When Bitcoin made its debut in 2009, it ignited a revolution in finance by introducing the world to blockchain technology. But it was Ethereum, launched in 2015 by a then-21-year-old programmer named Vitalik Buterin, that expanded the potential of blockchain far beyond the vision of digital gold. Ethereum opened the door to a more dynamic and versatile world of decentralized applications, smart contracts, and an entirely new ecosystem that could reshape industries.

Introduction to blockchain

Blockchain technology changed the game by introducing a way to record transactions that are transparent, secure, and decentralized. Instead of relying on banks or intermediaries, blockchains operate on a network of computers that verify each transaction and store it in “blocks”. These blocks link together, forming a “chain” that is nearly impossible to alter. First used in Bitcoin, It’s the foundation of a new era where trust is built right into the code.

The founder of Ethereum

Vitalik Buterin, the visionary behind Ethereum, is a Russian-Canadian programmer who helped reshape the cryptocurrency landscape. Born in 1994, Buterin discovered blockchain technology early on, recognizing its immense potential beyond Bitcoin’s vision of “digital gold”. At just 18, he co-founded Bitcoin Magazine, where he explored the capabilities of decentralized networks. But it was his creation of Ethereum that truly reshaped the landscape. With Ethereum, Buterin introduced the concept of smart contracts - self-executing agreements that run without intermediaries - unlocking an entirely new world of decentralized applications. What began as a bold idea has since grown into a global movement, changing the way we think about money, trust, and the internet itself.

Vitalik Buterin - the founder of Ethereum

A new kind of Internet

To understand why Ethereum caught fire so quickly, imagine a world where every agreement you make is sealed in code. Need to rent an apartment? A smart contract could ensure your payment releases the digital keys the moment the calendar flips to the first of the month. No landlords holding deposits hostage. No brokers taking a chunk for making phone calls you could’ve made yourself.

The implications spread like wildfire. Developers flocked to Ethereum’s platform, their fingers racing across keyboards as they dreamed up decentralized applications - or DApps - that could do everything from lending money without a bank to running online marketplaces free from corporate control. Ethereum was no longer just Vitalik’s brainchild; it was a universe, expanding with each passing day.

Ether - more than just digital gold

Ether (ETH) isn’t just a cryptocurrency; it’s the lifeblood of the Ethereum network. Want to execute a smart contract? You’ll need ETH to cover the gas fees. Every interaction, from launching a new DApp to minting an NFT, runs on this digital fuel. It’s the cost of admission to a world where code is king and trust is baked into every transaction. ETH ensures that the wheels of this decentralized machine keep turning, incentivizing validators to process transactions and secure the network.

But ETH is more than a tool for developers and tech enthusiasts. For artists, it’s the bridge between their vision and a global audience hungry for the unique and rare. For investors, it represents a bet on a future where financial services, identity, and ownership are decentralized and democratized. For businesses, it’s a gateway to building without barriers, free from the constraints of middlemen and gatekeepers.

How Ethereum works

Ethereum’s power lies in its versatility. Here’s a breakdown of the essential features that make Ethereum a unique platform for innovation.

Understanding gas fees

Every transaction on Ethereum requires a gas fee, paid in ETH. Gas fees are what keep the network running smoothly by incentivizing validators to process transactions. The more complex the action, the higher the gas fee. While high fees have been a drawback for newcomers, Ethereum’s development team is working on solutions to make transactions more affordable.

Usage fees for the most popular networks compared to ETH. Average fees as of Nov 12, 2024

What are smart contracts?

Smart contracts are self-executing agreements in code. Think of them like automated “if-then” statements. For example, if a smart contract manages an apartment lease, it could automatically release the digital keys to a tenant once payment is made. The contract enforces itself, removing the need for intermediaries like brokers or agents.

What are decentralized applications?

Imagine you’re in a small-town market where every vendor runs their own stall with no central manager. You buy produce directly from the farmer, trusting them because everyone can see what each vendor is selling and how they run their business.

This is the idea behind decentralized applications, or DApps. Running on a blockchain and using coded rules (smart contracts), DApps enable secure, direct transactions without a middleman.

How DApps work

DApps usually run on blockchain platforms like Ethereum. Smart contracts, the rules behind DApps, are like automated contracts written in code. For example, imagine a vending machine that sells drinks. Once you put in the correct amount of money, the machine automatically gives you your drink - no need for a cashier. Smart contracts do the same thing for DApps, ensuring that specific actions happen when certain conditions are met, without human intervention.

Examples of popular DApps

1. Uniswap: think of it as a peer-to-peer currency exchange. If you want to trade one type of cryptocurrency for another, you don’t need to go to a bank or a big exchange. Instead, you can go directly to Uniswap, which matches you with someone else who wants to trade with you. It’s like swapping foreign currency at the marketplace rather than at a bank, with fees shared among participants, not a central authority.

2. Aave: imagine you have some money that you’re willing to lend. Instead of going through a bank, you can offer it directly to others on Aave. Likewise, if you need a loan, you borrow directly from other users. Aave’s smart contracts handle everything, ensuring that lenders are repaid with interest and that borrowers meet all terms.

3. OpenSea: think of OpenSea as an art gallery where anyone can display and sell their digital creations, from artwork to collectibles. This gallery is decentralized, so no single curator decides what’s valuable. Instead, buyers and sellers interact directly, buying and selling unique digital assets (NFTs) that prove ownership and authenticity, like having a certificate for a one-of-a-kind painting.

A step into the future: The Merge

Fast forward to 2022. Ethereum had evolved, but it was still carrying the baggage of its early days. Transactions were faster, yes, but the network was still energy-hungry, relying on the same Proof of Work (PoW) system as Bitcoin. Miners solved puzzles to validate transactions, which meant burning through colossal amounts of energy.

That’s when the Ethereum team pulled off “The Merge”, one of the most anticipated upgrades in blockchain history. They swapped PoW for Proof of Stake (PoS), a system that was more energy-efficient and scalable. Instead of miners racing to solve puzzles, validators - people who staked their ETH as collateral - were chosen to confirm transactions. Overnight, Ethereum’s energy consumption dropped by 99%. The blockchain was leaner, greener, and ready for the future.

A comparison between Proof of Work and Proof of Stake

Challenges and competitors

But Ethereum isn’t the only tool available. Blockchain platforms like Solana and Avalanche are in the race, boasting cheaper and faster transactions. Ethereum’s network has faced criticism for high gas fees, which can be a deal-breaker for newcomers looking to make their first NFT or try a DeFi app. However, Ethereum isn’t just sitting still. Developers are working on layer 2 solutions—tools that help scale the network without changing its core. These solutions, like ZK (Zero Knowledge) Rollups, mean lower fees and faster transactions.

How to buy and store ETH?

To buy Ethereum, you’ll need a platform that supports cryptocurrency purchases. You can use a crypto on-ramp like Swapped.com, which offers several payment methods such as Apple Pay, Google Pay, Credit Cards, Skrill, and Bank Transfer.

• Buying: purchase ETH easily with Swapped.com. Just choose amount and payment method, such as a credit card or bank account - and your ETH will be delivered in minutes.

• Storing: you can store ETH in a digital wallet, either online or on a physical device called a hardware wallet. Hardware wallets add extra security by keeping your ETH offline.

What's next?

The Ethereum roadmap is as ambitious as it gets. There’s talk of sharding, a process that would split the network into smaller pieces, allowing it to handle even more transactions at once. And while these ideas are still unfolding, one thing is clear: Ethereum’s journey is far from over.

From a dorm room idea to an ecosystem that has helped millions realize new ways to exchange value and trust, Ethereum isn’t just a blockchain; it’s a movement. Every transaction, every contract, every application adds another chapter to its ongoing story. And as the network continues to evolve, we’re all part of its narrative - pioneers in the digital frontier, where the lines between technology, trust, and possibility blur into one.