Ethereum is a decentralized blockchain network providing global smart-contract functionality and decentralized application (dApp) integration. Ethereum is known for its native token Ether (ETH) and is the second-largest cryptocurrency by market capitalization.
The open-source distributed computing platform that powers the ETH network permits active participants to establish digital ledgers publicly ensuring:
- Community-driven trust
As the need for blockchain grows, Ethereum remains a top choice for developers to leverage their DeFi technologies, relying on the blockchain’s multi-functional and multi-layered ease of access.
Some of the major use-cases of Ethereum so far have been:
- Decentralized Finance (DeFi) – Lending, borrowing and countless derivatives are being deployed through Ethereum smart contracts, where the Ethereum blockchain acts as a trustless intermediary.
- Governance – Decisions about protocols collaboratively made.
- Crypto-collectibles (NFTs) – Non-fungible tokens (NFTs) whose scarcity is enforced by the blockchain.
- Stablecoins – Fiat-pegged cryptocurrencies (collateralized or fiat-backed) with their stability enforced by smart contracts.
These are just a handful of the applications conceived for Ethereum.
Ethereum set the standard for smart contracts, with its network currently servicing more than 1.45 million smart contracts on its blockchain. Smart contracts provide a decentralized protocol to facilitate and verify negotiations that cannot be tampered with or manipulated.
These programmable and self-executing contracts offer transparency since participants are free to view and audit the transaction logs. In addition, the permissionless capabilities of these smart contracts mean that anyone can deploy one.
Decentralized Finance (DeFi)
Apart from smart contracts, Ethereum serves a major role in other areas of decentralized finance (DeFi). Through the use of the network’s decentralized apps (dApps), users essentially become their own banks with elevated speed, transparency, and security.
This means there is no need to open accounts or provide personal information. You can get a loan, lend crypto, buy derivatives, and trade using Ethereum’s decentralized services. Some examples of its DeFi use cases include:
- Digital identities with the Ethereum Name Service (ENS)
- Decentralized Autonomous Organizations (DAOs)
- Decentralized exchanges (DEX)
- Asset management
- Decentralized gaming
The NFT market gained immense traction in 2021 as tokenized digital items were made available using Ethereum. The network’s blockchain provided the necessary platform to run NFT marketplaces whereby users can mint and trade their creations.
In addition, most NFT markets require ETH to conduct trades on the platform. Although other blockchains now provide NFT functionality, it was Ethereum that started it.
ETH remains the leader for NFT integration due to the blockchain’s highly-secure network and its connection to an entire growing market that gives NFT users maximum exposure.
Ethereum was founded by Canadian programmer Vitalik Buterin, co-founder of Bitcoin Magazine, and Joe Lubin, founder of blockchain software company ConsenSys. Along with Gavin Wood, Charles Hoskinson, and Anthony Di Lorio, an idea to revolutionize blockchain technology beyond a means of virtual payments gave rise to Ethereum’s legendary inception.
Vitalik, who published Ethereum’s white paper and introduced it to the public in 2014, spent much of his early days studying mathematics, economics, and programming. His passion for code later expressed itself during his travels when he visited other developers who shared the same enthusiasm.
After being awarded a $100,000 grant from venture capitalist Peter Thiel, he devoted his remaining time and energy to creating Ethereum. The official Ethereum blockchain network went live in 2015 along with its native token Ether (ETH) which followed an $18 million crowd sale.
The goal behind the creation of a new blockchain was to provide a decentralized platform to encourage developers and users to build their own peer-to-peer apps. Using Ethereum’s network, smart contracts and dApps began to revolutionize the financial sector.
This new way of doing business omitted the need for financial intermediaries and eventually led to the Ethereum Virtual Machine (EVM) — Ethereum’s underlying operating structure. In 2016, due to a system manipulation resulting in $50 million of Ether being stolen, the network experienced a hard fork—changes to the protocol—which resulted in two separate blockchains, with Ethereum Classic serving as the original.
Since then, seven more hard forks would ensue. Today, much of Ethereum’s praise comes from the NFT market since it is the main blockchain network that enables users to mint and trade their NFTs.
-  Swiss non-profit Ethereum Foundation founded
-  Ethereum releases its official coin launch
-  The DAO was exploited and a hard fork created resulting in two blockchains
-  Fortune 500 and top companies announce Enterprise Ethereum Alliance (EEA)
-  Ethereum Name Service (ENS) launch
-  Ethereum becomes the second-largest cryptocurrency by market cap
-  Network experiences a brief fork due to incompatible software versions
-  Ethereum’s merge set to launch
Ethereum price history
Ethereum’s susceptibility to price swings shouldn’t come as a surprise considering the extreme volatility of the crypto market. However, a close study of the coin’s overall price trend certainly proves the long-range potential of the second largest cryptocurrency.
Ethereum made its debut in the market with a token launch price of $0.31 and reached an astounding all-time high (ATH) above $4,880 in November 2021.
During the course of Ethereum’s price trajectory, the market experienced a couple of bull cycles as well as some catastrophic crashes. When 2017’s bull cycle soared ETH’s price to $826, Ethereum’s first major spike was marked.
After a continuous stride of peaks and valleys, ETH gained even more traction in the following year in January, when it reached another ATH of $1,396 before tumbling down and closing the year off at only $141.
However, it wasn’t until 2021 when the NFT market exploded, that Ethereum was to receive mass adoption. Ethereum’s smart contract capabilities fully enabled the minting and trading of NFTs, and because NFT users needed ETH to trade on the platforms, this alone allowed the token price to skyrocket to a whopping $4,0000.
- [July 2015] Ethereum’s token launched at $0.43
- [January 2016] Ethereum breaks $1 for the first time
- [December 2017] ETH’s price soars to $826 during its first bull run
- [March 2020] Covid-19 market crash, ETH plunges to $116
- [May 2021] The NFT boom pushes ETH to highs of $4,000 from a 2020 low of $730
- [November 2021] ETH reaches its all-time high above $4,800 during 2021’s bull cycle
- [March 2022] ETH’s price plummets to $994 due to the crypto crash following the Russian-Ukraine conflict
When Ethereum launched in 2015, it ran on a proof-of-work (PoW) consensus protocol, a protocol that involves computer nodes expending considerable amounts of computational power to solve mathematical puzzles to reach a consensus on the network. The high energy consumption by computers caused slower and costlier transactions, which was a drawback for the Ethereum blockchain.
To make the Ethereum network more sustainable and environmentally friendly, stakeholders coordinated an update to allow the network to run on a proof-of-stake (PoS) protocol. This update, called The Merge, was executed on September 15, 2022.
- The Merge switched the consensus protocol of the Ethereum blockchain from proof-of-work (PoW) to proof-of-stake (PoS).
- The update reduced the energy consumption of the Ethereum blockchain by 99.95%.
- The Merge was executed on the 15th of September, 2022.
The Merge represented the urgency of Ethereum stakeholders to provide a more robust architectural infrastructure to scale the network. This upgrade, also called Ethereum 2.0, was implemented to tackle issues like high gas fees and slow transaction speeds that users of the network often complained about.
With the Ethereum blockchain now operating on a proof-of-stake network, dedicated validators help process and confirm transactions on the blockchain without needing to solve complex mathematical puzzles. This consensus model reduced the network’s energy consumption by 99.95%.
Alongside ensuring a more sustainable network, the PoS consensus model incentivizes people to become validators by rewarding them with more cryptocurrency. In the same vein, validators that exhibit malicious behavior are penalized, giving them a reason to perform efficiently.
Ethereum co-founder Vitalik Buterin expressed legitimate approval for the proof-of-stake mechanism, stating that a potential attack on a PoS network is much less harmful and easier to recover from than an attack on a PoW network.
The Merge involved much complexity and was achieved with the efforts of the blockchain’s core developers. To accomplish it, the Ethereum mainnet – the original execution layer – merged with the Beacon Chain, a separate proof-of-stake consensus layer. The Beacon Chain currently has over 400,000 validators.
Following The Merge, the next stage of upgrades for the Ethereum network is the introduction of shard chains, which are like a collection of mini-blockchains that operate independently. These shard chains will provide extra storage layers for the network and bring about better speed and cost efficiency.