The world’s computer
Ethereum and the reinvented internet
Early internet pioneers imagined the world wide web as the great equalizer. The internet was supposed to be a place where open and accurate information fostered freedom.
One of the foundational pillars of the internet was that for the first time, information and data could be easily discoverable and shareable, as though the whole world was finally getting a card to the same library.
But, the vision of a free, openly accessible internet hasn’t yet been achieved. Instead, one of the biggest trends on the world wide web is that data and critical internet infrastructure is controlled by a few increasingly powerful internet companies.
If the headlines of past months are any indication of future trends, the concentrated control over the internet has led to outcomes such as fake news, swayed elections, privacy breaches, and surveillance in the name of selling well-targeted advertisements.
And this is where the idea for Ethereum as a new version of the internet fits in. The technology was conceived by Toronto-based computer programmer and early bitcoin proponent, Vitalik Buterin (he was 19 at the time) in 2013
Buterin’s vision, which he fleshed out in a paper outlining what would become the Ethereum Virtual Machine, took the ideals established by Bitcoin but added functionality by making Ethereum more of a programmable base layer so that other apps could be built on top of it.
The goal was to create a set of tools that developers could use to move the internet away from an information network characterized as centralized, controlled, and disproportionately profitable for only a few large companies. Instead, with a system like Ethereum the command and control functions of the internet can be redistributed and redeployed for greater access and security.
There are two main ways that Ethereum developers are trying to build a new, decentralized internet architecture. The first is by enabling a network that anyone can participate in running and securing by contributing their computing power as an Ethereum node.
The Ethereum network also allows people to create smart contracts or agreements that execute once certain conditions are met. Smart contracts will enable the next wave of digital innovation by helping to reduce the barriers of entry for new kinds of internet-based businesses and projects.
Already, there are a number of novel projects being built on Ethereum. These projects range from decentralized crypto exchanges and decentralized file sharing and storage to predictive markets and digital collectibles.
That’s not to say that decentralization at any kind of scale is easy, or even possible yet. In fact, following the launch of the Ethereum network in 2016, a large project called the Decentralized Autonomous Organization DAO, the first ambitious project that would be built on Ethereum was hacked (there was a security issue with the coded contract that was governing the DAO itself not with the code running Ethereum itself).
The result of the hack was that $50 million of the $150 million raised to build out the DAO was moved and controlled by the hacker. The funds were not lost completely, and could potentially be recovered, but it would require undoing some of Ethereum’s transactions, or editing the underlying Ethereum layer, which was supposed to be uneditable.
The decision about how best to proceed was controversial, and an early test in how the new system would be governed. Since there is no single company or gatekeeper in charge, the ultimate decision was to fork or split the code controlling the protocol, which essentially created two versions of Ethereum.
One version is maintained by people who believed that Ethereum should not have been edited to undo the hack. This version is called Ethereum Classic. The other version was supported by people that wanted to edit Ethereum to undo the hack and restore the funds. This version ultimately became the more dominant Ethereum.
Following the fork, the value of Ethereum continued to grow as new projects and companies began building decentralized applications while using Ethereum as a base layer.
One of the biggest improvements enabled by the combination of decentralized, permissionless computing and smart contracts, is that the Ethereum network allows people to build standalone economies that are supported by tokens.
The native token to the Ethereum network is called ether. But other projects that are building on top of Ethereum are able to create their own tokens which can be used to incentivize the building, adoption, and use of all kinds of new technologies and economic activity.
By 2017, one of the dominant uses for Ethereum was to create tokens, which were sold as a means to raise funds. The process became known as an ICO, or an initial coin offering, which is a play on an IPO, or initial public offering, which is when a company goes public on a traditional stock market.
These token sales, which were collectively raising hundreds of billions of dollars by the end of 2017 caught the attention of the Security Exchange Commission (SEC). The SEC is currently trying to develop regulations that address ICOs with an eye toward protecting investors while not hampering a new wave of digital innovation.
In addition to an ICO platform, there are two main uses emerging for the Ethereum platform. Both of them are new kinds of token standards, which are being developed to increase the ease of collaboration and use among the various crypto projects that are being built to support the vision of a decentralized future.
The ERC20 token standard is used widely by projects building on Ethereum because it provides a set of rules that allow the tokens from different projects to be traded back and forth and used with supporting wallets. The standard helps provide more flexibility and potential applications because all of the individual projects are tied to the larger Ethereum network.
The other token standard is called the ERC721, which achieves a different goal than the ERC20 standard. Instead of creating a set of rules that allow coins to easily be exchanged for one another, the ERC721 standard stamps each token as unique. Having distinctive tokens is useful for things like collectibles or digital expressions of rare material goods. More token standards are being developed for different use cases.
The construction of Ethereum as a new internet is still in its early days. And there are still a number of challenges to overcome before widespread adoption and daily use of Ethereum-powered apps are possible.
Two of the biggest challenges that the Ethereum development community are currently addressing are the scalability of the network (which translates to things like the number and speed of transactions) and general adoption and growth by everyday users.
The Ethereum roadmap is ambitious, and there are a lot of planned milestones and updates coming up in the near future, which should make watching the construction of the Ethereum Virtual Machine super interesting to watch!
The world’s computer: Ethereum and the reinvented internet was created by Abra as a quick look at a rapidly growing technology. Worldwide, developers are building on top of Ethereum and pushing the idea of decentralization forward.