- Ethereum launched five years ago today
- The smart contract platform has seen tremendous growth and success in that time
- Where will the protocol be in another five years?
Ethereum, the world’s first blockchain-based smart contract platform, turns five today. Five years and a 104,093% ICO return later, how much of a part does Ethereum play in the cryptocurrency market of today and, most importantly, tomorrow? We look back on how the protocol got started, what it has achieved in that time, and what it needs to do to stay where it is.
A Revolutionary Idea
Ethereum has its roots in a 1997 paper by Nick Szabo introducing the concept of smart contracts, but it wasn’t until 2013 when Vitalik Buterin published a paper entitled ‘A Next-Generation Smart Contract and Decentralized Application Platform’. This platform was, of course, Ethereum, a revolutionary idea that combined the principles of smart contracts with blockchain technology. Ethereum held an ICO in 2014 at a price per token of $0.311 and launched its blockchain on this day in 2015.
The ICO boom of 2017 and more recently the DeFi craze of 2020 has illustrated Ethereum’s diversity and ability to play host to almost any decentralized activity. To these two crazes we can also add the slow-burning growth of non-fungible tokens (NFTs), assets and collectibles that are sold on platforms powered by blockchains like Ethereum that many think represent the future of asset ownership and trading.
Ethereum’s Enterprise Success
It’s not just crypto projects using Ethereum. As far back In 2016 it was revealed that JPMorgan was basing their own private blockchain, Quorum, which will power their JPMCoin cryptocurrency, on Ethereum. This theme has only continued over time, with the Ethereum Enterprise Alliance membership roster including the likes of BP, Intel, and Microsoft as well as several banks including Santander, RBS, BBVA, and Société Générale, all of whom use Ethereum to power various issuance and settlement platforms. Considering XRP was supposed to be the token that all the banks used, Ethereum is doing a pretty good job in stealing its thunder, and its clients.
Ethereum also remains the second biggest cryptocurrency in terms of market cap, which is no mean feat considering how cryptocurrency has grown in the last four years. Market cap isn’t everything of course, but it still has more than double the market cap of third-placed XRP, whose place it took in February 2016 and has never looked back.
Ethereum Not Without Problems
While Ethereum is still making waves in the blockchain space, it can’t be denied that it has problems. The DeFi wave has shown that the transaction fee model needs looking at urgently, with the average Ethereum transaction fee having risen 11x since May. Buterin admitted last year that the Ethereum blockchain was “almost full”, and that was before DeFi.
Part of the problem is Ethereum’s Proof-of-Work consensus mechanism which limits the transactions per second (TPS) to 15-20. For comparison, EOS can do 4,000 TPS and NEO 10,000. These blockchains, and the many others that want to challenge Ethereum for the blockchain platform crown, are only going to get quicker over time as new consensus mechanisms are created. Ethereum risks being left behind – indeed, if it wasn’t for its first mover advantage it would already be dead.
Fortunately for Ethereum it has a solution. Ethereum 2.0, which in some ways has been in the works since Vitalik Buterin first discussed upgrading from Proof-of-Work in 2014, will usher in a switch to Proof-of -Stake, a potential 100x scalability increase, and a reduction in the coin issuance, among other benefits. This is what Ethereum supporters and users have been crying out for for years, and with the first proper test phase due to be rolled out in November, they might finally get it in early 2021.
Upgrade Essential for Continued Success
Ethereum has undoubtedly been the blockchain success story to date. No other project can claim the same amount of daily usage and variety of projects built on it. It is still the go-to platform for ICOs and DeFi startups and has some 200,000 active developers working on it.
Ethereum’s first mover advantage, the huge amount of projects already built on it, and its solid reputation both inside and outside the community will ensure that it continues to be a major player in the blockchain world over the next five years and beyond. Just how much of a major player depends on Ethereum 2.0 being successfully implemented in 2021, or Vitalik’s baby could see itself forgotten about and ignored more and more as it heads towards its tenth year.