Token Advice - #9 📈

Happy 8th Birthday, Ethereum 🎉

On July 30th, 2015 the genesis block on Ethereum was mined. What an incredible ride it’s been since. In crypto, weeks often feel like months and months feel like years. The short history of Ethereum has been a wild ride and we’re going to do our best to highlight some of the major milestones here. A brief history of the world’s second largest blockchain by market cap:

In 2013, a then 19 year old Vitalik Buterin wrote the initial Ethereum whitepaper. In this paper, Vitalik described Ethereum as a “Next-Generation Smart Contract and Decentralized Application Platform”. His thesis:

Satoshi Nakamoto's development of Bitcoin in 2009 has often been hailed as a radical development in money and currency, being the first example of a digital asset which simultaneously has no backing or “intrinsic value” and no centralized issuer or controller. However, another, arguably more important, part of the Bitcoin experiment is the underlying blockchain technology as a tool of distributed consensus, and attention is rapidly starting to shift to this other aspect of Bitcoin. Commonly cited alternative applications of blockchain technology include using on-blockchain digital assets to represent custom currencies and financial instruments, the ownership of an underlying physical device, non-fungible assets such as domain names, as well as more complex applications involving having digital assets being directly controlled by a piece of code implementing arbitrary rules or even blockchain-based "decentralized autonomous organizations" (DAOs). What Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create "contracts" that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code.

For those of us non-technical folks, the vision for Ethereum was to create an online financial system that could be owned and operated by anyone, and can be governed by code. A “digital legos” of sorts.

In 2014, development of the blockchain started and Ether (Ethereum’s native cryptoasset) was created. It’s important that we continue to separate the two - Ethereum and Ether - as they are different. Ethereum is the blockchain on which applications are developed. Ether (ETH) is the utility asset which allows people to use the blockchain. When someone buys Ethereum on an exchange or onchain, what they’re actually buying is Ether the asset.

From 2015 to late 2017, many beta applications were developed on the blockchain ultimately leading to the initial coin offering (ICO) boom and bust in 2017. By early 2018, Ethereum reached its all-time high in market cap at nearly $150 billion, but also began facing scaling challenges, which went on to become a turning point for its development community.

A few years later in 2020, Ethereum witnessed its first period of explosive user growth with the onset of decentralized finance applications. These applications leveraged Ethereum's smart contract functionality described above with the aim to recreate traditional financial services like lending, borrowing, and trading, but in a decentralized and permission-less manner fully onchain. Applications like Uniswap, Compound, and Aave grew incredibly fast, locking up billions of dollars worth of assets and thousands of users. Scale was still a major pain point for Ethereum as the fees to use the blockchain sky-rocketed with all the usage. This led to the next stage of development from 2021 to today, Layer 2 and side chain scaling solutions.

Over the course of these last 8 years, Ethereum went through another major shift, becoming the first blockchain to switch from a proof-of-work consensus to a proof-of-stake consensus. This was a groundbreaking shift that finalized with the Merge in the fall of 2022. We’ll touch more on this another day as it could be an entire newsletter in and of itself!

So where is Ethereum at today?

From a numbers standpoint, Ethereum has most definitely scaled (via Ethereum.org):

While staying true to its ethos of being open-source, Ethereum is also expanding its use cases. Here’s an overview of what Ethereum can do today (via Ethereum.org):

Ethereum has come a long way and we anticipate the move onchain is still in its very early stages. As the user experience improves, it could become likely we don’t refer to something being “onchain” at all, similar to how we rarely use the phrase “online commerce” anymore, it’s simply “commerce”. Our core thesis remains that both Bitcoin and Ethereum will play key roles in the financial systems of the future. We’ll be watching both closely and sharing our thoughts here!

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A very Happy Birthday to our President & Founder, Tyrone!

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