ETH

ETH
Name	ETH
Code	ETH
Precision	18
Original author	Vitalik Buterin, Gavin Wood, Joseph Lubin, Anthony Di Iorio, Charles Hoskinson
White paper	"A Next-Generation Smart Contract and Decentralized Application Platform"
Implementation date	30 July 2015
Source model	Open-source software
Mining algorithm	Proof-of-work (original), Proof-of-stake (current)
Block time	12 seconds (approx.)
Hash function	Ethash (original), SHA-256 (beacon chain)
Supply limit	No hard cap
Website	ethereum.org

ETH is the native cryptocurrency of the Ethereum blockchain, a decentralized, open-source platform renowned for its smart contract functionality. It serves as the fundamental fuel for operating the network, used to pay for transaction fees and computational services, colloquially known as "gas." Since its launch, it has become the second-largest cryptocurrency by market capitalization, underpinning a vast ecosystem of decentralized applications (dApps), decentralized finance (DeFi) protocols, and non-fungible token (NFT) marketplaces.

Overview

The asset functions as both a digital currency and a utility token within the Ethereum Virtual Machine (EVM), a global, decentralized computer formed by a network of nodes. Its primary role is to compensate participants, known as validators, for securing the network and executing operations, with fees dynamically priced based on computational complexity and network demand. The platform's design, spearheaded by co-founders like Vitalik Buterin and Gavin Wood, extends the concept of Bitcoin by enabling programmable, self-executing contracts, which has led to the creation of major protocols like Uniswap, MakerDAO, and OpenSea. This programmability has established it as the foundational layer for much of the Web3 and blockchain application landscape.

History

The concept was first described in a 2013 whitepaper by Vitalik Buterin, with development subsequently funded through a public crowdsale in mid-2014. The network, named Ethereum, went live on 30 July 2015, with its genesis block creating the initial supply. A major early event was the contentious hard fork following the DAO hack in 2016, which led to the split between Ethereum and Ethereum Classic. Key network upgrades over the years have included Homestead, Metropolis, and the multi-phased Serenity upgrade, culminating in the monumental transition from a proof-of-work to a proof-of-stake consensus mechanism in an event known as "The Merge" in September 2022.

Technology

The network operates on a proof-of-stake consensus mechanism, where validators stake ETH to propose and attest to new blocks, securing the chain against attacks like Sybil or 51% attacks. Execution and consensus are separated across the Execution layer and the Beacon Chain, with core technologies including the Ethereum Virtual Machine for smart contract execution and standards like ERC-20 for tokens and ERC-721 for NFTs. Upcoming developments, part of a roadmap including Danksharding, focus on scaling through layer 2 solutions like Optimism, Arbitrum, and zkSync, which process transactions off the main chain to improve throughput and reduce costs.

Economics and ecosystem

As a cryptoasset with no hard supply cap, its monetary policy is governed by network activity, with new issuance awarded to validators and a variable amount burned from transaction fees. It is a central reserve asset within the decentralized finance ecosystem, used for collateral in lending platforms like Aave and Compound Finance, and for liquidity pools on decentralized exchanges. The broader ecosystem includes stablecoins such as USD Coin and DAI, major NFT collections like Bored Ape Yacht Club, and infrastructure providers including ConsenSys, which develops the MetaMask wallet.

Governance and development

Core protocol changes are not governed by on-chain votes but are developed through a community-driven process led by researchers and developers, with final implementation requiring validator adoption via software clients like Geth or Prysm. Key decisions are discussed and researched by the Ethereum Foundation, along with other entities like the Enterprise Ethereum Alliance, with major upgrades like EIP-1559 and The Merge arising from extensive community deliberation. The off-chain governance model emphasizes rough consensus, with developers, miners (historically), validators, and large holders all influencing the network's direction.

Criticisms and challenges

The network has faced persistent criticism over high and volatile transaction fees, especially during periods of congestion from popular activities like NFT minting or DeFi trading, which can price out average users. Environmental concerns, largely associated with its original proof-of-work model, have been partially addressed by The Merge, though scrutiny remains over the energy source of validators. Other significant challenges include regulatory uncertainty from bodies like the U.S. Securities and Exchange Commission, potential centralization risks in staking pools like Lido, and the ongoing technical complexity of implementing full scaling solutions like sharding.

Category:Cryptocurrencies Category:Ethereum Category:2015 software