Ethereum is a public blockchain-based platform, featuring smart contract functionality.[2][3] It provides a decentralized virtual machine, the Ethereum Virtual Machine (EVM), that can execute peer-to-peer contracts using a cryptocurrency called ether.

Ethereum was initially proposed in late 2013 by Vitalik Buterin, a cryptocurrency researcher and programmer. Development was funded by an online crowd sale during July–August 2014.[4] The Ethereum platform was officially launched at July 30, 2015,[5] and is still in active development.

History

Ethereum was initially described in a white paper by Vitalik Buterin, a programmer involved with Bitcoin, in late 2013 with a goal of building decentralized applications.[6][7][8] Buterin believed that many applications could benefit from Bitcoin-like software.

In March 2014, Ethereum was described as being part of a group of projects with the potential to extend blockchain use beyond bitcoin's peer-to-peer money system.[9] While there was early praise for the technical innovations of Ethereum, questions were also raised about its security and scalability. Buterin won the World Technology Award in 2014 for the co-creation and invention of Ethereum.[10]

Initial funding for the Ethereum project was provided by a public crowdsale in July and August 2014, with the participants buying the ether with bitcoins.[4][8] The total amount raised by the closure of the event at September 2, 2014 was $18,439,086 worth of bitcoins.

Ethereum's live blockchain was launched on 30 July 2015.[11] The Ethereum software project was initially developed by a Swiss company, Ethereum Switzerland GmbH (EthSuisse),[12] and a Swiss non-profit foundation, the Ethereum Foundation.[4]

By May 2016, the market capitalization of the cryptocurrency ether was more than US$1 billion and Vox noted that the relatively new digital currency was challenging bitcoin by offering a range of services that are not possible using bitcoin.[13]

On June 17, 2016 The DAO, which had been hailed as a revolutionary use of Ethereum that demonstrated the potential for the platform, was hacked and around a third of the ether held by The DAO, worth about $50 million at the time, was moved[14][15] into a clone of The DAO that likely prevented the hacker from withdrawing the ether for about a month.[16] After the hack the Ethereum community debated how and whether to reclaim the ether, and whether to shut down The DAO,[16] as the decentralised nature of the DAO and of Ethereum meant a lack of a central authority that could take quick action, instead requiring community consensus.

Ether

The value token of the Ethereum blockchain is called ether. It is traded on cryptocurrency exchanges like any other cryptocurrency;[19] it is also used to pay for transaction fees and computational services on the Ethereum network.[20]

Buterin sold 25% of his ETH holding in April 2016,[21] describing this diversification as "sound financial planning," and also quoted Gavin Andresen’s statement concerning Bitcoin: "I still say that it’s an experiment, and the whole thing could implode." [22]

The price can be volatile per circumstances, such as a plunge from $21.50 to $15 when The DAO was hacked on June 17, 2016.[15]

Smart contracts

Smart contracts are applications with a state stored in the blockchain. They can facilitate, verify, or enforce the negotiation or performance of a contract, or that make a contractual clause unnecessary. Ethereum contracts can be implemented in various Turing complete scripting languages,[23] The Ethereum system has been described by the New York Times as "a single shared computer that is run by the network of users and on which resources are parceled out and paid for by Ether."[20][24]

Smart contracts on a public blockchain mean that bugs, including security holes, are visible to all but cannot be fixed quickly;[25] the 17 June 2016 attack on The DAO was of this sort and could not be quickly stopped.[14]

Programming languages

The Ethereum Virtual Machine (EVM) works on a protocol defined in the Ethereum Yellow paper. Solidity is the JavaScript-like programming language designed for developing smart contracts that run on the Ethereum Virtual Machine (EVM). Solidity is compiled to bytecode which is executable on the EVM. Using Solidity, developers can write applications that implement self-enforcing business logic embodied in smart contracts.[26] Enterprise software vendors such as Microsoft and ConsenSys have also created systems that translate common programming languages such as Visual Basic into Solidity coded smart contracts.[26]

Performance

In Ethereum all smart contracts are stored publicly on every node of the blockchain, which has trade-offs.[27] The downside is that performance issues arise in that every node is calculating all the smart contracts in real time, resulting in slower speeds.[27] Ethereum engineers have been working on sharding the calculations, but no solution is present at this time.[27] As of January 2016, the Ethereum protocol can process 25 transactions per second.[27]

Uses

As well as being a cryptocurrency, the Ethereum platform has multiple uses. By March 2016, companies developing for the Ethereum distributed application platform included Microsoft, IBM, and JPMorgan Chase.[20]

In hypothetical uses, higher-level software could utilize Ethereum to establish an online marketplace platform.[4] or in devices that have their permitted uses embedded in them, e.g. in car hire.

Applications

Ethereum has been used as a platform for decentralized applications, decentralized autonomous organizations and smart contracts.[20][28] The scope of applications include projects related to finance, the internet-of-things, identity management,[29] farm-to-table produce, electricity sourcing and pricing, and sports betting.[20] Decentralized autonomous organizations may enable a wide range of possible business models that were previously impossible or too costly to run.[30] Notable Ethereum applications include:

  • Augur decentralized, distributed prediction market software.[31]
  • ConsenSys, a blockchain startup focused on Ethereum technology is developing both enterprise software and Dapps.[32]
  • The DAO[33] with the objective to "provide a new decentralized business model for organizing both commercial and non-profit enterprises".[34][35] The DAO was funded with Ether.[20][34]
  • Backfeed, socioeconomic platform[36]
  • Ethcore, an Ethereum-based private venture focusing on light clients and Internet of Things (IoT).[5]
  • FreeMyVunk, a gaming value platform.[5]
  • The Rudimental, an equity crowdfunding portal for arts and media.[5]
  • TransActive Grid[5]
  • Slock.It, a system for building smart locks with Ethereum.[5]
  • Etheropt, a decentralized options exchange.[5]
  • Digix[4] A value token, called DigixDAO has also been created and the token began trading on exchanges on 28 April 2016.[5][5]
  • Ujo Music.[45] Imogen Heap used the technology with her single "Tiny Human".[45]

Enterprise software

Ethereum is also being either tested or implemented by enterprise software companies for various applications.

  • Deloitte and ConsenSys announced plans in 2016 to create a digital bank called Project ConsenSys.[5]
  • R3 Project, which connects 11 banks to distributed ledger using a private Ethereum blockchain running on Microsoft Azure.[28]
  • IBM ADEPT, an IoT system using Ethereum for smart contracts support.[47]
  • Microsoft Visual Studio is making the Ethereum Solidity language available to application developers.[48]
  • Ethereum Blockchain As a Service (EBaaS) on Microsoft Azure, which provides enterprise clients and developers with a cloud-based blockchain developer environment.[32]
  • Innovate UK provided 248,000GBP in funding to Tramonex to develop cross border payments prototype using Ethereum.[49][50]

Adoption

The New York Times noted in March 2016 that Ethereum platform adoption is still early, and that Ethereum could encounter technical and legal problems going forward that would slow the growth of the distributed computing platform. Many Bitcoin advocates say that Ethereum may "face more security problems than Bitcoin because of the greater complexity of the software."[20]

A New York Times article said, "The system is complicated enough that even people who know it well have trouble describing it in plain English".[20]

Microsoft announced a partnership with ConsenSys, a blockchain startup focused on Ethereum technology. Customers of popular cloud-based business service Microsoft Azure have access to tools that "allow them to experience and build with cloud-based blockchain applications, from securities trading to cross-border payments...".[3]