On 15 September 2022, Ethereum transitioned itsconsensus mechanism fromproof-of-work (PoW) toproof-of-stake (PoS) in an upgrade process known as "the Merge", which cut the blockchain's energy usage by 99%.[10]
Ethereum was initially described in late 2013 in awhite paper byVitalik Buterin,[4][11] a programmer and co-founder ofBitcoin Magazine, that described a way to builddecentralized applications.[12][13] Buterin argued to theBitcoin Core developers that blockchain technology could benefit from other applications besides money and that it needed a more robust language for application development[14]: 88 that could lead toattaching[clarification needed] real-world assets, such as stocks and property, to the blockchain.[15] In 2013, Buterin briefly worked witheToro CEO Yoni Assia on theColored Coins project and drafted its white paper outlining additional use cases for blockchain technology.[16] 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—aTuring-complete programming language[17]—that would eventually become Ethereum.[14]
Ethereum was announced at the North American Bitcoin Conference in Miami, in January 2014.[18] During the conference,Gavin Wood,Charles Hoskinson, andAnthony 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.[18] Di Iorio invited friendJoseph Lubin, who invited reporter Morgen Peck, to bear witness.[18] Peck subsequently wrote about the experience inWired.[19] Six months later the founders met again inZug, 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 forCardano.[18]
Ethereum has an unusually long list of founders.[20] 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 browsinga list of elements from science fiction onWikipedia. 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."[18] Buterin wanted his platform to be the underlying and imperceptible medium for the applications running on top of it.[21]
Development (2014)
Formal development of the software underlying Ethereum began in early 2014 through a Swiss company, Ethereum Switzerland GmbH (EthSuisse).[22]The idea of putting executablesmart contracts in the blockchain needed to be specified before it could be implemented in software. This work was done by Gavin Wood, then thechief technology officer, in the Ethereum Yellow Paper that specified the Ethereum Virtual Machine.[23][24] Subsequently, a Swiss non-profit foundation, theEthereum 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.[12]
The Foundation funded multiple teams in different cities building three separate implementations of the protocol: Geth (Go), Pyethereum (Python), aC++ 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 theirproof-of-concept series.[4] "Olympic" was the last prototype and public beta pre-release. The Olympic network gave users abug 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".[4][25] The genesis block contained 8,893 transactions allocating various amounts of ether to different addresses, and a block reward of 5 ETH.[citation needed]
Since the initial launch, Ethereum has undergone a number of planned protocol upgrades, which are important changes affecting the underlying functionality and/orincentive structures of the platform.[26][27] Protocol upgrades are accomplished by means of ahard fork.[citation needed]
In 2016, adecentralized autonomous organization calledThe DAO—a set of smart contracts developed on the platform—raised a recordUS$150 million in acrowd sale to fund the project.[28]Emin Gün Sirer, Vlad Zamfir and Dino Mark had written a paper calledA Call for a Temporary Moratorium on The DAO in which they described in which way the DAO might be vunerable to attacks.[29] The DAO was exploited in June 2016 whenUS$50 million of DAO tokens were stolen by an unknown hacker.[30][31] The event sparked a debate in the crypto-community about whether Ethereum should perform a contentious "hard fork" to reappropriate the affected funds.[32] The fork resulted in the network splitting into two blockchains: Ethereum with the theft reversed, andEthereum Classic which continued on the original chain.[33]
Continued development and milestones (2017–present)
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.[38]
CryptoKitties and the ERC-721 NFT standard
In 2017,CryptoKitties, theblockchain game anddecentralized application (dApp) featuring digital cat artwork asNFTs, was launched on the Ethereum network.[39] In cultivating popularity with users and collectors, it gained notable mainstream media attention providing significant exposure to Ethereum in the process.[40] It was considered the most popular smart contract in use on the network[41] but it also highlighted concerns over Ethereum's scalability due to the game's substantial consumption of network capacity at the time.[42]
In January 2018, a community-driven paper (an EIP, "Ethereum Improvement Proposal") under the leadership ofcivic hacker and lead authorWilliam Entriken was published, calledERC-721: Non-Fungible Token Standard.[43] It introducedERC-721, the first official NFT standard on Ethereum.[44] This standardization allowed Ethereum to become central to a multi-billion dollar digital collectibles market.[45]
Continued developments
By January 2018, ether was the second-largest cryptocurrency in terms of market capitalization, behind bitcoin.[46] As of 2021[update], it maintained that relative position.[2][3]
In 2019, Ethereum Foundation employeeVirgil Griffith was arrested by the US government for presenting at a blockchain conference in North Korea.[47] He would later plead guilty to one count of conspiring to violate the International Emergency Economic Powers Act in 2021.[48]
In March 2021,Visa Inc. announced that it began settlingstablecoin transactions using Ethereum.[49] In April 2021,JP Morgan Chase,UBS, andMasterCard announced that they were investingUS$65 million intoConsenSys, a software development firm that builds Ethereum-related infrastructure.[50]
There were two network upgrades in 2021. The first was "Berlin", implemented on 14 April 2021.[51] The second was "London", which took effect on 5 August.[52] The London upgrade included Ethereum Improvement Proposal ("EIP") 1559, a mechanism for reducing transaction feevolatility. 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.[53]
On 27 August 2021, the blockchain experienced a brieffork that was the result of clients running different incompatible software versions.[54]
Ethereum 2.0
Ethereum enthusiasts gather for a Merge party in San Francisco in 2022.
Ethereum 2.0 (Eth2) was a set of three or more upgrades, also known as "phases", meant to transition the network's consensus mechanism to proof-of-stake, and to scale the network's transaction throughput with execution sharding and an improved EVM architecture.[55][non-primary source needed]
The switch from proof-of-work to proof-of-stake on 15 September 2022 has cut Ethereum's energy usage by 99%. This upgrade, known as "The Merge", was the first phase in the series of upgrades. However, the impact this has onglobal 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.[10]
On March 13, 2024 the second phase known as "Dencun" or also "Deneb-Cancun" upgrade went live. This upgrade lowered the transaction fees on the many Layer 2 networks built on top of the base Ethereum blockchain.[56]
Ethereum is apeer-to-peer network that maintains adatabase containing the storage values of all Ethereum accounts and processes state-altering transactions.[57] Approximately every 12 seconds, a batch of new transactions, known as a "block", is processed by the network. Each block contains acryptographic 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 theblockchain.[58]
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 of these 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".[59]
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.[60]
Any Ethereum account may "stake" (deposit) 32 ETH to become a validator. At the end of each "epoch" (32 block slots, each slot lasting 12 seconds), each validator ispseudorandomly 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. It may add to its stake at any time. A validator's attestation is given a weight equal to its stake or 32, 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.[61]
Ether
Ether (ETH) is the cryptocurrency generated in accordance with the Ethereum protocol as a reward to validators in aproof-of-stake system for adding blocks to the blockchain. Ether is represented in the state as anunsignedinteger associated with each account, this being the account's ETH balance denominated in wei (1018 wei = 1 ether). At the end of each epoch, new ETH is generated by the addition of protocol-specified amounts to the balances of all validators that made valid block proposals or attestations in the epoch before the last (i.e. the epoch being finalized). Additionally, ether is the only currency accepted by the protocol as payment for the transaction fee. The transaction fee is composed of two parts: the base fee and the tip. The base fee is "burned" (deleted from existence) and the tip goes to the block proposer. The validator reward together with the tips provide the incentive to validators to keep the blockchain growing (i.e. to keep processing new transactions). Therefore, ETH is fundamental to the operation of the network. Ether may be "sent" from one account to another via a transaction, the execution of which simply entails subtracting theamount to be sent from the sender's balance and adding the same amount to the recipient's balance.[62]
Ether is often erroneously referred to as "Ethereum".[63]
There are two types of accounts on Ethereum: user accounts (also known as externally-owned accounts), and contract accounts. Both types have an ETH balance, may transfer ETH to any account, may execute the code of another contract, or create a new contract, and are identified on the blockchain and in the state by an account address.[64]
Contracts are the only type of account that has associatedbytecode and storage (to store contract-specific state). The code of a contract is evaluated when a transaction is sent to it. The code of the contract may read user-specified data from the transaction, and may have areturn value. In addition tocontrol flow statements, the bytecode may include instructions to send ETH, read from and write to the contract's storage, create temporary storage (memory) that vanishes at the end of code evaluation, performarithmetic and hashing operations, send transaction-like calls to other contracts (thus executing their code), create new contracts, and query information about the current transaction or the blockchain.[65][unreliable source?]
Addresses
Ethereum addresses are composed of the prefix "0x" (a common identifier forhexadecimal) concatenated with the rightmost 20 bytes of theKeccak-256 hash of theECDSApublic key (the curve used is the so-calledsecp256k1). In hexadecimal, two digits represent a byte, and so addresses contain 40 hexadecimal digits after the "0x", e.g.0xb794f5ea0ba39494ce839613fffba74279579268. Contract addresses are in the same format, however, they are determined by sender and creation transactionnonce.[24][non-primary source needed]
Virtual machine
The number of daily confirmed Ethereum transactions as of February 2024
The Ethereum Virtual Machine (EVM) is theruntime environment for transaction execution in Ethereum. The EVM is astack based virtual machine with aninstruction set specifically designed for Ethereum. The instruction set includes, among other things, stack operations, memory operations, and operations to inspect the current execution context, such as remaining gas, information about the current block, and the current transaction. The EVM is designed to bedeterministic on a wide variety ofhardware andoperating systems, so that given a pre-transaction state and a transaction, each node produces the same post-transaction state, thereby enabling network consensus. The formal definition of the EVM is specified in the Ethereum Yellow Paper.[24][66] EVMs have been implemented inC++,C#,Go,Haskell,Java,JavaScript,Python,Ruby,Rust,Elixir,Erlang, and soon[when?]WebAssembly.[citation needed]
Gas
Gas is aunit of account within the EVM used in the calculation of the transaction fee, which is the amount of ETH a transaction's sender must pay to the network to have the transaction included in the blockchain. Each type of operation which may be performed by the EVM ishardcoded with a certain gas cost, which is intended to be roughlyproportional to the monetary value of the resources (e.g.computation andstorage) a node must expend or dedicate to perform that operation.[citation needed]
When a sender is creating a transaction, the sender must specify agas limit andgas price. Thegas limit is the maximum amount of gas the sender is willing to use in the transaction, and thegas price is the amount of ETH the sender wishes to pay to the network per unit of gas used. A transaction may only be included in the blockchain at a block slot that has abase gas price less than or equal to the transaction'sgas price. The portion of thegas price that is in excess of thebase gas price is known as the tip and goes to the block proposer; the higher the tip, the more incentive a block proposer has to include the transaction in their block, and thus the quicker the transaction will be included in the blockchain. The sender buys the full amount of gas (i.e. their ETH balance is debitedgas limit ×gas price and their gas balance is set togas limit) up-front, at the start of the execution of the transaction, and is refunded at the end for any unused gas. If at any point the transaction does not have enough gas to perform the next operation, the transaction is reverted but the sender is still only refunded for the unused gas. Inuser interfaces, gas prices are typically denominated in gigawei (Gwei), a subunit of ETH equal to 10−9 ETH.[67]
Ethereum's smart contracts are written inhigh-level programming languages and thencompiled down to EVMbytecode, which is then deployed to the Ethereum blockchain. They can be written inSolidity (a language library with similarities toC andJavaScript), Serpent (similar toPython, but deprecated), Yul (an intermediate language that can compile to various different backends—EVM 1.0, EVM 1.5, and eWASM are planned), LLL (alow-levelLisp-like language), and Mutan (Go-based, but deprecated). Source code and compiler information are usually published on blockchain explorer websites soon after the launch of the contract so that users can see the code and verify that it compiles to the bytecode that is on-chain.[citation needed]
One issue related to using smart contracts on a public blockchain is that bugs, including security holes, are visible to all but cannot be fixed quickly.[68] One example of this is the 2016 attack onThe DAO, which could not be quickly stopped or reversed.[30]
ERC-20 tokens
The ERC-20 (Ethereum Request-for-Comments #20) Token Standard allows forfungible tokens on the Ethereumblockchain. The standard, proposed by Fabian Vogelsteller in November 2015, implements anAPI for tokens withinsmart contracts. The standard provides functions that include the transfer of tokens from one account to another, getting the current token balance of an account, and getting the total supply of the token available on the network. Smart contracts that correctly implement ERC-20 processes are called ERC-20 Token Contracts, and they keep track of created tokens on Ethereum. Numerous cryptocurrencies have launched as ERC-20 tokens and have been distributed throughinitial coin offerings.[69]
Ethereum also allows for the creation of unique and indivisible tokens, callednon-fungible tokens (NFTs).[70] Since tokens of this type are unique, they have been used to represent such things as collectibles, digital art, sports memorabilia, virtual real estate, and items within games.[71] ERC-721 is the first official NFT standard for Ethereum and was followed up by ERC-1155 which introduced semi-fungibility, both are widely used,[72] though some fully fungible tokens using ERC-20 have been used for NFTs such asCryptoPunks.[73]
The first NFT project, Etheria, a 3D map of tradable and customizable hexagonal tiles, was deployed to the network in October 2015 and demonstrated live at DEVCON1 in November of that year.[74] In 2021,Christie's sold a digital image with an NFT byBeeple forUS$69.3 million, making him thethird-most-valuable living artist in terms ofauction prices at the time, although observers have noted that both the buyer and seller had a vested interest in driving demand for the artist's work.[75][76]
Decentralized finance (DeFi) offersfinancial instruments in a decentralized architecture, outside of companies' and governments' control, such as money market funds which let users earn interest.[77] DeFi applications are typically accessed through aWeb3-enabled browser extension or application, such asMetaMask, which allows users to directly interact with the Ethereum blockchain through a website.[78] Many of these DApps can connect and work together to create complex financial services.[79]
Examples of DeFi platforms includeMakerDAO.[80]Uniswap, adecentralized exchange for tokens on Ethereum grew fromUS$20 million in liquidity toUS$2.9 billion in 2020.[81] As of October 2020, overUS$11 billion was invested in various DeFi protocols.[82] Additionally, through a process called "wrapping", certain DeFi protocols allow synthetic versions of various assets (such as bitcoin, gold, and oil) to be tradeable on Ethereum and also compatible with all of Ethereum's major wallets and applications.[82]
Ethereum-basedpermissioned blockchain variants are used and being investigated for various projects:
In 2017,JPMorgan Chase proposed developingJPM Coin on a permissioned-variant of Ethereum blockchain dubbed "Quorum".[87] It is "designed to toe the line between private and public in the realm of shuffling derivatives and payments. The idea is to satisfy regulators who need seamless access to financial goings-on while protecting the privacy of parties that don't wish to reveal their identities nor the details of their transactions to the general public."[88]
Performance
As of January 2016[update], the Ethereum protocol could process about 25 transactions per second; this did not change after the move to proof-of-stake. In comparison, theVisa payment platform processes 45,000 payments per second. This has led some to question the scalability of Ethereum.[89]
A proposal to partition global state and computation intoshard chains was presented at Ethereum's Devcon 3 in November 2017.[90] If implemented, each node in the network would only have to store and validate a subset of the network.
Ethereum's blockchain uses aMerkle–Patricia Tree to store account state in each block.[91] The trie allows for storage savings, set membership proofs (called "Merkle proofs"), and light client synchronization. The network has faced congestion problems, such as in 2017 in relation toCryptoKitties.[92]
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