Ethereum, a token or a "World Computer"?
The founding story of the second biggest Crypto Network in the world
This article will sound much more technical than many of my previous articles. Still, if you have the patience to read it twice, I promise you that you will understand a lot more about Ethereum than 99% of the world’s population. Don't worry for those of you who still can’t understand Ethereum. I will be digging deeper into each aspect of this article. Now let’s get on with the origin story of Ethereum.
Ethereum, like many community-driven, open-source software projects, has evolved since its initial inception. In 2014 Vitalik Buterin published a white paper titled "Ethereum: A Next-Generation Smart Contract and Decentralised Application Platform." This was five years after the original Bitcoin white paper by Satoshi Nakamoto. A year later, in 2015, the Ethereum project was launched. The original document acts as a good starting point for us to understand the vision and purpose behind Ethereum.
Before we unpack Ethereum, it's a good idea to learn more about the co-founder and inventor of Ethereum. Born to Russian parents, Vitalik migrated with his family to Canada when he was six. A gifted child from a very young age, he was drawn to mathematics, programming, and economics. At the age of 17, he learned about Bitcoin from his father. He pursued writing as a path to earn bitcoin. The publication owner of Bitcoin Weekly offered five bitcoin (about $3.50 at the time) to anyone who would write an article. The relationship didn't last long as the publication didn't make sufficient revenues.
Vitalik moved on, co-founding and writing for Bitcoin Magazine. During his period as a writer and contributor to the Bitcoin community, Vitalik realised that the Bitcoin protocol had several limitations. He realised that while Bitcoin was excellent as a token for transactions, it wasn't built for smart contracts. In his white paper, he highlights the need for creating a consensus protocol (bitcoin uses proof-of-work) for smart contracts and applications. While developers were already using the bitcoin protocol to develop applications, it was severely limited because it was never intended for this purpose. At the time, if you wanted to create a smart contract, you had two options.
Building an independent network was a good approach but very difficult for most people to implement. You literally had to create a separate blockchain (your own version of bitcoin). It wouldn't be possible for individual applications to interact with each other (because they would be on different blockchains). This wouldn't be a viable approach for most small applications.
Building a protocol on top of Bitcoin - At the time, protocols built on Bitcoin had to depend on a trusted server to provide the data. This inherently defeated the purpose of having a decentralised protocol.
So Vitalik proposed this (it may sound complicated, but I will unpack the below paragraph):
The intent of Ethereum is to merge together and improve upon the concepts of scripting, altcoins and on-chain meta-protocols, and allow developers to create arbitrary consensus-based applications that have the scalability, standardisation, feature-completeness, ease of development and interoperability offered by these different paradigms all at the same time. Ethereum does this by building what is essentially the ultimate abstract foundational layer: a blockchain with a built-in Turing-complete programming language, allowing anyone to write smart contracts and decentralised applications where they can create their own arbitrary rules for ownership, transaction formats and state transition functions.
Famously, Vitalik delivered a 25-minute speech about Ethereum at the North American Bitcoin Conference in Miami on 26 January 2014. He compares Bitcoin to SMTP (protocol for email). SMTP is very good at one thing, sending and receiving email. Similarly, Bitcoin is essentially excellent at just one thing, sending and receiving money. He then compares Ethereum to TCPIP (protocol for the internet).
He classifies Ethereum as a next-generation foundational layer with its own blockchain. He explains that it has a built-in Turing Complete programming language. The term "Turing complete" refers to a system capable of performing any logical step of the computational function. This is similar to JavaScript, the programming language that powers the Web.
Vitalik's proposal was to create a "World Computer". A platform on which to develop decentralised applications and write smart contracts. Essentially what differentiates Ethereum from bitcoin is that it doesn't stand first as a payment system but rather as a computing platform. He proposed that the Ethereum world computer be fuelled by its internal crypto-fuel, "Ether". It would be used to pay transaction fees on the network.
Some of the examples of applications that could be developed with ease on Ethereum include:
Creating Crypto Currencies with inbuilt smart contracts
Savings Wallets
Decentralised Exchanges
Decentralised Social Networks
This was the beginning of so much innovation in Crypto. I strongly recommend watching this video to soak in some Crypto History. You can see it here.
Over the next few weeks, I'll dig deeper into the key differences and unique aspects of Ethereum. I will also look at some of the initial applications developed on Ethereum and the evolution of Ethereum since 2015.
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