History of Ethereum in 5 charts

Five years ago this week, the first general-purpose blockchain went live on a mainnet. Ethereum has paved the way for an entirely new use case for blockchain technology that is unbound from the original view of Bitcoin as electronic money.

Here are five charts to understand the evolution of Ethereum.

Not a year after the launch of Ethereum, a landmark event split the community in two.

The disagreement between these two subcommunities was so acute that the queue led to the creation of a new cryptocurrency called “ethereum classic”, cloned from the original Ethereum code.

Ethereum classic was created on July 20, 2016, after $ 60 million ether (ETH), Ethereum’s native cryptocurrency, was stolen from users of a dapp known as The DAO. At the time, DAO was the only dapp of its kind where users could raise funds and vote on which projects the money would be invested in. DAO’s vision (before it was hacked and drained of a significant portion of its finances) was to be an investor-driven venture capital fund.

After weeks of reflection, the Ethereum developers reached a consensus that they should go back in time – reverse the DAO’s hacking transactions and restore users’ lost ETH. The changes could only be implemented via a network-wide update, also called a hard fork. Those who opposed the change have come out in favor of maintaining the integrity of the transaction history and balances of the original blockchain – hacked funds and all.

Then, on July 20, 2016, when the update to restore user funds was performed, the Ethereum blockchain split in two. The part of the community that kept the original record of DAO hacking transactions and balances and did not update the software created a parallel network, Ethereum Classic.

Since the split, the Ethereum network has strongly forked seven more times, although none of these subsequent updates have reached the same level of controversy as 2016’s “The DAO Fork”.

The first Ethereum dapp to gain real traction from users was a collectible game known as CryptoKitties. Launched in November 2017, “digital cats” have become so popular that they have been followed by news outlets around the world, including The Financial Post, BBC and The New York Times.

At the peak of their popularity, Tokenized Cats were trading on Ethereum for over $ 200,000. However, the influx of users and a high volume of transactions from this viral dapp have clogged the Ethereum blockchain to unprecedented levels. As of December 2017, a backlog of 30,000 transactions had accumulated, meaning users would have had to wait days for their ETH transfers to be confirmed.

The developers behind CryptoKitties were quick to help stem the tide of new users increasing gaming commissions. Shortly after the launch of CryptoKitties, Ethereum recorded the highest total for daily transaction fees in its history, on January 10, 2018. Ethereum miners collected over $ 4.5 million in fees that day. The same month, CryptoKitties reached 250,000 registered users.

In many respects, the CryptoKitties craze was the rude awakening that reminded Ethereum developers of the platform’s technical limitations. How could Ethereum become the world computer when one viral dapp was enough to overwhelm it? If developers wanted to take onboarding not thousands but millions of dapp users seriously, they would need to come up with a concrete plan to increase throughput.

The need for Ethereum 2.0 and its expected benefits for network efficiency and scalability only grew after the CryptoKitties craze of 2017. The popularity of Initial Coin Offerings (ICOs) – a way to fund the early stages of a cryptocurrency project – per dollar the amount raised reached its peak in 2018. A total of $ 7.8 billion was raised for over 1,000 projects that year. According to ICObench, over 80% of all ICOs rely on the Ethereum blockchain to create their tokens and issue them to investors.

Trends like the 2018 ICO boom are indicative of the ways blockchain technology can be leveraged in more ways than just peer-to-peer e-money. Ethereum, as the world’s first general-purpose blockchain platform, has become the central hub where dapp developers come together to create all kinds of use cases for blockchains, be they related to gaming or finance.

As a result, despite the technical limitations of the platform, the business of dapp developers on Ethereum continues to thrive. The latest trend dominating user traffic and transaction volume on Ethereum is decentralized finance (DeFi). The DeFi movement that is currently investing Ethereum consists of dapps modeled on traditional financial players such as lending services, exchanges and derivatives markets. As of July 29, 2020, $ 3.68 billion of crypto assets are locked out of users in various DeFi protocols.

Ethereum’s vision since its inception has always been to be “the world computer” on top of which decentralized applications (dapps) and resources of any kind can be freely created and distributed.

To this end, Ethereum developers have pioneered a new technology in the emerging blockchain space called “smart contracts”. A new programming language called Solidity was invented to help code dapps on Ethereum. In order to ensure interoperability between the different dapps on the network, common frameworks have been developed, such as the ERC-20 and ERC-721 token standards.

These innovations have paved the way for the emergence of other generic blockchain platforms since the birth of Ethereum in 2015. EOS, Stellar, Tezos and Tron are four cryptocurrencies in the top 15 by market share that also include the creation and implementation of dapp. Despite the growth in the number of alternative dapp platforms, Ethereum remains the most popular general-purpose blockchain in terms of both the number of users and dapps, as shown in the graph above.

However, Ethereum has not yet realized its vision. Developers are convinced that the current blockchain infrastructure is wholly inadequate to handle an influx of millions, if not billions of users around the world. This has always been the suspicion of Ethereum’s early founders, including Vitalik Buterin. Five years after releasing their creation in the wild, Buterin and others came up with a roadmap called “Eth 2.0” to get the Ethereum development done. The first step of Eth 2.0 is expected to be launched this year or early next.

Ethereum has not yet realized its vision.

Developers are convinced that the current blockchain infrastructure is wholly inadequate to handle an influx of millions, if not billions, of users around the world. This has always been the suspicion of early Ethereum founders like Vitalik Buterin. Five years after releasing their creation in the wild, Buterin and others have come up with a roadmap called “Ethereum 2.0” to complete Ethereum development and is expected to launch this year or early next.

The Ethereum 2.0 roadmap is almost as ambitious as the original one that gave birth to the first dapps. While the launch of this technology is imminent, an important part of understanding Ethereum’s five-year history lies in studying the many iterations Ethereum 2.0 has undergone over its planning years.

Originally, Ethereum 2.0 in 2015 was intended as the final development stage of the project and dubbed “Serenity”. Serenity was expected to roll out 16 months after initial launch on the mainnet (which would be November 2016). The upgrade would shift Ethereum from its reliance on a compute-intensive process for producing blocks inherited from Bitcoin, known as “mining,” to a more energy-efficient validation process.

To this end, the developers created what is called the “difficulty bomb” to slowly but surely encourage this transition from mining. The bomb, which was activated on March 14, 2016, increases the difficulty levels for miners in finding an Ethereum block over time. This program where this bomb slows down block production has been delayed three times over the past five years, as developers reworked their plans to launch Ethereum 2.0.

The most recent delay for the difficulty bomb occurred on January 2, 2020. This may be the last time the difficulty bomb is dismissed as tentative estimates from some developers suggest that the transition to Ethereum 2.0 could officially begin this. year and replace the existing network by the end of next year.

While there is no telling what new blockchain technologies and standards of practice will be innovated as a result of Ethereum 2.0, looking back at the network’s first five years of development provides some indication. During that time, Ethereum underwent upgrades for the division of the network, faced crippling technology bottlenecks, advanced new forms of fundraising for crypto projects, and formalized a launch plan for the migration to Ethereum 2.0.