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Gate.io Blog From Bitcoin to Ethereum: Why Ethereum is Blockchain 2.0

From Bitcoin to Ethereum: Why Ethereum is Blockchain 2.0

20 June 17:30

Vitalik Buterin, the founder of Ether, fits almost everything one would expect from a genius.

Vitalik was born in Russia in 1994. His father, Dmitry, is a computer scientist. But when he was 5 years old, Vitalik's parents divorced, and he later immigrated to Canada with his father. At the age of 4, his father gave him a computer as a gift and he got addicted to writing calculations programs in Microsoft Excel. By the age of 12, Vitalik was writing simple games on his own in C++, and at the age of 19, he entered the University of Waterloo, one of Canada's leading computer schools.

Influenced by his father, who co-founded a blockchain incubator BlockgeeksLabs, Vitalik was introduced to Bitcoin at the age of 17 and was fascinated by Bitcoin's decentralization. Later Vitalik began writing Bitcoin-related blog posts and then founded the website Bitcoin Magazine as the chief writer. Just eight months after entering college, Vitalik took a break from his studies to devote himself to the development of ethereum. Today, Vitalik is still the soul of the Ethereum team.

The Birth of Ethereum

Bitcoin was the first blockchain-based virtual currency system that achieved "decentralization", but its applications were limited. In 2014, Vitalik published "Ethereum: A Next-Generation Cryptocurrency and Decentralized Application Platform" in Bitcoin Magazine, in which technologies such as general-purpose contracts were first proposed in an attempt to create a more general blockchain system from the underlying protocol. The "Ether" in Ethereum is a classical concept with a long history. It was first introduced by Aristotle as one of the five elements in ancient Greek philosophy, representing the sky or atmosphere. Since then, modern physicists have borrowed this concept and considered the "Ether" as the medium for electromagnetic wave propagation. The "Ether" is thought to exist between the stars and planets, reminiscent of the bright summer sky.

In the Miami Bitcoin Conference in 2014, Vitalik officially announced the Ethereum project, and in July of the same year, Ethereum launched a special crowdfunding campaign. The campaign lasted for a total of 42 days, raising only bitcoins, while the participants would receive a certain percentage of Ether, the common currency of Ethereum, after its official launch. Throughout the crowdfunding, the team received 31,531 bitcoins from approximately nine thousand addresses, with a value of $18 million at that time. The launch crowdfunding for Ethereum was extremely successful, and later came to be known as the Initial Token Offering (IC0).

In 2015, when Ethereum was officially launched, the nine thousand participating addresses received a total of 60 million Ether from the Ethereum team, and these transactions were written directly into the Genesis block. In addition, it issued 12 million Ether to pay directly to the Ethereum Foundation. So Ethereum had 72 million coins issued in the Genesis block in all, which has grown each year since then through mining. Unlike Bitcoin's limited total supply of 21 million, Ether's supply is theoretically unlimited.

Ethereum and Smart Contracts

In the Ethereum white paper, Vitalik mentions the goals of the project: “What Ethereum intends to provide is a blockchain with a built-in fully fledged Turing-complete programming language that can be used to create "contracts" that can be used to encode arbitrary state transition functions, allowing users to create any of the systems described above, as well as many others that we have not yet imagined, simply by writing up the logic in a few lines of code.”

Simply put, this means creating a Platform for Smart Contracts and Decentralized Applications. Ethereum has a built-in Turing-complete programming language, Solidity, with which, developers can create "smart contracts" to enable the transfer of digital assets on the blockchain (what Vitalik calls "encoding arbitrary state transition function"). Then, developers can easily develop decentralized applications using and running them on the Ethereum Virtual Machine. Ether will be used as the system's "fuel" (Gas fee) to keep the application running. In Ethereum, accounts are divided into two categories: Externally Owned Accounts, which are controlled by ordinary users with their private keys, and Contract Accounts, which store the contract code and do not have corresponding private keys and therefore do not belong to anyone. Once the contract code is completed, it requires a transaction from an external account in order to start the code.

The birth of Bitcoin and blockchain redefined trust and made it possible for humans to transfer digital assets without third-party intermediaries. The birth of Ethereum and smart contracts has greatly advanced the application of blockchain. The Bitcoin network is a set of distributed databases, while Ethereum can be seen as a distributed computer. All nodes of it together constitute the CPU of the system, the blockchain is like a ROM, and smart contracts take the role of the program in it.

With smart contracts, once the terms are drawn up, they will be strictly enforced and cannot be modified. In this way, Ethereum realizes the integration of blockchain technology and Turing architecture. In the white paper, Vitalik envisions three types of applications of Ethereum: Non-financial, Semi-financial and Financial. Non-financial applications include online voting, decentralized governance, etc.; Semi-financial applications such as smart reward payments, etc. The financial applications are more popular, as Ethereum provides flexible and reliable contractual methods to build sub-currencies, financial derivatives, hedging contracts and other applications.

ERC20 and ERC721 token standards

In the white paper, Vitalik discusses in detail the so-called "Token System". Token is a general term used in the blockchain industry to represent an asset or value on the blockchain. Tokens are particularly important in machine-to-machine interaction and are considered the core of blockchain applications. It is even regarded as the key to the future "consensus economy".

In November 2015, Ethereum launched the ERC20 token standard, which allows developers to write smart contracts to create common tokens based on Ethereum. Today, anyone can follow a tutorial and issue a crypto coin in half an hour.

In 2018, the Ethereum community accepted the ERC721 standard. Under the ERC20 standard, tokens are homogeneous and interchangeable, and can be subdivided infinitely. Under the ERC721 standard, the smallest unit of a token is 1, which is not subdividable and is non-fungible (Non-fungible Token Standard or NFT). Based on the ERC721 standard, a variety of NFT projects have emerged, allowing real-world assets such as patents and digital artwork to be represented on the blockchain.

(For more information on NFT, see Gate.io Cryptopedia: NFTs for Everyone.

The Future of Ethereum: Ethereum 2.0

Ethereum and smart contracts have brought prosperity to emerging fields such as IC0, NFT, DeFi, which have also brought great challenges to Ethereum itself. Restricted by its own architecture, the transaction speed of Ethereum is insufficient to support its applications, and the network transaction fee (Gas fee) remains high. For this reason, the Ethereum Foundation has set up a roadmap to launch Ethereum 2.0 (aka “serenity”) around 2021. It is expected that after the launch, high Gas fee will be effectively alleviated, thus promoting further prosperity of DeFi. And after the consensus mechanism shifts from PoW to PoS, the energy consumption of the Ethereum system will be greatly reduced, and the participating threshold of nodes will also drop, thus promoting decentralization. In addition, due to the large number of tokens involved in pledging, the circulation of ETH in the market will drop, and the price of Ether is expected to rise further.

By Gate.io researcher Edward. H
*This article represents the views only of the researcher and does not constitute any investment advice.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
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