Ethereum, the second-biggest cryptocurrency after Bitcoin, is a blockchain-powered platform for creating decentralized applications (dapps).
Ethereum is not just a cryptocurrency. It’s a global, decentralized network that enables smart contracts—self-executing programs on the blockchain—and decentralized applications, or dapps, that run without banks, governments, or big tech.
When programmer Vitalik Buterin published a “whitepaper” in late 2013 proposing a new kind of blockchain—not just for money but for programmable code—a revolution in digital finance began. Today, the Ethereum blockchain hosts decentralized applications like smart contracts, games, digital art, and assets worth billions.
Ultimately, many believe that Ethereum could underpin a re-imagining of how the internet works, dubbed Web3, in which control of the internet is disintermediated away from big companies such as Amazon, Google, Facebook, and X.
This guide will help you understand the history of Ethereum, Buterin’s big idea, and the role Ether plays in that vision.
Smart contracts: Ethereum’s breakthrough
The feature that set Ethereum apart from Bitcoin early on was the smart contract. A smart contract is a code stored and executed on the blockchain that runs automatically once its conditions are met.
Smart contracts are transparent, tamper-proof, and execute without relying on third parties. This makes them the backbone of everything built on Ethereum, from DeFi protocols to NFT marketplaces.
Who Invented Ethereum?
Russian/Canadian computer programmer Vitalik Buterin wrote the whitepaper that Ethereum is based on. However, the building of the network and community was helped along by a number of co-founders: Anthony Di Loria, Charles Hoskinson, Miha Alisie, Amir Chetrit, Joseph Lubin and Gavin Wood.
Development of the Ethereum network began in early 2014 under the Ethereum Foundation, with Gavin Wood publishing the technical “yellow paper” that defined the Ethereum Virtual Machine.
A crowdfunded token sale followed in mid-2014, raising funds through an initial coin offering, or ICO, that exchanged Bitcoin for Ether. The ICO raised over $18 million.
The network officially went live on July 30, 2015, launching as “Frontier”—a platform for developers to test and deploy decentralized applications.
The switch from Proof-of-Work to Proof-of-Stake
When it first launched, Ethereum used the same Proof-of-Work consensus mechanism as Bitcoin, with cryptocurrency miners securing the network by solving complex cryptographic puzzles.
In September 2022, Ethereum switchted to a Proof-of-Stake (PoS) consensus algorithm. Instead of mining, Ether is created through staking: validators lock up at least 32 ETH as collateral and are chosen to propose and verify new blocks. Honest participation earns them ETH rewards.
This shift, known as “The Merge,” ended Proof-of-Work mining, making Ethereum more energy-efficient while allowing anyone with the required stake to help secure the network and earn rewards.
Blocks are still added about every 12 seconds, but ETH is now distributed as staking rewards, not mining rewards.
