Ethereum: A Decade of Trials and Triumphs, With a Promising Future Ahead
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Abstract: The advent of Ethereum Spot ETFs paves the way for mainstream institutions to enter the market.
On July 22, Justin Drake, an official researcher at the Ethereum Foundation, announced that today marks the tenth anniversary of Ethereum. Ten years ago, Ethereum officially launched its ICO (Initial Coin Offering), with the ETH/BTC exchange rate at 0.0005 at that time, and it has increased over 100 times in the past decade.
Over these ten years, Ethereum has undergone tremendous technical transformations and market fluctuations while achieving remarkable success in promoting decentralized finance (DeFi) and transforming the traditional financial world. Recently, the U.S. SEC officially approved the Ethereum spot ETF, paving the way for mainstream financial institutions to invest in Ethereum. This further highlights Ethereum's status and potential in the traditional financial market, adding a significant milestone to its development.
From its humble beginnings to becoming a leader in the cryptocurrency and blockchain field, Ethereum's story is not only a legend of technological innovation but also a magnificent chapter of overcoming difficulties, facing challenges, and reshaping the future. At this important historical moment, MEXC will lead everyone to look back on Ethereum's development trajectory and look forward to its promising future.
1. Early Stage: Smart Contracts Make ETH the Ticket to ICOs
In December 2013, Russian programmer Vitalik Buterin published a white paper that first introduced the concept of Ethereum. The project secured development funding through a crowdfunding campaign in 2014, and the Ethereum network officially launched in July 2015.
Unlike Bitcoin, Ethereum allows developers to create and deploy smart contracts on its blockchain. These smart contracts can automatically execute contract terms without intermediaries, enabling the widespread use of decentralized applications (DApps). However, Ethereum did not achieve significant ecosystem development in its early stages.
Initially, Ethereum did not make a significant market impact, and its development faced many challenges. The platform experienced multiple system vulnerabilities and hacker attacks, which threatened its very survival.
For instance, the infamous "Dao Attack" in 2016 saw hackers exploit a contract vulnerability to steal approximately 3.6 million Ether (worth about $50 million at the time, and $11.8 billion today). This incident led to severe disagreements within the Ethereum community on how to handle the stolen funds, specifically whether to implement a "hard fork" to recover the stolen Ether. Ultimately, Ethereum executed a hard fork to return the stolen funds to investors, resulting in the creation of two blockchains: Ethereum (ETH) and Ethereum Classic (ETC). Although this action temporarily resolved the crisis, it caused the first major consensus split within the Ethereum community, leading to disagreements and doubts.
As we entered 2017, the ICO (Initial Coin Offering) boom began, with Ethereum playing a pivotal role. ETH became the ticket for ICO participants.
Ethereum's smart contract functionality allowed projects to issue their own ERC-20 tokens and conduct crowdfunding through smart contracts. The introduction of the ERC-20 standard particularly simplified the token issuance process for ICO projects, significantly boosting the growth of the Ethereum ecosystem.
Moreover, the ICO model leveraged Ethereum's decentralized nature to bypass traditional venture capital and banking financing routes, enabling startups to raise funds directly from global investors. This new funding method drastically changed the financing landscape for startups.
With the rise of the ICO craze, the demand for ETH surged. According to MEXC market data, the price of ETH skyrocketed from $8 at the beginning of 2017 to a peak of $750 by the end of the year, an increase of nearly 100 times.
However, the rapid growth of ICOs also drew the attention of global regulatory bodies. Some projects engaged in fraudulent and speculative activities, leading certain countries to impose strict regulations or outright bans on ICOs. As a result, Ethereum became a focal point in discussions about blockchain and cryptocurrency regulation.
In addition, the influx of numerous ICO projects exposed the limitations of the Ethereum network in terms of scalability and security. For example, in late 2017, the CryptoKitties game caused severe congestion on the Ethereum network, causing transaction fees to skyrocket by dozens of times. These issues further prompted the Ethereum community to research and develop scalability solutions such as Ethereum 2.0 and Layer 2.
2. Exploring DeFi: Ethereum Shapes a New Financial Landscape
Today, Ethereum's market cap stands at $394 billion (according to 8marketcap data), ranking among the top thirty global assets, surpassing companies like Samsung, Oracle, and Bank of America. Ethereum's success is fueled by the rapid development of decentralized finance (DeFi), building on the foundations laid during the ICO era.
2.1 DeFi and NFT Development
Hundreds of projects utilized Ethereum for ICOs, raising billions of dollars and attracting a large number of developers and investors to the Ethereum ecosystem, spanning fields from fintech to gaming and supply chain management.
The ICO era not only brought capital and users but also advanced Ethereum’s development tools and infrastructure. Developer tools, wallets, exchanges, and blockchain explorers all improved during this period, making the Ethereum ecosystem more comprehensive and mature.
After years of accumulation, the DeFi flower finally bloomed in the summer of 2020.
Ethereum's smart contract capabilities provided fertile ground for the rise of decentralized finance. DeFi platforms like Compound and Aave allowed users to lend and borrow without traditional financial intermediaries. Decentralized exchanges (DEXs) like Uniswap and SushiSwap offered more open and transparent trading environments. Stablecoins like DAI provided relatively stable value storage tools for the crypto market. These projects, utilizing Ethereum’s smart contracts, significantly lowered the threshold for financial services, breaking traditional financial monopolies and offering more open, transparent, and fair financial services, promoting financial inclusion and decentralization.
Ethereum provided the infrastructure for DeFi, and DeFi's rapid development, in turn, expanded Ethereum’s application scenarios, attracting more users and developers.
In 2021, the popularity of non-fungible tokens (NFTs) further boosted Ethereum's adoption. NFTs enabled digital artworks, virtual real estate, and gaming assets to be uniquely identified and transacted on the blockchain, creating new economic models and market opportunities. As the main NFT trading network, Ethereum hosted well-known NFT projects like CryptoPunks and Bored Ape Yacht Club, attracting significant attention and investment.
2.2 Transition from POW to POS
The rise of DeFi and the NFT market explosion posed severe challenges to Ethereum's infrastructure, with increasing network congestion leading to persistently high transaction fees (Gas fees). This made it difficult for ordinary users and small transactions to bear, hindering network adoption and development.
To address these issues, the Ethereum community has been continuously working and has implemented several important upgrades. From "Byzantium" to "Constantinople" to the current Ethereum 2.0, each upgrade marked a substantial technological breakthrough and improvement.
To tackle scalability and security issues, the Ethereum community initiated the Ethereum 2.0 (Serenity) upgrade plan. Ethereum 2.0 aims to improve the network’s scalability, security, and energy efficiency by introducing the proof-of-stake (PoS) consensus mechanism, replacing the original proof-of-work (PoW) mechanism, significantly reducing energy consumption, and increasing transaction processing speed. On December 1, 2020, Ethereum 2.0’s Beacon Chain went live.
On August 5, 2021, Ethereum underwent the "London Hard Fork," which included the highly anticipated EIP-1559. EIP-1559 changed Ethereum’s transaction fee structure by introducing a base fee and a tip mechanism, with part of the transaction fees being burned. This not only improved the user experience but also introduced a deflationary model for ETH, having a profound impact on Ethereum’s economic model.
On September 15, 2022, Ethereum completed The Merge, officially transitioning from PoW to PoS. This milestone event significantly reduced Ethereum's energy consumption and paved the way for future scalability and performance improvements.
On April 12, 2023, Ethereum completed the Shanghai upgrade. The Shanghai upgrade primarily introduced the ETH staking withdrawal feature through EIP-4895 (Ethereum Improvement Proposal 4895), allowing validators to withdraw their staked ETH on the Beacon Chain. This provided an important supplement to Ethereum 2.0’s economic model, offering higher liquidity.
On March 13, 2024, Ethereum underwent the Dencun upgrade, mainly involving EIP-4844, introducing a new transaction type with data blobs to reduce the cost of rollup transactions. This significantly lowered the cost for Layer 2 networks to store data on Ethereum.
With the ongoing advancement of Ethereum 2.0, Ethereum’s scalability, security, and performance will continue to improve. Additionally, the continuous enhancement of various Layer 2 solutions allows Ethereum to handle more transactions at lower costs, supporting a broader range of applications. Solutions like Optimism and Arbitrum provide strong support for Ethereum’s performance enhancement, enabling more users to enjoy fast, low-cost transactions.
These events have played crucial roles in Ethereum's development, shaping not only Ethereum itself but also having a significant impact on the entire blockchain and cryptocurrency industry.
3. Moving Towards the Mainstream: Spot ETFs Bringing Closer Mainstream Adoption
The rapid development of DeFi and NFTs has also boosted Ethereum's prominence in the traditional world. Over the past few years, several large traditional financial companies have started entering the Ethereum ecosystem.
For instance, (1) BlackRock, one of the world’s largest asset management companies, has established the "iShares Build" fund focusing on investing in Ethereum and its related blockchain projects. (2) Visa has partnered with Ethereum to develop Ethereum-based payment solutions, providing users with more convenient and secure payment experiences. (3) Microsoft has collaborated with ConsenSys to launch an Ethereum blockchain developer toolkit, simplifying the process for enterprises to develop and manage blockchain applications on Azure. (4) JPMorgan has developed the Quorum enterprise blockchain platform based on Ethereum, primarily for internal cross-border payments and settlements, and became the foundation for the Enterprise Ethereum Alliance (EEA). (5) Amazon Web Services (AWS) offers managed blockchain services, allowing users to quickly deploy and configure Ethereum networks, aiming to simplify enterprise blockchain application development. (6) Samsung SDS has developed the Nexledger platform based on Ethereum for enterprise blockchain solutions. (7) Procter & Gamble, with its partners, has developed a supply chain tracking system based on Ethereum, ensuring the traceability of products from raw materials to final sales. (8) IBM, in collaboration with ConsenSys, has participated in several Ethereum-based projects exploring cross-industry blockchain solutions.
These cases demonstrate that Ethereum has become a force to be reckoned with for traditional financial institutions, driving change in the financial industry. The involvement of these traditional financial giants undoubtedly brings new growth momentum to Ethereum, signaling its further penetration into mainstream financial markets.
As such, the official approval of Ethereum spot ETFs this July did not surprise many in the crypto market. However, it is noteworthy that the launch of Ethereum spot ETFs might cause some short-term price volatility.
Data shows that on July 23, the first day of launch, the combined inflow of 9 spot ETH ETFs reached $107 million, with a total trading volume exceeding $1.1 billion. Despite the impressive performance on the first day, since July 24, Ethereum spot ETFs have shown a continuous outflow. As of press time, the total net asset value of Ethereum spot ETFs stands at $9.238 billion, with the ETF net asset ratio (market value compared to Ethereum's total market value) at 2.36%. The historical cumulative net outflow has reached $341 million, causing ETH prices to drop by over 10%.
Looking ahead, Trader T predicts that Grayscale's ETHE will see a 50% outflow within 12 days. It is worth noting that Grayscale's GBTC experienced a 50% outflow within 65 days. Large market maker Wintermute estimates that Ethereum spot ETFs could attract up to $4 billion in inflows from investors over the next year. This is lower than most analysts' expectations of $4.5 billion to $6.5 billion, which is already about 62% less than the $17 billion raised by Bitcoin spot ETFs since they began trading in the U.S. six months ago. Wintermute predicts that these inflows will drive Ethereum's price up by 24% over the next 12 months.
Despite Ethereum's tremendous success, it still faces many challenges.
Competitors like Solana and Cardano are emerging, each with their technical advantages and application scenarios, and their ecosystems are catching up to Ethereum. Particularly this year, the Meme season has shown Solana’s immense potential. Additionally, the Bitcoin ecosystem and various Layer 2 solutions are actively being developed, trying to grab a share from Ethereum.
On the other hand, Ethereum still needs to address network congestion and high transaction fees. The sharding upgrade process is complex and lengthy, involving large-scale technical changes and extensive community consensus.
4. Conclusion
Over the past decade, Ethereum has faced countless challenges and hardships, but through its innovative technology and strong community support, it has successfully promoted the adoption and application of blockchain technology. In the future, Ethereum will continue to lead the development of decentralized finance, transform the traditional financial world, and bring more opportunities and possibilities to global users. It will continue to lead the development of blockchain technology and contribute to building a more fair, transparent, and efficient digital world. Let us look forward to Ethereum achieving even greater success in the next decade.
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