH they have staked (minimum 32ETH).
As there is no need for expensive specialized mining equipment, more individuals can participate in consensus by staking, enhancing decentralization.
A significant event in Ethereum’s history is the 2016 hard fork, which led to the split between Ethereum and Ethereum Classic. This occurred after a substantial theft of Ether due to a vulnerability in a third-party project’s smart contracts.
The majority of the community elected to reverse the theft by modifying the blockchain, while a minority maintained the original chain, leading to the creation of Ethereum Classic. So in essence Ethereum is not the first version of Ethereum.
While Ethereum and Bitcoin are often seen as direct competitors, they serve different purposes. Bitcoin has the narrative of a store of value, akin to digital gold, primarily used as a hedge against inflation.
In contrast, Ethereum is viewed more as an investment in the infrastructure for decentralized finance and web 3 in general.
But, the comparison has been made a lot. With proponents of Ethereum seeing it could take over Bitcoin in terms of market cap (called the flippening).
If we look at the price action or dominance of the two we see that Bitcoin dominance is rising while Ethereum’s influence is waning.
Ethereum does not have a fixed maximum supply of ETH, meaning the total number of ETH in circulation is uncapped. New ETH is continuously minted as block rewards to validators (previously miners) at a rate of approximately 2 ETH every 15 seconds. This ongoing issuance results in an inflationary supply, with the current annual inflation rate estimated at around 2.7%.
However, Ethereum implements a mechanism called EIP-1559 token burning, which helps offset the inflationary effect of new ETH issuance. With this mechanism, a portion of the transaction fees paid by users is burned or permanently removed from circulation. The amount of ETH burned depends on the network demand, as higher usage leads to more fees being burned.
ETH plays a crucial role in the Ethereum ecosystem as the fuel for executing smart contracts and running decentralized applications (dApps) on the Ethereum blockchain.
When users interact with smart contracts or use dApps, they need to pay transaction fees in ETH to cover the computational costs and incentivize validators to process the transactions.
In addition to powering smart contracts and dApps, ETH is also used to pay gas fees for regular transactions on the Ethereum network. Gas fees are denominated in ETH and are paid by users to compensate for the computational resources required to validate and include their transactions in blocks.
Furthermore, ETH is an essential component of Ethereum’s proof-of-stake (PoS) consensus mechanism, which is used to secure the network. Users can stake their ETH to become validators and participate in the process of creating and validating new blocks.
Ethereum’s token allocation strategy at its launch in 2014 had the following numbers:
During Ethereum’s 2014 initial coin offering (ICO), ETH likely met the criteria for a security under the Howey Test, as investors pooled funds expecting profits from the Ethereum Foundation’s efforts.
However, by 2018, the SEC concluded that Ethereum had become sufficiently decentralized, meaning ETH was no longer considered a security. The CFTC also recognized ETH as a commodity, allowing regulated futures trading and reinforcing its non-security status.
In 2023, the SEC secretly reopened an investigation into ETH’s status, causing uncertainty and a lawsuit from Consensys, Ethereum’s major developer. However, in June 2024, the SEC’s Enforcement Division officially closed its investigation into Ethereum 2.0 and decided not to pursue charges, effectively reaffirming ETH’s non-security status.
Ethereum has been THE leading blockchain platform for DeFi, in terms of applications and Total Value Locked (TVL), even as the numbers show some declines from recent highs.
With a TVL of $59.655 billion, Ethereum’s dominance in the DeFi space is still undeniable. The network boasts an impressive 1,336 DeFi protocols running on its platform.
The Ethereum network experiences a high level of activity and value transfer, as demonstrated by its 24-hour on-chain transaction volume of $1.695 billion.
When we look at the top protocols on Ethereum who make DeFi on it happen we see the following ones.
For more information on DeFi, please read our page on decentralized finance.
A lot can be said for Ethereum. Despite some declines from its highs, both price-wise and in terms of TVL, Ethereum is still king in the decentralized finance space. Most of the liquidity is there and it is the most trusted layer for big money.
They were the ground layer for where it all started, think of stablecoins, staking (derivatives), lending markets and decentralized exchanges. It all started on Ethereum.
As the hub for blockchain innovation, Ethereum hosts numerous high-caliber projects, making it the network of networks. But will it stay this way?
While some argue that Ethereum mainly rode on Bitcoin’s coattails and derived its value from the crypto hype cycle and now loses traction to newer blockchains like Solana or its own L2 solutions, we cannot know what the future will bring for everyone involved in Ethereum.
However, when we look at the numbers we see that Ethereum still has the biggest developer community building decentralized apps and remains the second largest crypto, while the only thing that is not beneficial is the price of ETH.
Ethereum’s journey from a visionary whitepaper to a transformative force in the world of decentralized finance and Web 3.0 is nothing short of remarkable. Despite facing challenges and competition from newer blockchains, Ethereum remains the go-to platform for developers and big money.
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