The Evolution of Cryptocurrency Series: Ethereum the Masterchain

There is a fact that: When asked “What is Ethereum?” 90% of crypto market participants answered it is ETH. However, is that correct?

No!

Ethereum is a blockchain! And ETH is just 1 of many crypto belongs to that chain.

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So what is it to be exact?

Strictly speaking, Ethereum is an open source, distributed computing platform based on blockchain technology that has the ability to execute smart contracts (Smart Contracts) - that is, the terms written in the contract. will be executed automatically when the previous conditions are satisfied, no one can interfere. At the same time, Ethereum also allows developers to build decentralized applications (DApps) and decentralized autonomous organizations (DAOs). In which:

  • Decentralized applications (DApps) are independently deployed software, not on a single server, but distributed in a distributed manner on decentralized repositories and can be written in any language.
  • Decentralized Autonomous Organizations (DAOs) are organizations run by members based on a set of rules that are encoded in code. All members have the right to vote on important decisions of the DAOs. In return, members participating in DAOs must have a reward for participating in the operation of DAOs.

The evolution of Ethereum

Ethereum’s early days - The idea begin from Mastercoin

In October 2013, Vitalik Buterin, a young programmer and Bitcoin enthusiast, proposed an improved solution for the Mastercoin (now OmniLayer) project.

In that proposal, Vitalik came up with a solution that allows MasterCoin to support more types of contracts without having to add complex features.

Although the Mastercoin development team was impressed with Vitalik's proposal, they did not apply the solution to their project.

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The Beginning of Ethereum

After MasterCoin failed to adopt his solution, Vitalik continued his research and realized that: Smart contracts can be completely generalized.

In November 2013, Vitalik first shared an outline whitepaper of Ethereum. Only a few dozen people have access and pre-read this sketch. They then give feedback, allowing Vitalik to finalize the whitepaper for Ethereum.

Since sharing the whitepaper, Vitalik has added a teammate to build Ethereum and that person is: Gavin Wood. Gavin Wood was the first to proactively contact Vitalik and offer to help with his C++ programming skills.

In the summer of 2014, Gavin Wood published a yellow paper for Ethereum. At the same time, Vitalik also announced that Ethereum will be developed by the non-profit organization Ethereum Foundation.

After a year of construction and development, in June 2015 the first block of Ethereum was mined. It marks the official formation of the Ethereum Blockchain - One of the most important blockchains in the entire cryptocurrency ecosystem today.

The DAO Hack Incident

Ethereum at that time has been operating so well for about a year and has begun to form its own ecosystem. Among this ecosystem, it is impossible not to mention The DAO project - the first decentralized autonomous investment fund built on Ethereum.

The DAO was established and raised capital in May 2016 with a total value of up to 150 million USD. But after 1 month, The DAO encountered an extremely serious problem that caused the Ethereum blockchain to split later. That incident was called: The DAO Hack.

On June 17, 2016, a hacker activated a split function vulnerability in the code of The DAO smart contract. It allows the hacker to set up a “child DAO” from The DAO and transfer about $50 million into the wallet of the “child DAO”.

The smart contract of The DAO stipulates that: The money in the wallet will have to be locked for 28 days before the wallet owner officially has the right to use it.

Because it is forked from The DAO, the “child DAO” will have the same smart contract structure as The DAO. Therefore, the $50 million in the wallet of the “child DAO” had to wait 28 days before the hacker had full access to this asset.

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Faced with that situation, Vitalik could not stand to see the image of Ethereum deteriorate in the eyes of the community. Vitalik has a solution through a soft fork proposal, blocking all transactions from The DAO and "child DAO" wallet addresses, and calling on miners to still confirm transactions as usual. normal and ready to install when the soft fork is approved.

The soft fork update made it impossible for hackers to withdraw after 28 days of waiting. Phase 1 has been completed by freezing the funds in the “child DAO” wallet. Then how to get the money back from the “child DAO” wallet?

Ethereum Hard Fork

Hours before the soft fork was approved, a few community members discovered a bug that made Ethereum's network vulnerable to DoS (denial of service) attacks.

To protect the network, the Ethereum community has agreed to the only option: The Hard Fork Ethereum - change the rules and regulations being applied on the Ethereum blockchain to make blocks, transactions translations confirmed by the old rule become invalid.

Hard fork is the last resort to both recover the stolen funds in the "child DAO", and help the Ethereum network to avoid the risk of DoS attack. The entire Ethereum community has decided to conduct a hard fork at block 1,920,000. This is the block before the “child DAO” split from The DAO.

Although the lost funds were recovered, the consequences of the hard fork caused Ethereum's network to split in two - Ethereum and Ethereum Classic.

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ETH’s price through time

Ethereum’s price history reveals an eventful ride over the years. In ETH’s early days, the coin traded below $2.00 at times. The Ethereum price chart shows ETH’s price history on Cointelegraph’s Ethereum price index. ETH traded below $15.00 per coin in early 2017 and surged all the way up to around $1,400 per ETH in January of the following year.

Following that high, ETH proceeded to fall all the way back down near and below $100 at times in the subsequent months and years. The asset eventually trended back upward, surpassing the $4,000 mark in 2021.

Conclusion

Ethereum is a significant player in the crypto space, as evidenced by its market capitalization and the vast array of solutions that entities have built on the Ethereum blockchain. However, the network has faced difficulty in scaling. Its transition over to ETH2 aims to solve its challenges. Only time will tell regarding the results, though, and the transition is expected to take some time to play out.