After Three Years Of Ethereum, How Close Are We To Web 3.0? August 01, 2018, 03:30:45 PM EDT By Guest Contributors Shutterstock photo
By: Fran Strajnar, CEO of Brave New Coin
In 1999, Russian computer engineer Dmitry Buterin moved his family to Canada after establishing himself as a tech entrepreneur in Moscow. Around 2011, he introduced his 17-year-old son Vitalik to Bitcoin. Vitalik’s first foray into cryptocurrency was writing about it as Co-founder of Bitcoin Magazine, but after just two years, the prodigious polymath had learned so much in the field that he was about to revolutionize the industry with his concept of building a blockchain with its own programming language.
History
While working with Mastercoin (now called Omni) in Israel in 2013, Vitalik suggested improvements to the project to make the protocol more generalized in order to support more contracts. Moreover, he saw a major flaw in its scripting language which was not Turing complete .
Although appreciated, his suggestions weren’t implemented by the Mastercoin team, which left Vitalik to envision the Ethereum Virtual Machine:
In 2013, Vitalik said: “This project intends to do is to take cryptocurrency 2.0, and generalize it – create a fully fledged, Turing-complete (but heavily fee-regulated) cryptographic ledger that allows participants to encode arbitrarily complex contracts, autonomous agents and relationships that will be mediated entirely by the blockchain.
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After sketching his ideas for a new cryptocurrency on Bitcointalk and a variety of other crypto forums, Vitalik was soon joined by several other programmers wanting to contribute to the project. Among them was Charles Hoskinson (the founder of Cardano), Jeffrey Wilcke, and Gavin Wood, who can claim to be among the Co-founders of Ethereum.
The premise was set for Ethereum to be the first blockchain with its own programming language, functioning as more than just a virtual currency, but rather a “world computer.” The first Ethereum smart contract language, Serpent, was written entirely by Vitalik Buterin, but was made redundant after inherent flaws were uncovered in the code of one of its earliest contracts, Augur’s REP token.
The next native language, Solidity, was written in an amalgam of all the most prominent languages its developers were using — Go, Javascript, Python, and C++.
The genesis
The project survived for months in the ether of emails between contributors until January 2014, when the team met for the first time in Miami Beach for the North American Bitcoin Conference. This inevitably became the place where the team decided they were ready to unveil their project to the world.
After the conference, the fledgling Ethereum team had to decide whether the venture was going to be, as Hoskinson puts it, crypto Mozilla (non-profit) or crypto Google (for profit). The vote was a unanimous 8-0 in favor of crypto Google. The team went to Zug, known as the synonymous as the “Crypto Valley of Switzerland, and learned the intricacies of establishing the non-profit Ethereum Foundation to raise funds for the for-profit venture.
However in June 2014, the decision was reversed and the Ethereum project was re-established as an entirely non-profit venture. Amid dispute, some of the core developers left the project, including Hoskinson.
Ethereum democratizes fundraising with ERC20 token
Ethereum fundraised for its ether (ETH) token between July and August 2014, issuing 11.4 million pre-mined ETH out of a total supply of 100 million, and raising almost $11m by the time the ICO ended.
Despite a successful fundraising, issuing an ICO during this early stage in crypto was an arduous affair that required building a cryptocurrency almost from scratch.
By the end of 2015, however, the ERC20 token became a standardized smart contract in the Ethereum eco-system, which set out common rules that all Ethereum contracts would follow.
With the ERC20, anyone could take that smart contract, issue as many tokens as they wanted, and then sell them for Ether.
Chart of rate of ICOs
Described by Charles Hoskinson as “crowdfunding on steroids,” the ERC20 has revolutionized fundraising and disintermediated banks, venture capital, and crowdfunding platforms like Kickstarter with true peer-to-peer funding.
It has levelled the playing field for startup funding which once used to be domain of VC investors in very specific areas like Hong Kong, Tokyo or New York, now people who have never met from other parts of the world could essentially donate to a project. The informal nature of ICOs has also been a poisoned chalice – the 2016 hack of the ICO funds raised for the Decentralised Autonomous Organisation (DAO) led to a schism in the community and the creation of Ethereum Classic.
Scalability hindering roll out of Web 3.0
Ethereum has suffered from scalability issues since its inception and is capable of handling just 14 transactions per second – compared to Visa’s 24,000 per second – causing network congestion.
Last year, one of the most popular DApps, Cryptokitties, infamously crashed the network.
Ethereum is preparing to hard fork from Ethereum Metropolis version 3.0 to version 3.1, Constantinople, by October which will make transactions more efficient and reduce fees. Four Ethereum improvement proposals (EIP) are also being tested by developers on the network. Several scaling solutions are in the works, including sharding the network (breaking the ledger into smaller chunks) and a Layer 2 solution called Plasma, that would function in a similar way to the Lightning Network for Bitcoin .
There are over 700 DApps listed on Dappradar and over 1,700 listed on community website State of the DApps (though a majority of these are inactive). If Ethereum is to become the ‘Blockchain 2.0,’ there is an urgent need for the network to scale to thousands of transactions per second before it is usurped by a superior technology that can.
Moving to proof-of-stake
Sharding and migration from a proof-of-work protocol to proof-of-stake are the imminent priorities for Ethereum. According to Ethereum researcher Justin Drake , the two goals have been merged into one project instead of being worked on separately, with the move to the PoS Casper protocol slated for 2019 and sharding implemented in two phases over 2020 and 2021.
At the suggestion of Charles Hoskinson, Ethereum has been using a proof-of-work mining algorithm similar to Bitcoin’s SHA256, the newer SHA3, before it removes mining altogether with a proof-of-stake algorithm.
This migration will be done during the “Ethereum Ice Age” — a period in which the PoW mining difficulty is exponentially raised to a point where it becomes unviable to mine and is expected to kick in sometime in 2020.
Ethereum is also in a race to move to a PoS protocol before ASIC chips (processors purposely built to mine ETH) overwhelm the hash rate of the network, making it susceptible to attacks – the threat of which some believe the development team isn’t taking seriously enough.
Hedge funds are also reportedly starting to take short positions in ETH due to the slow progress in improvements.
Ethereum empowering users
With 17,000 nodes running the network globally and a community of around 250,000 members, the network effect of Ethereum could reach a critical mass before it is undercut by a competitor.
“Ethereum has been wonderfully stable now for years and this is the greatest credit that can go to its authors, Vitalik Buterin, Gavin Wood and others. It’s this stability which makes it so hard for other smart contracting blockchain challengers, even those which promise some brilliant features, to take Ethereum on,” said Henri Pihkalak, CEO and Founder of Streamr, a data platform running on smart contracts.
“As for Vitalik, he’s an amazing ambassador for the underlying socio-economic struggle of decentralization – to return control of technology to ordinary people. There are few others in this space who remain so focussed on those deeper political ends as he is.
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