What is Ethereum: How has it evolved since its creation?
TLDR;
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- What is Ethereum? Ethereum is the second largest and most popular blockchain after Bitcoin
- The network powers popular decentralized applications like decentralized exchanges
- Ethereum changed its consensus mechanism from Proof of Work to Proof of Stake
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Ethereum was the first blockchain to support smart contract-based applications birthing a new ecosystem of decentralized finance (DeFi) and non-fungible token applications. Although Bitcoin remained the most popular, mostly because of its base currency BTC, Ethereum attracted a following due to its utility. Its success has motivated the creation of other blockchains like Solana, that initially marketed themselves as Ethereum killers. So, what is Ethereum and how much has it evolved since its creation.
What is Ethereum?
Unlike Bitcoin, Ethereum is a blockchain network dedicated to creating a decentralized computing platform rather than primarily powering a virtual currency. Launched in 2015, Ethereum is the brainchild of computer programmer Vitalik Buterin.
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Other notable figures that contributed heavily during the network�s early days include Gavin Wood, Joseph Lubin, Anthony Di lorio, and Charles Hoskinson. Hoskinson has since left the pack to develop his own blockchain called Cardano which uses a unique consensus mechanism called Ouroboros.
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Lubin, on the other hand, runs Consensys, a company that creates Ethereum-linked solutions. Ethereum�s development is funded by the Ethereum Foundation which is headed by Aya Miyaguchi
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Initially, Ethereum used a Proof of Work (PoW) consensus mechanism like its predecessor, Bitcoin. In 2022, it made the leap from from a PoW to a Proof of Stake (PoS) consensus mechanism through a process called �the Merge.�
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The process was called the Merge because it fused the beacon chain with the Ethereum mainnet allowing the network to switch to a new consensus mechanism without affecting transaction history and the blockchain�s functionality. With the switch to PoS, transaction validators on the network embraced staking and ditched mining. Here�s a post explaining what is staking and another one diving deep into what is cryptocurrency mining.
Why did Ethereum switch from Proof of Work to Proof of Stake?
To better understand why Ethereum made the switch, let�s look at two major shortcomings of Proof of Work.
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A PoW-based system uses enormous amounts of computing power to conduct the mining process. The higher the computing power, the more the electrical energy needed to power the computing devices and consequently a negative imapct on the environment.
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A PoW blockchain is also slower than a PoS-based network. A slow connsensus mechanisms is unable to provide the speed needed to efficiently run DeFi applications, decentralized exchanges, and other DApps that support concurrent users.
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Ethereum switched to a PoS system for three main reasons:
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One, a PoS mechanism is more energy efficient and less harsh to the environment. Second, PoS is sustainable and more secure than a PoW. Third, It�s scalable and improves decentralization. Ethereum also switched from PoW to PoS to lower the hardware requirements for anyone wishing to join the network as a validator.
Ethereum 2.0
The PoS-based Ethereum blockchain was christened Ethereum 2.0. Since the 2022 Merge, Ethereum has gone through other upgrades to enhance transaction cost, security, user experience, among other aspects of the blockchain.
Major Ethereum upgrades after the Merge
The Shanghai/Capella upgrade
The Ethereum blockchain welcomed the Shanghai/Capella upgrade in 2023. The update worked on both the execution and consensys layers of the network allowing stakers to withdraw their funds. Stakers had to wait for almost three years, from December 2020, for this option.
Ethereum Dencum upgrade
The Dencum upgrade went live in 2024 and focussed on making it cheaper to transact on Ethereum scaling networks or layer 2s such as Polygon, Base, and Optimism.
What is Ethereum Pectra upgrade
The Ethereum Pectra upgrade is scheduled to take place in the first quarter of 2025. It enhances the blockchain�s scalability, staking system, and user experience. The update also enables basic cryptocurrecny wallets to perform complex computations and directly connect to decentralized applications.
What is Ethereum Fusaka upgrade
Ethereum�s Fusaka Upgrade comes after the Pectra update. Fusaka will largely focus on improving the blockchain�s scalability.
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Note that Ethereum upgrades are done through Ethereum Improvement Proposals. (EIPs). A single upgrade can involve several EIPs. Each EIP handles a specific aspect of that upgrade. You can consider EIPs to be sections of a larger upgrade.
Conclusion
Although the shift from a Proof of Work to a Proof of Stake system is Ethereum�s biggest update, the blockchain is always evolving and going through upgrades. Pectra and Fusaka are the main upgrades after ditching a PoW consensus mechanism. According to Ethereum.org, the blockchain will continue upgrading �as new information and technology become available.�
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Since the Merge, Ethereum has evolved to offer cheaper transactions, handle more transactions per second, and consume less electricity making it sustainable and environmentally friendly.