Even those who are not familiar with blockchain are likely to have heard about Bitcoin, the cryptocurrency and payment system that uses the technology. Another platform called Ethereum, that also uses blockchain, is predicted by some experts to overtake Bitcoin this year.
In late 2013, Vitalik Buterin was working on the Mastercoin project. Being an early Bitcoin enthusiast, he envisioned blockchain as more than just a payment system. In November 2013, Buterin wrote a white paper proposing Ethereum, and the idea garnered significant interest.
The concept began to become a reality, and the Ethereum core team consisted of Vitalik Buterin, Mihai Alisie, Anthony Di Iorio, and Charles Hoskinson. Buterin presented at a Bitcoin conference held in Miami between 25th-26th January, 2014. The participants gave him a standing ovation and a lengthy Q&A session followed.
A presale was planned on February 1st, 2014, but this was dropped. A crowdfunding campaign then went live from July 20th to September 2nd, 2014. A total of 60 million Ether (the primary cryptocurrency of the Ethereum platform) were created to sell; this is also known as the Genesis issuance, as these are the first ever Ether tokens created.
The price was 2,000 Ether (ETH) = one Bitcoin (BTC) for the first 14 days of the sale. The price then changed to 1,339 ETH per BTC for the remainder of the campaign.
The first two weeks of the campaign sold over 50 million tokens. 31,500 Bitcoins were raised through the crowdsale, and 12 million ETH were created, which would be used as funding for the development and other activities.
History of the Ethereum Foundation
A non-profit organisation called the Ethereum Foundation was formed on July 6th, 2014 and registered in Zug, Switzerland. This organisation governs the Ethereum project.
The four phases of Ethereum
The Ethereum project consists of four major phases.
Frontier (July 30th, 2015):
Olympic, a test version of Frontier, was released on May 9th, 2015. The purpose was to test the project and reward those who found issues. The testing was done in four areas.
Virtual machine usage — responsible for executing smart contracts
General punishment — stress testing the platform with smart contracts
Each category had a main prize of 2,500 ETH and many smaller prizes. After the Olympic testing, Frontier was released. With that release, the developers were able to build distributed applications and started mining Ether.
Homestead (March 14th, 2016):
The platform was then enhanced with Ethereum Improvement Proposals (EIP). The upgrade helped the future updates and improved the speed of transactions. The Ethereum Foundation also began to accept funding from various sources in Ether apart from the first treasury created in the beginning.
Metropolis (October 16th, 2017):
This phase includes two upgrades.
1. Byzantium (October 2017)
2. Constantinople (Scheduled for early 2019)
The platform improved furthermore in terms of scalability, transaction processing, and security through the Byzantium upgrade, which was also a hard fork. Moreover, the mining reward was decreased to 3 ETH from 5 ETH. The Constantinople upgrade is scheduled for release in early 2019.
In this phase, the Ethereum project will move from proof of work (PoW) to proof of stake (PoS), which uses the Casper consensus algorithm. PoS has significant benefits over PoW in terms of security and being resistant to attacks, and also boosts transaction processing times.
What are the advantages of Ethereum?
Proponents of Ethereum believe its main advantage over Bitcoin is that it allows individuals and companies to do much more than just transfer money between entities leading Bloomberg to write it’s “the hottest platform in the world of cryptocurrencies and blockchains” and companies such as JPMorgan Chase, Intel and Microsoft to invest in it.