You can not run the experiment again. Once a system like Ethereum starts, it can only progress, stacking blocks one atop the other. Edging forward, the system creates its own understanding of time measured in block height. Hopefully it gains users, who can fill the chain with history – after which they can “read” the ledger, validating it’s the same one broadcasted around the world, but not alter it. And yet, Ethereum’s history is full of fits and starts.
Today, Ethereum is the most active blockchain (when counting by number of developers). It supports novel financial systems worth $10s of billions, like algorithmic stablecoins and automated market makers (AMM), which could one day displace the old forms of payments and trade. It’s also no stranger to legacy firms – Visa, for instance, began using Ethereum to settle stablecoin transactions in 2021, and JPMorgan liked Ethereum enough to fork it to create Onyx.
This feature is part of our CoinDesk Turns 10 series looking back at seminal stories from crypto history. Ethereum's founding is our choice of the most important event from 2015.
At times, Vitalik Buterin, one of Ethereum’s five, or eight, or 15 co-creators (depending on how you measure) has doubted whether Ethereum deserves its accomplishments. In 2017, during the initial coin offering (ICO) rush that ushered in a new model of startup funding and pushed ETH’s market capitalization past half a trillion dollars, he asked on Twitter “...have we *earned* it?” Four years later, in an interview with Time Magazine, during another market rush that propelled Ethereum to unseen heights, he warned of the “dystopian potential” of digital assets if implemented incorrectly.
But would Buterin have done it differently if he could do it over? It’s a difficult question for a reporter in my shoes to pose. Given Buterin’s stature (and workload), he’s not responding to emails. So many of his co-founders (how many were there?) are in the same position, or left Ethereum in acrimony and have been accused of giving twisted accounts. Thankfully, the digital entrails still exist – the countless podcasts and blog posts Ethereum’s chief architect has left behind. And like an anthropologist on a Sisyphean search for a grand unifying theory that spans human time and culture, I can only propose:
One must imagine Buterin happy.
Despite its founder’s world-weary suspicions, Ethereum has arguably achieved much of what the founding cast set out to accomplish. The chain has fundamentally changed the way the world can conceive of finance and tech – even if its solutions ultimately are not adopted (or regulated out of existence). In an early publicity video, a boyish Buterin described Ethereum as a censorship-resistant platform for building decentralized applications (dapps). That’s as general a statement as any. But the prediction quickly proved true about a world-shaking “general-purpose technology,” to use a favorite phrase of Buterin.
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None of this would have been possible without the flexibility and foresight programmed into Ethereum since the beginning. Or the hard lessons learned along the way. Ethereum is a story of fits and starts about an immutable chain that’s changed. It began with Buterin’s inkling of an idea in 2013, which gained credency and currency as a worthwhile endeavor in 2014 when Buterin and friends raised $18 million in a token offering (paid in 30,000 bitcoin!).The first iteration of Ethereum launched in 2015, only to be reorganized a year later following the infamous attack on “The DAO” (which my colleague David Z. Morris covered in another feature for this series.)
Most recently, the project’s stewards rewrote Ethereum’s code base to swap out its energy-intensive proof-of-work (PoW) algorithm for proof-of-stake (PoS), a significant shift applauded even on Capitol Hill. Notably, the overhauled chain was supposed to be called “Ethereum 2.0” – an unintentional callback to the “Blockchain 2.0” meme popular during Ethereum’s early days – but everyone stuck with Ethereum. Just Ethereum. The idea of the network transcends its code; the chain is whatever people prefer.
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Looking back at the network’s founding reveals a lot about what it means to be consistent in a quick-changing industry, and how to execute on a vision with stakeholders spread across the world, many of whom want things done differently. It’s a story that’s literally filled books (notably Laura Shin’s and Camilla Russo’s). Filled with intrigue. That’s been juiced for headlines. But this story told as CoinDesk turns 10 (Ethereum, too, depending on how you count), wants to do something different – it tells you, dear reader, the ending is foreknown, the more that changes on Ethereum, the more it stays the same.
Who are you to disagree?
Vitalik Buterin, the Russia-born coder raised in Canada, grew up programming video games for fun. He was largely self-taught. His computer scientist parents would buy him dummies guides to programming and send him to math camp while he attended public grade school. He learned to see computer programs as things that can be owned and controlled and quickly forgotten.
Then Blizzard, the company that runs the multi-player online game World of Warcraft popular when Buterin was a teenager, “nerfed” his favorite character.
In an interview with Morgan Peck for Wired, Buterin said that event stirred something inside of him. The world, the highschooler began to see, was full of powerful decision makers who were like “Mr. Burns, sitting behind their desks saying, ‘Excellent. How can I screw a thousand people over this time.”
It was a “cartoonish” thought, he now admits, but the idea it sparked, to build a machine that could “decentralize” anything a computer, corporation or government could do – wresting power away from financial incumbents and building more enlightened social networks than Facebook and Twitter – stuck.
At least that’s the story Buterin has told about the inspiration behind Ethereum. Whether or not it’s the same spiel he gave to Peter Thiel is unknown. But the 19-year-old computer engineering student at the University of Waterloo eventually received a Founder’s Fund scholarship to drop out and code all day everyday towards that vision.
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Before that, for six months in 2013, he bounced around crypto meetups and hacker houses in the usual places like Amsterdam, Berlin, London, Tel Aviv and up and down the U.S. West Coast. There, he met the people looking to unravel the Web Thiel played a part in creating, the Web that went wrong, Web 2.0.
There’s a travelog of this period in Bitcoin Magazine, the publication Buterin co-founded, that gives the sense that Buterin, who has been described as robot-like on video, would not be too sentimental as a writer to miss the obvious poetry. Academic and journalist Nathan Schnieder has commended Buterin on his “reporter’s eye.”
Take just one article jokingly titled “BITCOIN GROUP THERAPY IN BERLIN TOMORROW,” where Buterin encourages anyone reading the Magazine to attend a meet-up at a once popular bar that accepted bitcoin. He anticipates a convivial scene where “everyone will be able to talk to the group for 5-10 minutes” about what they’re working on. There are plans to “gather in the sun,” to hand out.
It was then that Buterin was also most exposed to the early efforts to use Bitcoin for more than “decentralized money.” If non-fungible token (NFT) and smart contract forebears like Counterparty and Colored Coins once grabbed his attention, they eventually seemed like pitfalls.
Somewhere along the way, the true inspiration for Ethereum came – the story left untold. It was likely a gradual awakening to the realization that scaling blockchains by forking or layering networks on top of Bitcoin was a dead end. If you wanted anything more than a faster version of Bitcoin (like Litecoin), you’d need to build from the ground up.
Lost too to the sands of time is the exact moment Buterin conceived the name Ethereum – whether it came to him on the road or while back home in Toronto. Buterin told The Defiant’s Cami Russo the inspiration was a Wikipedia entry on “aether,” the medieval theory of a weightless, transparent element that permeates all matter and space.
It reportedly reminded him of science books he read as a kid and the simlarly-named chemical element. But mostly the debunked theory was a rich metaphor for the type of universal network he had in mind.
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"Vitalik wanted his platform to be the underlying and imperceptible medium for every application, just what medieval scientists thought ether was,” as Russo wrote in “The Infinite Machine.” And that’s Buterin, the sentimentalist story-teller, in a nutshell.
Buterin typed up the idea for Ethereum and proposed its early specs in a white paper and sent it to 15 friends and acquaintances in 2013.
Cardano founder Charles Hoskinson and Bitcoin Magazine co-founder Mihai Alisie came on as early co-founders, part of the first five official backers. By the time Buterin spoke at the North American Bitcoin Conference in Miami a few months later, the white paper had spread widely beyond that small group. According to Bitcoin OG Bruce Fenton, a conference attendee, Buterin was mobbed by 40 people after his “unpolished” presentation.
From that moment, the Ethereum project went from an idea to a whirlwind of activity.
Legendary British programmer Gavin Wood wrote the “Yellow Paper” introducing the network’s bespoke programming language Solidity. Together with another experienced coder Jeffrey Wilcke and Buterin, Wood is also credited with building Ethereum’s first prototype and implementing the network into seven other programming languages in a matter of weeks. Buterin had settled down for a time in a Miami hacker pad financed by the independently-wealthy Canadian web developer Anthony Di Iorio.
(While Buterin is often credited with predicting and outlining a number of core crypto technologies in the Ethereum whitepaper – like decentralized autonomous organizations (DAOs), though not non-fungible tokens – Wood’s document outlined the all-important Ethereum Virtual Machine setting the stage for a “multichain future” and Wood’s next project, Polkadot.)
Buterin today says he regrets the “greedy algorithm” he used when determining who would be brought into the fold to help build the technical and business case for the network. Essentially, it was a first-come-first-serve basis, he said on Naval Ravikant’s popular tech podcast, which led to in-fighting among Ethereum’s first inner circle.
Among the most volatile disputes was whether the organization overseeing the “free and open software” project should turn a profit. Hoskinson, for instance, wanted a corporate structure (where he would likely be CEO), while Buterin himself wanted an ostensibly non-profit organization. It was a weighty question not only because early Ethereans didn’t want to trigger U.S. securities law, but also because Ethereum badly needed funding.
The history here is muddled and filled with contradictory claims, but the scars of that debate are visible today. Hoskinson, one of the first whitepaper readers, argued against Buterin’s preference to run Ethereum through a non-profit and left to found IOHK, the company behind his blockchain Cardano. (As Laura Shin documents in her book about Ethereum, Hoskinson’s grating personality also likely accelerated the split.)
Joseph Lubin, a banker who discovered bitcoin, helped spin up the Ethereum Switzerland GmbH (EthSuisse) corporation to house Ethereum’s early development work. He’s now being sued by early employees looking for a greater equity stake in the company and network.
“We certainly miscalculated the sheer difficulty of navigating the relevant legal processes in the United States and Switzerland, as well as the surprisingly intricate technical issues surrounding setting up a secure sale website and cold wallet system,” Buterin wrote in a blog post announcing the ether (ETH) crowdsale, posted on the Swiss-based non-profit eventually spun up called the Ethereum Foundation.
The Foundation would manage the legal and marketing efforts of the ICO campaign, which lasted from July 20 to Sept. 2, 2014. And the sale was organized by EthSuisse, which controlled the wallet Ethereum funders would send bitcoin to. There was controversy about the fundraising details from the jump, including that U.S. residents would be able to contribute – potentially opening Ethereum to legal scrutiny. There was a promise to dissolve the corporate entity after the sale, and plans for the first 4,000 BTC to go towards “expenses incurred prior to and related to Genesis Sale.”
Ethereum was not the first token sale – it wasn’t even the largest example having raised $18 million prior to the ICO bubble. But it was still the early days of alt-chain launches and surrounded by legal uncertainties. Bitcoin, the first cryptocurrency, is said to have had a “fair launch” because its creator Satoshi Nakamoto published the code online without taking a cut. Ethereum’s sale took place in the full view of an investing public, too, in a sense, but had known founders, legal entities and “Terms and Conditions.” The Ethereum Foundation essentially created 72 million ETH tokens to bootstrap the network.
Today, U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler hints that ETH could be a security. There’s an intense legal debate about the issue, including inside federal agencies. By 2018, SEC Director of Corporate Finance William Hinman said Ethereum was “sufficiently decentralized” to be considered a commodity, a view inline with the agency’s director of the time, but which the SEC now argues was just Hinman’s personal opinion. Whatever the future legal outcomes, Ethereum has certainly benefited hugely from Hinman’s largesse, especially when you consider the scrutiny placed on a project like Ripple, which launched three years earlier than Ethereum.
Earlier this year, New York Attorney General (NYAG) Letitia James filed a lawsuit against crypto exchange KuCoin, which argued in part that ETH may be classified as a security now that Ethereum has switched to a new consensus mechanism, an event that “demonstrates a degree of centralization” just because it occurred. The legal challenge was precipitated by Ethereum’s adoption of proof-of-stake, but is rooted in Ethereum’s founding.
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“Buterin and the Ethereum Foundation also received significant quantities of ETH in the ICO and are believed to retain significant stakes of that ETH today,” James’ suit reads.
The crowdfunding is an unignorable part of Ethereum’s legacy, because it was necessary to bootstrap the network and a continual reminder that code has authors, whether or not those authors would prefer that “code is law.”
Regardless of how ETH is legally classified, which would no doubt have major repercussions for the industry, the debate around the asset is a clear example of Ethereum’s founding principle. The ability for government agents to make deliberations and revert prior decisions throws the idea of a “credibly neutral” blockchain into relief.
Ethereum went live on July 30, 2015 with a “barebone implementation” of the code called Frontier, nearly two years after Buterin published the project’s whitepaper and after a robust testing phase. In an effort to reduce dependencies on the Ethereum Foundation, and facilitate a more “grass roots” founding, the team set block and gas limits intended to allow miners to come online and adopters to get up to sync without having to “rush.”
“In the interest of decentralization and transparency, Ethereum will not provide the Genesis block as a download, but instead have created an open source script that anyone can use to generate the file,” early Ethereum developer Stephen Tual wrote. In a blog post around the time, Buterin reiterated the idea that “everyone must be able to see that the mechanism is fair.”
Even from that early date, Buterin had the idea that Ethereum would transition to proof-of-stake, which at that time was a largely untested and experimental way to secure blockchains. He first wrote about proof-of-stake back in 2013. Shortly after the launch of the Genesis Block, Ethereum developers introduced the “difficulty bomb,” which would allow programmatic updates making mining harder and less profitable over time, necessitating a switch to staking.
The social consensus that forms Ethereum could be seen in the network’s early adoption of “hard forks.” Unlike on Bitcoin, which fought an entire “Civil War” over a decision to update the codebase, these backwards-incompatible updates were seen as a sign that even if updates were planned among a circle of developers, the community can quickly come aboard. On March 14, 2016, for instance, when ETH hovered around $12.50, there was the “Homestead” fork that changed the protocol in a way that would make it even easier to change down the line.
In some sense, this fork was a dry run for one of Ethereum’s most monumental decisions – the rolling back of The DAO attack. As my colleague David Z. Morris wrote, on July 20, 2016, a hard fork proposal was put before ETH holders, which received 85% of the vote to allow Ethereum to revert back to a prior state after an attacker cleaned out the very first decentralized autonomous organization’s address of over 3.6 million ETH, or about 15% of the cryptocurrency’s total supply.
It’s tempting to consider this moment as a rebirth of Ethereum as we know it today, as there exists an alternative blockchain called Ethereum Classic that keeps a record of all Ethereum transactions including the DAO attacker’s. Ethereum Classic had heavy-hitting supporters, who believed that a hard fork to rescue funds for early adopters is anathema to crypto’s key values. Bitcoin was founded during the age of bank bailouts.
Buterin sees the situation differently. In a podcast with Lex Fridman, he noted the differences between holding values close to heart, and knowing when to compromise. The DAO fork was a pragmatic decision, he said, based on a particular set of circumstances. At a technical level it was possible to revert the attacker’s transactions, which is not always the case after a hack, he said. But more importantly, the network was just born, relatively, and full of promise – why risk knocking it off its feet?
See also: Did Ethereum Learn Anything From the $55M DAO Attack? | Opinion
This was arguably the understanding of Ethereum from the beginning. Reasonable people can disagree, and a blockchain’s only purpose is to make space for those opinions.
In a 2016 blog post urging more collaboration between crypto experts and researchers of artificial intelligence, the latest technical field that seems set to transform the world, Buterin provides a high-level description of the machines built on Ethereum.
“The algorithms are dumb, and yet the agents that they have to control are quite smart,” he wrote. And, in many ways, Ethereum is allowed to be dumb because it has people around it making smart decisions.
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