Origins of Ethereum

Learn how Ethereum made an extendable blockchain possible, its basic features, and how it's used.

In the previous lesson, we learned the history of blockchain technologies, what problems they aimed to solve, and how they got initial traction. In this lesson, we'll see how Bitcoin’s limitations caused the creation of Ethereum.

Creation of Ethereum

The lack of an extendable blockchain was spotted by Canadian developer Vitalik Buterin, who was frustrated by the complexity of creating new blockchain applications. Vitalik was deeply involved in the blockchain ecosystem and was familiar with emerging blockchain projects and their limitations. He was also very familiar with Bitcoin and was a writer for the popular Bitcoin Magazine.

Seeing how much effort it took other teams to launch these projects, Vitalik came up with what was a radical idea at the time. What if there was a programmable blockchain network that allowed us to deploy arbitrary applications on top of it? In this way, instead of redesigning the whole network from scratch for every new idea or trying to hack a solution on top of Bitcoin, it would be possible to deploy a new application on top of this network.

An Ethereum developer would only need to focus on implementing the application’s logic. The rest would be taken care of by the shared blockchain implementation running multiple applications. To implement a new application, there would be no need to redesign the network protocol and launch a new network.

If we continue our analogy of a blockchain network as a mobile phone, the creation of Ethereum was like the creation of an iPhone with an App Store. Developers of mobile applications can focus on writing a mobile application and don’t need to start designing their own hardware just to develop a new game.

Ethereum vs. Bitcoin

Despite having different goals, Ethereum and Bitcoin have several similarities:

  • Both are based on blockchain technology.

  • Both are run as a network of peer-to-peer nodes.

  • Both were using the same consensus algorithm (that was true when the Ethereum network was created, but there is currently an ongoing effort to move it to a better algorithm, which we'll discuss later).

  • Both have their own currency that users can use for payments. Ethereum’s currency is called Ether, but the concept is the same.

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