Vitalik Buterin created Ethereum in 2013, after what he perceived as limitations in the functionality of the Bitcoin programming language, namely Turing’s lack of integrity. He published the first whitepaper at the end of that year, describing a distributed computing platform for running smart contracts and creating decentralized applications (dApps).
A year later, Buterin and a few other early contributors created a nonprofit called the Ethereum Foundation, an organization dedicated to researching this cryptocurrency, developing core protocols, and growing the ecosystem. The foundation’s first task was to host the Ethereum crowd sale, which raised 31,529 BTC ($ 18 million at the time) in exchange for roughly 60 million ether and use the proceeds to fund the network’s initial development.
The mainnet launched in July 2015, with the first live release called Frontier. Soon after, Augur (REP) held the first Initial Coin Offering (ICO), in which the startup sold its Ethereum-based REP tokens (created through the ERC-20 standard) to help fund the project.
The ability to develop and sell a newly generated token to help raise capital became an attractive fundraising method because the projects could circumvent traditional companies’ legal policies and costs. Ethereum-centric startups created thousands of new tokens since Augur’s ICO, raising billions of dollars in the process.
What was DAO?
In April 2016, a decentralized hedge fund known as DAO hosted an ICO, raising $ 150 million in ETH in the process. In July of the same year, an attacker exploited a bug in DAO’s smart contracts, allowing the guilty party to divert 3.6 million ETH. A significant part of the Ethereum community chose to reverse the chain to remove DAO and its subsequent hack from the network’s history.
The remaining stakeholders held the preservation of immutability in the highest regard and refused to agree to a ledger rewrite. The division in the community led to a complex and controversial fork a few weeks after the hack, causing a permanent division in the network. The legacy chain that did not reverse its transaction history is known as Ethereum Classic (ETC).
Differences with Bitcoin
The main difference is the type of category in which they are included. While Bitcoin is used to make payments, Ethereum is a platform to build other projects and their respective cryptocurrencies.
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Ethereum is an inflationary cryptocurrency, so it does not have an issuance limit. But this does not mean that it is unlimited. Its token, ether, is the gasoline or native means of payment that other projects use and that as it is used, it is liquidated as if it were a traditional fuel.
Another big difference is the consensus algorithm; in this case, it uses the proof of work, and the standard token is ERC-20.
Its primary function is the execution of smart contracts.
What is Ethereum?
What is Ethereum: A beginners guide to ETH cryptocurrency
To fully understand Ethereum, what it does, and how it can potentially impact our society, it is essential to learn its main properties and how they differ from standard approaches.
First of all, Ethereum is a decentralized system, which means that any governing entity does not control it. The absolute majority of online services, companies and businesses are based on a centralized system of governance. This approach has been used for hundreds of years, and although history has proven to be flawed, its application is still necessary when the parties do not trust each other.
A centralized approach means control of a single entity, but it also means a single point of failure, making online applications and servers using this system extremely vulnerable to hacker attacks and even power outages. Additionally, most social media and other online servers require users to provide at least some degree of personal information, which is then stored on their servers. From there, it can easily be stolen by the company itself, its rogue workers, or hackers.
