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Mensholong Lepcha is a financial journalist specializing in cryptocurrencies and global equity markets. He has worked for reputed firms such as Reuters and Capital.com. Fascinated…
Ethereum’s journey from inception in 2015 to its recent milestones showcases its impact on blockchain technology. It faced challenges like the DAO hack and underwent a hard fork, leading to the birth of Ethereum and Ethereum Classic. The platform enabled the ICO boom, DeFi summer, and NFT hype and implemented EIP-1559 to address gas fee issues. The Merge shifted Ethereum to proof-of-stake, and now it focuses on the rollup technology for scalability.
The end of July 2023 marked Ethereum’s eight-year anniversary since its genesis block. Over the years, the project has championed blockchain and smart contract technology and has provided the crypto community with the tools to disrupt the global finance system.
This article takes you on a captivating journey through Ethereum’s major milestones and achievements from its inception to its “darkest hour” during the DAO hack to the highly-anticipated Merge.
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Although it has been eight years since the first Ethereum block in July 2015, the history of Ethereum goes back even further to late 2013 when Vitalik Buterin released its whitepaper.
It was roughly five years after the appearance of Bitcoin in 2008. At the time, Buterin proposed to build an alternative blockchain for building decentralized applications (dApps). Buterin argued that Bitcoin’s use of scripting language limited its capabilities. As such, Ethereum had to be created from scratch with a built-in Turing-complete programming language while adopting tested cryptographic concepts such as the proof-of-work (PoW) consensus mechanism.
Buterin described Ethereum as
“A blockchain with a built-in Turing-complete programming language, allowing anyone to write smart contracts and decentralized applications, where they can create their own arbitrary rules for ownership, transaction formats and state transition functions.”
Soon enough, the Ethereum Foundation was founded in 2014. The core members of the Ethereum development team consisted of Buterin, Anthony Di Lorio, Charles Hoskinson, Mihai Alisie, Gavin Wood, and Joseph Lubin, among others.
On 22 July 2014, the Ethereum Foundation announced a 42-day-long ether (ETH) sale. The price of ETH was initially set to 2,000 ETH per 1 BTC for the first 14 days, before declining to 1,337 ETH per 1 BTC by 2 September 2014.
It is estimated that the ether sale raised more than $18.3 million in BTC by selling more than 60 million ETH. Over 6,600 transactions occurred in the sale as people swapped their BTC for ETH.
Fast forward to 2016, Ethereum’s blockchain was up and running and gaining momentum. A decentralized autonomous organization (DAO) called The DAO was created in April 2016 via a token sale.
The DAO, which was created to act as a venture capital firm for the Ethereum ecosystem, saw immense interest and raised over $150 million in ETH from over 11,000 participants in its 28-day funding window.
Less than three months after its launch, The DAO was attacked by unknown hackers who exploited a bug in its smart contract. Over $60 million in ETH (one-third of the funds raised) was stolen in the infamous DAO hack. At the time, The DAO held roughly 15% of all ETH tokens and was the most heavily invested Ethereum project.
The failure of The DAO marked Ethereum’s first existential crisis, one which would lead to a split of the one-year-old blockchain.
Following the DAO hack, the Ethereum community faced a predicament. Core Ethereum developers saw that the only solution to retrieving the lost funds was to fork the Ethereum blockchain. In doing so, a new blockchain would be created, which basically took back all the stolen funds from the hacker and redistributed The DAO funds back to investors.
The plan sparked intense debates within the Ethereum community, resulting in a division between two opposing factions: the pro-forkers and the anti-forkers.
The central point of contention revolved around the concept of blockchain immutability.
The Ethereum community was called upon to vote whether “to fork or not fork.” 87% of the participants voted to fork the chain.
On 20 July 2016, Ethereum completed its hard fork to create a new version of the blockchain. The original, unforked chain went on to be known as Ethereum Classic.
Ethereum made headlines for the right reason in 2017 and 2018 as thousands of crypto projects tapped into the power of Ethereum smart contracts to launch their own tokens.
Billions of dollars were raised as ICOs became a popular way to raise funds. This period gave rise to a number of successful projects such as Filecoin, Tezos, and Bancor while also giving the world failures such as Sirin Labs, and Dragon Coin.
2020 saw a time when decentralized finance (DeFi) protocols came of age as user participation and capital in the fledgling industry grew exponentially. According to Decrypt, at the start of 2020, only $700 million was locked into various DeFi smart contracts. That figure ballooned to about $15 billion by the end of the year.
The year saw prominent DeFi protocols like Compound, Aave, and yearn.finance launch their governance tokens. Yield farming became popular among crypto degens looking to make a quick buck off their interest in cryptocurrencies. Decentralized exchange (DEX) trading volume surged, and meme coins investing took off.
All of this was happening on the hottest blockchain at the time – Ethereum.
Although the NFT culture was growing infectiously within the crypto community since 2018, 2021 was the year that the outside world got engulfed in the hype. Millions of NFT projects began popping up as Ethereum’s ERC-721 token standard made it easy to mint NFTs on the blockchain.
CryptoPunks and Bored Ape Yacht Club became status symbols on social media. Renowned auction house Christie’s sold Beeple’s “Everdays: The First 5000 Days” for a whopping $69.3 million. Nike took its first steps into the blockchain world by acquiring the digital art studio RTFKT.
By the end of the year, nearly $41 billion was spent on NFTs.
The explosion of NFT sales and DeFi transactions had resulted in gas fee spikes on Ethereum. In order to address this problem, EIP-1559 was implemented in August 2021, which introduced a base fee and miner tip to make gas fees stable and predictable.
EIP-1559 also made ETH more scarce by introducing a mechanism to burn all the base fees paid in a transaction.
On 16 November 2021, the ETH price hit an all-time high of $4,891.
In 2022, all the Ethereum community could talk about was The Merge – Ethereum’s long-awaited transition from PoW to the proof-of-stake (PoS) consensus mechanism.
Work on The Merge was ongoing before 2022. The Beacon chain – the original Ethereum PoS blockchain – launched in 2020 and was running simultaneously alongside the Ethereum main net. It was extensively tested with real-world data.
On 15 September 2022, the Beacon chain merged with the Ethereum mainnet to complete Ethereum’s transition to the PoS consensus mechanism. As a result, miners were replaced by validators, the energy consumption of the network was reduced by over 99%, and Ethereum became more scalable.
The Merge was a major step in Ethereum’s aim of achieving mass scale. Now, the community is focused on developing the rollup technology to help Ethereum reduce gas fees and increase transaction throughput.
Rollups are layer-two blockchains that bundle hundreds of transactions off-chain and submit them to the main chain (Ethereum) as a single transaction, resulting in cheaper gas fees for the end user. The two most prominent rollup technologies being used are optimistic rollups and ZK rollups.
Upcoming upgrades on Ethereum are all geared toward supporting its rollup-centric roadmap.
Ethereum’s journey from its inception to the present day has been nothing short of remarkable. The platform’s introduction of smart contracts and decentralized applications, the success of DeFi and NFTs, and the ongoing rollup-centric scaling plan showcase its transformative impact on the blockchain and decentralized technologies.
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Mensholong Lepcha is a financial journalist specializing in cryptocurrencies and global equity markets. He has worked for reputed firms such as Reuters and Capital.com. Fascinated with blockchain technology, NFTs, and the contrarian school of investing, Mensholong has expertise in analyzing tokenomics, price movement, and technical details of Bitcoin, Ethereum, and other blockchain networks. He has also written articles on a wide range of financial topics including commodities, forex, central bank monetary policies, and other economic news.
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