Ethereum
Ethereum is a decentralized blockchain with smart contract functionality. Ether (abbreviation: ETH) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. It is open-source software.
Overview
Ethereum is a decentralized blockchain with smart contract functionality. Ether (abbreviation: ETH) is the native cryptocurrency of the platform. Among cryptocurrencies, ether is second only to bitcoin in market capitalization. It is open-source software. Ethereum was conceived in 2013 by programmer Vitalik Buterin. Other founders include Gavin Wood, Charles Hoskinson, Anthony Di Iorio, and Joseph Lubin. In 2014, development work began and was crowdfunded, and the network went live on 30 July 2015. Ethereum allows anyone to deploy decentralized applications onto it, which anyone can then use. Decentralized finance (DeFi) applications provide financial instruments that do not directly rely on financial intermediaries like brokerages, exchanges, or banks. This facilitates borrowing against cryptocurrency holdings or lending them out for interest. Ethereum allows users to create fungible (e.g. ERC-20) and non-fungible tokens (NFTs) with a variety of properties, and to create smart contracts that can receive, hold and send those assets in accordance with the contract's immutable code and a transaction's input data. On 15 September 2022, Ethereum transitioned its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS) in an update known as "The Merge", which cut the blockchain's energy usage by over 99%.
Founding (2013–2014)
Ethereum was initially described in late 2013 in a white paper by Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, that described a way to build decentralized applications. Buterin argued to the Bitcoin Core developers that blockchain technology could benefit from other applications besides money and that it needed a more robust language for application development that could lead to attaching real-world assets, such as stocks and property, to the blockchain. In 2013, Buterin briefly worked with eToro CEO Yoni Assia on the Colored Coins project and drafted its white paper outlining additional use cases for blockchain technology. However, after failing to gain agreement on how the project should proceed, he proposed the development of a new platform with a more robust scripting language—a Turing-complete programming language—that would eventually become Ethereum. Ethereum was announced at the North American Bitcoin Conference in Miami, in January 2014. During the conference, Gavin Wood, Charles Hoskinson, and Anthony Di Iorio (who financed the project) rented a house in Miami with Buterin at which they could develop a fuller sense of what Ethereum might become. Di Iorio invited friend Joseph Lubin, who invited reporter Morgen Peck, to bear witness. Peck subsequently wrote about the experience in Wired. Six months later the founders met again in Zug, Switzerland, where Buterin told the founders that the project would proceed as a non-profit. Hoskinson left the project at that time and soon after founded IOHK, a blockchain company responsible for Cardano. 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 Wilcke were added in early 2014 as founders." Buterin chose the name Ethereum after browsing a list of elements from science fiction on Wikipedia. He stated, "I immediately realized that I liked it better than all of the other alternatives that I had seen; I suppose it was that [it] sounded nice and it had the word 'ether', referring to the hypothetical invisible medium that permeates the universe and allows light to travel." Buterin wanted his platform to be the underlying and imperceptible medium for the applications running on top of it.
Development (2014)
Formal development of the software underlying Ethereum began in early 2014 through a Swiss company, Ethereum Switzerland GmbH (EthSuisse).The idea of putting executable smart contracts in the blockchain needed to be specified before it could be implemented in software. 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 founded. Development was funded by an online public crowd sale from July to August 2014, in which participants bought 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. The Foundation funded multiple teams in different cities building three separate implementations of the protocol: Geth (Go), Pyethereum (Python), a C++ implementation, and also Swarm (decentralized file storage), Mist Browser (A wallet, browser and a user interface for smart contracts, now defunct) among other projects. The intended purpose of the three distinct implementations would be so that if one of them had a bug, the other two could be used as a comparison.
Launch and the DAO event (2014–2016)
Several codenamed prototypes of Ethereum were developed over 18 months in 2014 and 2015 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 gave users a bug bounty of 25,000 ether for stress-testing the Ethereum blockchain. On 30 July 2015, "Frontier" marked the official launch of the Ethereum platform, and Ethereum created its "genesis block". The genesis block contained 8,893 transactions allocating various amounts of ether to different addresses, and a block reward of 5 ETH. Since the initial launch, Ethereum has undergone a number of planned protocol upgrades, which are important changes affecting the underlying functionality and/or incentive structures of the platform. Protocol upgrades are accomplished by means of a hard fork. In 2016, a decentralized autonomous organization called The DAO—a set of smart contracts developed on the platform—raised a record US$150 million in a crowd sale to fund the project. Emin Gün Sirer, Vlad Zamfir and Dino Mark had written a paper called A Call for a Temporary Moratorium on The DAO in which they described in which way the DAO might be vunerable to attacks. The DAO was exploited in June 2016 when US$50 million of DAO tokens were stolen by an unknown hacker. The event sparked a debate in the crypto-community about whether Ethereum should perform a contentious "hard fork" to reappropriate the affected funds. The fork resulted in the network splitting into two blockchains: Ethereum with the theft reversed, and Ethereum Classic which continued on the original chain.
Continued development and milestones (2017–present)
In March 2017, various blockchain startups, research groups, and Fortune 500 companies announced the creation of the Enterprise Ethereum Alliance (EEA) with 30 founding members. By May 2017, the nonprofit organization had 116 enterprise members, including ConsenSys, CME Group, Cornell University's research group, Toyota Research Institute, Samsung SDS, Microsoft, Intel, J. P. Morgan, Cooley LLP, Merck KGaA, DTCC, Deloitte, Accenture, Banco Santander, BNY Mellon, ING, and National Bank of Canada. By July 2017, there were over 150 members in the alliance, including MasterCard, Cisco Systems, Sberbank, and Scotiabank. In 2024, Paul Brody, EEA board member for EY, was announced as the new chairperson, and Karen Scarbrough, board member for Microsoft, as the new executive director. Vanessa Grellet from Arche Capital also joined as a new board member.
CryptoKitties and the ERC-721 NFT standard
In 2017, CryptoKitties, the blockchain game and decentralized application (dApp) featuring digital cat artwork as NFTs, was launched on the Ethereum network. In cultivating popularity with users and collectors, it gained notable mainstream media attention providing significant exposure to Ethereum in the process. It was considered the most popular smart contract in use on the network but it also highlighted concerns over Ethereum's scalability due to the game's substantial consumption of network capacity at the time. In January 2018, a community-driven paper (an EIP, "Ethereum Improvement Proposal") under the leadership of civic hacker and lead author William Entriken was published, called ERC-721: Non-Fungible Token Standard. It introduced ERC-721, the first official NFT standard on Ethereum. This standardization allowed Ethereum to become central to a multi-billion dollar digital collectibles market.
Continued developments
By January 2018, ether was the second-largest cryptocurrency in terms of market capitalization, behind bitcoin. As of 2021, it maintained that relative position. In 2019, Ethereum Foundation employee Virgil Griffith was arrested by the US government for presenting at a blockchain conference in North Korea. He would later plead guilty to one count of conspiring to violate the International Emergency Economic Powers Act in 2021. In March 2021, Visa Inc. announced that it began settling stablecoin transactions using Ethereum. In April 2021, JP Morgan Chase, UBS, and MasterCard announced that they were investing US$65 million into ConsenSys, a software development firm that builds Ethereum-related infrastructure. There were two network upgrades in 2021. The first was "Berlin", implemented on 14 April 2021. The second was "London", which took effect on 5 August. The London upgrade included Ethereum Improvement Proposal ("EIP") 1559, a mechanism for reducing transaction fee volatility. The mechanism causes a portion of the ether paid in transaction fees for each block to be destroyed rather than given to the block proposer, reducing the inflation rate of ether and potentially resulting in periods of deflation. On 27 August 2021, the blockchain experienced a brief fork that was the result of clients running different incompatible software versions.
Transition to proof-of-stake
"The Merge" (formerly called Ethereum 2.0) was a set of three updates (Bellatrix, Paris, and Shapella) that transitioned Ethereum's consensus protocol from proof-of-work to proof-of-stake. Bellatrix updated the proof-of-stake Beacon chain and introduced economic slashing. Paris was the event at block 15537393 on 15 September 2022 that merged Ethereum to the Beacon chain. Shapella (Shanghai-Capella) was the update that allowed for staking withdrawals. The switch from proof-of-work to proof-of-stake has cut Ethereum's energy usage by over 99%. However, the effect this has on global energy consumption and climate change may be limited since the computers previously used for mining ether may be used to mine other cryptocurrencies that are energy-intensive.
Dencun
On 13 March 2024, "Dencun" or also "Deneb-Cancun" set of upgrades went live. These included EIP-4844 (Proto-Danksharding) which introduced "blobs" that can be used for general-purpose data-availability. Because "Blob" data is stored only temporarily, it is much cheaper than using normal call data for storage. This allows for Ethereum Layer 2 (L2) networks to greatly reduce the cost of posting compressed transaction data to the Layer 1 (L1).
Pectra
The Prague-Electra ("Pectra") update was launched on 7 May 2025. It brought various updates.
Fusaka
The Fulu-Osaka update went live on 3 December 2025. This update introduced several protocol improvements.
Overview
Ethereum is a peer-to-peer network that maintains a database containing the storage values of all Ethereum accounts and processes state-altering transactions. Approximately every 12 seconds, a batch of new transactions, known as a "block", is processed by the network. Each block contains a cryptographic hash identifying the series of blocks that must precede it if the block is to be considered valid. This series of blocks is known as the blockchain. Each "node" (network participant) connects with a relatively small subset of the network to offer blocks and unvalidated transactions (i.e. transactions not yet in the blockchain) to its peers for download, and it downloads any from its peers that it doesn't already have. Each node usually has a unique set of peers, so that offering an item to its peers results in the propagation of that item throughout the entire network within seconds. A node's collection of unvalidated transactions is known as its "mempool". A node may choose to create a copy of the state for itself. It does this by starting with the genesis state and executing every transaction in the blockchain, in the proper order of blocks and in the order they are listed within each block. Any Ethereum account may "stake" (deposit) 32 or more ETH to register a "validator". At the end of each "epoch" (32 block slots, each slot lasting 12 seconds), each validator is pseudorandomly assigned to one of the slots of the epoch after the next, either as the block proposer or as an attester. During a slot, the block proposer uses their mempool to create a block that is intended to become the new "head" (latest block) of the blockchain, and the attesters attest to which block is at the head of the chain. If a validator makes self-contradicting proposals or attestations, or if it is inactive, it loses a portion of its stake. Any Ethereum account may send ETH to a validator at any time to increase its stake. A validator's attestation is given a weight equal to its stake or 2,048, whichever is less. According to the Ethereum protocol, the blockchain with the highest accumulated weight of attestations at any given time is to be regarded as the canonical chain. Validators are rewarded for making valid proposals and attestations. A validator's rewards are paid via transactions within the same chain that contains their proposal or attestation, and therefore would have little or no market value unless that chain becomes the canonical chain. This incentivizes validators to support the chain that they think other validators view as the canonical chain, which results in a high degree of consensus.
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