11 critical moments in Ethereum’s history that made it the No.2 blockchain

08/19/2024

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2024.08.19 12:09

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The history of Ethereum began more than a decade ago as a gleam in the eye of its creator, Vitalik Buterin, a gangly math genius frustrated by the limitations of Bitcoin who believed he could do something better with a blockchain.

Instead of cryptocurrency being solely a monetary asset, Buterin envisioned extending blockchain technology to the point where it became a “global computer” — a platform that hosts decentralized applications, powered by smart contracts, with minimal need for human intervention or trust assumptions.

Fast forward to today, and Ethereum is the second-largest crypto asset in the world, underpinning a trillion-dollar ecosystem of dependent networks. It’s the blockchain of choice for several of the world’s largest asset managers, as well as hundreds of thousands of daily users on the layer 1 and millions on connected L2s.

Here are 11 of the most important moments in Ethereum’s history and some of the big upgrades to look forward to.

Ethereum creator Vitalik Buterin with his father, Dmitry.

The Ethereum white paper — 2013

Buterin was first introduced to Bitcoin in his late teens by his father, a Russian-born engineer who immigrated with his family to Canada.

With little in the way of funds to invest in Bitcoin mining or the asset itself, Buterin worked as a crypto blog writer and received payments in BTC during the early 2010s.

Noticing his talent as a leading thinker and author in the field, Romanian Bitcoin enthusiast Mihai Alisie approached him, and the pair launched Bitcoin Magazine in 2012.

Ethereum: A Next-Generation Smart Contract and Decentralized App The first page of the Ethereum white paper. (Ethereum.org)

A year later, in 2013, when he was just 19 years old, Buterin published the Ethereum white paper outlining a “next-generation smart contract and decentralized application platform.” The aim was simply to fix Bitcoin’s “too limited functionality” he told Business Insider:

“Think of the difference between something like a pocket calculator and a smartphone, where a pocket calculator does one thing and it does one thing well, but really people want to do all these other things. And if you have a smartphone then on the smartphone you have a pocket calculator as an app. You have playing music as an app. You have a web browser as an app and pretty much everything else.”

He was later awarded $100,000 by the Peter Thiel Fellowship to begin working on the Ethereum platform.

The Red Wedding — 2014

Before Ethereum became what it is today, it suffered through some growing pains and conflict, the first major one being the infamous “Red Wedding” — where the future of the network was thrown into the hands of Buterin.

Joe Lubin told Magazine all about the Red Wedding in 2023.

As Camila Russo documented in her book, The Infinite Machine, the team of co-founders had gathered in Zug, Switzerland on June 7, 2014, to sign a document that would transform Ethereum into a for-profit company.

But instead of signing the contract, tensions concerning Charles Hoskinson’s management style, Amir Chetrit’s contributions to the project and Ethereum’s future direction reached a boiling point.

The call for which way Ethereum should go was left to Buterin, who moved to oust Hoskinson (who went on to create Cardano) and Chetrit and establish Ethereum as a nonprofit foundation instead of a company.

“We had differences of opinion, at times, those differences of opinion boiled over famously… infamously,” fellow Ethereum co-founder Joe Lubin told Magazine in 2023.

11 critical moments in Ethereum’s history that made it the No.2 blockchain

ICO and launch — 2014

The next major step for Ethereum was raising capital and sparking widespread public awareness during its initial coin offering in 2014, selling millions of dollars worth of ETH to fund the development of the project.

Between July 22 and Sept. 2, 2014, the ICO saw investors snap up more than $18 million worth of ETH, which they paid for with BTC.

The Ethereum blockchain and its native token, ETH, were officially launched on July 30, 2015.

ETH hit the market with a value of $0.31 per ETH token, marking an impressive 1,057,000% return for anyone lucky enough to hold their ETH until today’s price of $3,275.

Nobody knows for sure, of course, but Ethereum and Consensys co-founder Joe Lubin is rumored to have invested more in the ICO than anyone else.

The DAO hack and Ethereum Classic — 2016

Arguably the most formative event in Ethereum’s history was the now-infamous hack of The DAO, an exploit where hackers stole more than 3.6 million ETH from the early, idealistic The Decentralized Autonomous Organization.

The attack sent shockwaves through the market, sending the price of ETH plummeting from $20 to $9 in less than 36 hours.

Divided on how to proceed in the wake of the attack, the Ethereum community split into two main camps: One wanted to keep going, business as usual, and the other wanted to roll back the network to before the attack occurred to fix the issue.

The DAO hack was a seminal moment in Ethereum’s history.

It was a philosophical split: Should blockchains be immutable records, with code as law, or can their leaders simply change history to erase inconvenient episodes? There were passionate arguments on both sides, and the debate over whether Ethereum took the correct path continues to this day.

Ultimately, the majority of the Ethereum community voted in favor of hard forking the network to wind back the blockchain and regain the assets lost in the exploit.

One of the hard forks is the proof-of-stake blockchain that still holds the Ethereum name to this day, while the other is called Ethereum Classic — technically the original version of the Ethereum blockchain, which remains a proof-of-work blockchain.

CryptoKitties breaks Ethereum — 2017

One of the strangest things to happen to Ethereum was the advent of the non-fungible token collection CryptoKitties, which more or less broke the network.

Launched in October 2017 by the Vancouver-based venture studio Axiom Zen, CryptoKitties was designed as an earnest and fun experiment with blockchain tech, allowing users to collect and breed different types of NFTs.

By early December, CryptoKitties had gone giga-viral, sending prices for the NFTs as high as $170,000. The demand and activity around Kitties were so high that they clogged the Ethereum network, sending fees skyrocketing.

CryptoKitties are now being sold for as low as 0.002 ETH. (CryptoKitties)

In response to the sudden network outage, a crack team of Ethereum developers from projects including MetaMask and Infura banded together to deploy quick optimizations and work on long-term scaling solutions for the network.

While crypto enthusiasts remain divided on the quality and value of the CryptoKitties project itself, there’s no denying the tectonic level of impact it had on the development of the Ethereum network or that it helped spark the NFT boom.

DeFi summer — 2020

The summer of 2020 — colloquially referred to as “DeFi summer” by crypto enthusiasts — marked a turning point in the history of crypto, with Ethereum suddenly becoming a hotbed for an entirely new breed of financial activity.

New users flocked to the Ethereum network in droves, all eager to experiment with the hundreds of new protocols springing up across the network. This sparked a boom in the borrowing, lending and trading of digital assets across hundreds of protocols, many of which now form the backbone of today’s multibillion-dollar DeFi sector. Much of the activity was driven by “yield farmers” who were rewarded for their activity with tokens. It was either a genius way to crank up the flywheel or unsustainable Ponzinomics.

Big-name Ethereum-based DeFi protocols that took off during DeFi summer, including Aave and Compound, now tout tens of billions of dollars in total value-locked and hundreds of millions in daily trading volume.

There was also an explosion in food-themed DeFi, most notably SushiSwap, which famously forked Uniswap and “vampire attacked” it for liquidity and users. After Chef Nomi cashed out $14 million in SUSHI, he handed control of the DEX to a young upstart investor called Sam Bankman-Fried.

Aave boasts $13 billion in TVL and $168 million in daily trading volume as of Aug. 9. (DefiLlama)

Rollup roadmap overhaul — October 2020

According to Ethereum developer Marius van der Wijden, one of the best things about Ethereum is that the roadmap itself isn’t super strict or fixed in place.

He tells Magazine the community holds constant “debates about what to do and what to prioritize next,” which are crucial to keeping Ethereum decentralized and avoiding capture.

This flexibility was shown in October 2020 when Buterin ditched the long-standing Eth 2.0 roadmap, which planned to scale Ethereum in a monolithic fashion using OG sharding — something that looked more like 64 Ethereum blockchains all running together in unison.

Ethereum’s roadmap was aimed toward eating the world.

But Buterin bailed on this form of sharding (later implemented by projects like Near) as an alternative solution began to emerge in the form of optimistic and ZK-rollups, layer 2 projects that take the execution and computation off the main chain but still inherit its security.

As research and development suggested this would become viable as a path forward for scaling, he published a new “rollup-centric roadmap.”

The new rollup roadmap ensured that the Ethereum network would be forged into an optimal base layer blockchain with the lion’s share of scaling and experimentation to occur by way of layer-2 networks, such as Polygon, Optimism and Arbitrum, to name a few. Optimistic rollups were seen as the faster solution to implement, with ZK-rollups seen as the likely endgame.

The invention of ZK rollups saw a major overhaul of Ethereum’s roadmap The invention of ZK-rollups saw a major overhaul of Ethereum’s roadmap.

“Today, they take advantage of a lot of technological discoveries that we have now that we did not have 10 years ago. So, like, data availability sampling… did not exist before 2017 — 2017 was when I published my first work on it. Optimistic and ZK-rollups did not exist, like, really before around 2019,” Buterin said while speaking at a 2022 press conference at ETH Seoul.

Proof-of-stake, the Merge — September 2022

Van der Wijden says the Merge is what he considers the “most pivotal” moment in the history of the Ethereum network.

The Merge was finalized on Sept. 15, 2022, and marked the switch from an energy-intensive proof-of-work consensus mechanism to a more environmentally friendly proof-of-stake mechanism.

“It was an enormous effort from so many people, all working together for a common goal — I’m glad that we did it. After learning some of the numbers around electricity, CO2 consumption and electronic waste, I’m proud to be a part of that effort.”

The Merge saw Ethereum’s energy consumption reduced by 99% and brought about a major shift in the network’s tokenomics.

Dencun upgrade: Blobs and sharding — March 2024

The next crucial step for Ethereum arrived on March 13, 2024, when the Dencun upgrade was implemented on the network.

The Dencun upgrade introduced a suite of nine different Ethereum Improvement Proposals (EIPs), most notably including EIP-4844.

EIP-4844 introduced proto-danksharding, which utilizes “blobs,” a mechanism that allows transaction data to be stored separately and temporarily, to significantly reduce the fees paid for block data on Ethereum layer-2 networks.

How blobs function in storing transaction call data. (Ethereum.org)

Dencun saw a massive reduction in the cost of executing transactions on Ethereum layer-2 networks such as Arbitrum and Optimism; however, a side effect was that the total amount of ETH fees burned on the mainnet has fallen significantly in its wake.

Matan Si, a contributor at eOracle, tells Magazine the most significant progress for Ethereum since the Merge has been the expansion of rollups and layer-2 solutions.

“What excites me most about Ethereum’s future is the potential to bridge the gap between these execution layers and the real world. Connecting onchain activities with offchain data and computation will unlock a myriad of new use cases.”

BlackRock chooses Ethereum — March 2024

One of the biggest institutional milestones for Ethereum occurred on March 20, when the asset management giant BlackRock launched its tokenized fund on the Ethereum network.

Dubbed the BlackRock USD Institutional Digital Liquidity Fund, or BUIDL for short, the money market fund is fully backed by cash and US treasury bills and provides investors with yield paid out daily to tokenholders.

The move was widely regarded as a massive endorsement of the reliability and trustworthiness of the Ethereum network by the world’s largest asset manager.

The BUIDL fund now boasts a market capitalization of $517 million and has seen over $116 million in volume in the last month, according to data from rwa.xyz.

BlackRock’s BUIDL fund touts over $517 million in assets. (rwa.xyz)

BlackRock CEO Larry Fink said that while he was originally a “naysayer” on crypto assets, he’d changed his tune and sees crypto, particularly Ether and Bitcoin, as a nascent asset class.

“In the last two years, I’m a big believer [in ETH],” Fink told CNBC on Jan. 12.

Launch of spot ETFs — July 2024

Initially approved by the SEC on May 23, a roster of nine spot Ether ETFs was officially launched on July 23.

The introduction of spot funds marked the first major step in the adoption of ETH as an institutional-grade asset.

As with the Bitcoin ETFs, the launch has been muted by investors selling up their holdings in Grayscale, which has 10x higher fees than other ETFs for its converted Grayscale Ethereum Trust (ETHE).

As of the time of publication, the funds have posted a net outflow of $390 million; however, ETHE flows are slowing, and Nate Geraci, president of the ETF store, says three weeks of inflows into BlackRock’s ETHA has already made it the sixth-most successful ETF launched this year.

Ethereum ETFs are yet to flip into overall net positive inflow territory. (FarSide Investors)

Next steps: Pectra, the Verge and the Splurge

The next major step on the roadmap is the Pectra upgrade, something van der Wijden says will contain “a bunch of upgrades” to the Ethereum Virtual Machine, enabling new use cases, such as trustless staking pools and making the lives of developers easier.

Following Pectra comes Verkle, or the Verge as Vitalik likes to call it.

“With Verkle, we change the way we store the state — all accounts, balances, contracts — in order to make it easier to [prove] that your balance was x at block y,” says van der Wijden.

Van der Wijden describes the Purge as being exactly that: a swathe of new upgrades that relate to getting rid of old functionality that is no longer useful to the network.

“When Ethereum started, they made a bunch of assumptions about how things would work, and a lot of them turned out correct, but a few didn’t pan out the way they expected,” van der Wijden explained.

The latest version of the Ethereum roadmap. (Vitalik Buterin/X)

“So, we’ll slowly clean up some of the paths not taken, like disabling Selfdestruct (which was done last upgrade) or, in the future, getting rid of the bloomfilters in the receipts (which will make syncing a node faster),” he adds.

The Splurge is also somewhat self-explanatory at a top-line level at least, containing new features the Ethereum community is willing to “splurge” on.

“They contain some of the already mentioned changes that make Ethereum easier and nicer to use. These changes will probably be shipped together with other upgrades if we feel like there is enough space — complexity-wise — in an upcoming hard fork,” van der Wijden says.

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