Vitalik Buterin and Ethereum
Just 5 years after Satoshi Nakamoto’s Bitcoin, Vitalik Buterin, co-founder of Ethereum, took the world of finance by surprise once more.
Nakamoto’s Bitcoin eliminated the third party out of the global payment system and allowed people from all over the world to send one-another money without the help of a bank or any intermediary. The reason why this digital currency came to be in 2009 was precisely the fact that financial institutions were fallible, as the crisis of 2007-08 had shown.
However, the Bitcoin protocol is intentionally limited in terms of what it can be used for – it’s only designed to send and receive money. In 2013, Vitalik thought of taking this idea of a digital asset to the next level.
What if we would use the same blockchain technology behind Bitcoin to create something bigger, a virtual machine that would support complex transactions (e.g. smart contracts) and even application development?
And that’s exactly what happened.
Who Is Vitalik?
Having made both Forbes’ 30 under 30 and Fortune’s 40 under 40 lists, Vitalik Buterin describes Ethereum as a world computer that’s both nowhere and everywhere at the same time. The true gift of decentralization. To better understand how this idea came to be, let’s take a closer look at Vitalik himself, ETH co-founder.
Vitalik spent his early childhood in the Russian city of Kolomna, where he was born in 1994. Before starting elementary school, his parents relocated to Canada in an effort to increase the family’s living standards, but also to give their only child a chance at a better education.
In early primary school, Vitalik’s uncanny understanding of economics, math, and programming landed him in a class for gifted children. Later on, he attended the Abelard School in Toronto, an institution known for its Socratic method of instruction.
At the ripe young age of 17, Vitalik’s father introduced him to Bitcoin. In 2012, he snatched a Bronze medal at the International Olympiad in Informatics and at the end of 2013, he published a white paper entitled “A Next-Generation Smart Contract and Decentralized Application Platform.”
In his own words, he was expecting his idea to be mocked by experts in the field. However, the opposite was the case. A great number of developers that attended the international Bitcoin conference in 2014 joined the Ethereum project and, aside from dedicating their skills to it, they also helped raise over 30,000 Bitcoin from the community.
What Is Ethereum?
In specialized terms, Ethereum is an open-source, public, blockchain-based distributed computing platform that is Turing-complete, which is to say it’s a ledger that can be used to create new applications.
The idea might be difficult to grasp, but the EVM (the Ethereum Virtual Machine that conducts currency operations) is nothing less than a de-centralized world computer. It’s not fully physical, nor completely code. Think of it as the middle-way between software and hardware.
EVM is a virtual machine, similar to those created on a server, but also different. For instance, if you shut down someone running an Ethereum node, the network maintains integrity. You also can’t alter the code behind it, although you can create applications. In fact, you could shut every user down and Ethereum will still exist.
Alternatively, the more people are connected to it, the bigger it gets. The job of the EVM supercomputer is to run user-submitted code. If, for example, you want to write an Ethereum smart contract and submit it, you can do so freely. However, a significant amount of programming knowledge and logic is required (alongside a proficient command of legal reasoning and contract writing).
Once you’ve submitted a contract to the Ethereum network, it can never be altered. These agreements function as agents themselves, since they continue to execute their instructions whenever there is a transaction or message that concerns them.
What’s one of the first things that people did with the Ethereum infrastructure? You guessed it: they created new cryptocurrencies and went wild with ICOs (Initial Coin Offerings). Today, there are nearly 1000 different types of coins, including one for funding Russian gas extraction and processing (RGS), a collateralized USD Coin (USDC), and a MEDX token that supports a decentralized healthcare information system.
Naturally, not many of them survive the initial period of aggressive speculation and a great deal of them have even been exposed as scams and Ponzi schemes (OneCoin and HEX among them). Ethereum continues to have the biggest market cap, but XRP and Tether have raised a significant amount of interest.
While the first is a digital currency aimed at liquidity providers and financial institutions, the second is a cryptocurrency meant to mirror the value of the US dollar. At the moment of writing, Ethereum has a market cap of roughly $14 billion – but it has seen better days, as it reached ten times that amount before the crypto crash of 2018.
The Future of Ethereum
As early as the summer of 2020, we’re going to witness the launch of Eth 2.0, an upgrade to the existing block-chain that will introduce PoS (proof-of-stake) and sharding. Aside from improving the speed of transactions, this upgrade will also reward cryptocurrency investors for having assets in the network’s native coin.
Eth 2.0 will basically be the same block as the one we know today, only that it will be much lighter to operate. Because the price of ETH is determined by the free market, its value (in relation to the traditional currencies we continue to use and other cryptos) is subject to change as a result of trading, which… well, sucks.
It’s a pity that such a revolutionary technology that empowers individuals, rather than institutions, is subject to the pitfalls of investor speculation. The constants, however, are that the market capitalizations of the top 100 coins continue to grow and more people are using them for global transactions.
Bitcoin slid on Monday in volatile trading, after it went through a technical adjustment that reduced the rate at which new coins are created, but the outlook remained upbeat as the increase in supply slows down.