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After discovering cryptocurrencies while still at school, Vitalik Buterin dropped out of university to travel the world and explore crypto projects. He then realised he could take the blockchain technology far beyond financial applications.
‘I went around the world, explored many crypto projects, and finally realised that they were all too concerned about specific applications and not being sufficiently general - hence the birth of Ethereum, which has been taking up my life ever since.’ – Vitalik Buterin
Born in Russia in 1994, he emigrated to Toronto in Canada in 2000 with his parents Dmitry Buterin, a computer scientist, and Natalia Ameline. Subsequent to quitting his hobby of playing the hugely popular online multiplayer role-playing game, World of Warcraft, after realising ‘what horrors centralised services can bring’, the 17-year old schoolboy started to search for a new purpose in life in 2011.
‘At first, I was sceptical, and did not understand how it could possibly have value without physical backing. But slowly I became more and more interested.’ – Vitalik Buterin
This led to his discovery of bitcoin, which gradually introduced him to cryptocurrencies and the blockchain technology underpinning it. After launching a blog named Bitcoin Weekly in 2011, he soon teamed up with Mihai Alisie to create the first publication devoted exclusively to the original cryptocurrency, Bitcoin Magazine, publishing the first issue in May 2012.
Alisie, who graduated with a licentiate degree in Cybernetics, Economy Informatics and Statistics in 2010, was the editor-in-chief of the publication until late 2013, when he, and others, assisted Buterin in founding the Ethereum project. Buterin continued to contribute articles until leaving in 2014.
Buterin soon found himself working over 30 hours a week on crypto projects and decided to drop out of university in 2013, only a year after joining. He then started to travel the world and study what the existing blockchain technology and applications had to offer.
Visiting Israel in October 2013, Buterin ended up spending time with a team developing one of the first ‘crypto 2.0’ projects, Mastercoin, which aimed to take blockchain technology beyond digital currency.
While Mastercoin now lives on as Omni, following a rebrand in early 2015, the project was ground breaking at inception. Its creator, a software engineer by the name of J.R. Willett, published ‘The Second Bitcoin Whitepaper’ in January 2012 outlining his idea to use the existing bitcoin network for what are now known as smart contracts – which would go on to form a major part of Buterin’s Ethereum project. Willett was also the inventor of initial coin offerings (ICOs).
Buterin was quick to identify ways to improve Mastercoin. He put forward proposals to the team to make their protocol more generalised and to support more types of contracts without adding an equally large and complex set of features. Although Buterin says the Mastercoin team were impressed, they ‘were not interested in dropping everything they were doing’ to pursue his idea.
Smart contracts are lines of code written into the blockchain to serve as the terms and agreements between a buyer and seller. They ensure anonymous parties can enter a transaction with one another without the need for a central authority or legal intermediary. In short, they make transactions traceable, transparent and irreversible.
Find out more about how to trade CFDs on cryptocurrencies.
‘I was acutely aware that many of the major problems still plaguing the bitcoin ecosystem, including fraudulent services, unreliable exchanges, and an often surprising lack of security, were not caused by bitcoin’s unique property of decentralisation; rather, these issues are a result of the fact that there was still great centralisation left, in places where it could potentially quite easily be removed.’ – Vitalik Buterin
Increasingly convinced his proposal put forward to the Mastercoin team was the way forward, Buterin, on a cold day in San Francisco in November 2013, began writing the white paper for Ethereum, envisioning a new open-source protocol for creating decentralised applications.
This would turn the project from one man’s idea into a collaborative project, involving several other individuals who were all integral to Ethereum’s success.
‘This was the time when the Ethereum protocol was entirely my own creation. From here on, however, new participants started to join the fold. By far the most prominent was Gavin Wood.’ – Vitalik Buterin
Having started his career in computer programming and software engineering when Buterin was still a child, Wood brought experience to complement Buterin’s youthful creativity. Wood reached out to Buterin a month after the Ethereum white paper had been released. By early 2014 he published the Ethereum yellow paper – described as the ‘technical bible’ - detailing the Ethereum Virtual Machine that would go on to sit at the heart of the entire concept by executing all of the smart contracts on the network.
In addition to Buterin, Alisie and Wood, another four individuals played important roles in founding Ethereum.
‘The Ethereum Foundation’s mission is to promote and support Ethereum platform and base layer research, development and education to bring decentralised protocols and tools to the world that empower developers to produce next generation decentralised applications (dapps), and together build a more globally accessible, more free and more trustworthy Internet.’ – the Ethereum Foundation
Launched in July 2014 in Switzerland, and originally named Stiftung Ethereum, the organisation has similar ambitions to the foundations that have spawned out of other cryptocurrencies, including bitcoin, litecoin and ripple.
Buterin sits on the Foundation Council, while Wilcke leads the Technical Steering Group. The third leader of the foundation with the role of executive director is Ming Chan, a computer science and media arts and science alumna of the Massachusetts Institute of Technology (MIT). She specialises in legal and regulatory matters related to blockchain technology.
‘Ether is a necessary element — a fuel — for operating the distributed application platform Ethereum’ – Ethereum Foundation
A presale of ether was quickly launched in July 2014, running for 42 days to close in August. The event raised about 31,500 bitcoins that were worth about $18.4 million at the time, and resulted in just over 60 million ether being sold.
Of the ether created for the presale, about one-fifth (12 million) went to early contributors and developers, with the rest being managed by the Ethereum Foundation. Buterin, Wood and Wilcke formed a development arm after the presale, leaving the foundation to focus on marketing and educating the public about Ethereum and ether.
According to the foundation, the supply of ether was agreed at the time of the presale, and is capped at 18 million ether per year – equal to a quarter of the initial supply. However, that limited rate is expected to be abandoned once the network moves to a new consensus algorithm, named Casper, from the existing proof-of-work algorithm. The test network for Casper was launched right at the start of 2018 – which pushed ether to its all-time high of $1360.74 on 10 January, having started the year at just $768.47.
With the project now financially stable, a swathe of new developers interested in developing blockchains came on board. With grants being offered to willing developers, progress accelerated from the start of 2015 and the vision slowly started to become a reality.
Following a couple of test versions emerging within months of the enlarged development team coming together, the Ethereum project would not release Frontier, its live, fully-operating blockchain, until 30 July 2015 – just one year after the ether presale, and 18 months after Ethereum was founded.
Interest in Ethereum and ether gained traction, and the second conference, DEVCON1, was held in November 2015. Nick Szabo, a legend within the crypto-space, and the first person to propose smart contracts back in 1994, was the keynote speaker.
The project, and its vision, received its first official major backing in February 2017, when a group of the world’s biggest banks and tech giants – including JPMorgan, UBS, Santander, BNY Mellon, ING, Microsoft, Intel and Lubin’s ConsenSys - teamed up to form the Enterprise Ethereum Alliance (EEA), with the aim of developing versions of Ethereum’s software suitable for big business.
‘The Enterprise Ethereum Alliance connects Fortune 500 enterprises, startups, academics, and technology vendors with Ethereum subject matter experts. Together, we will learn from, and build upon, the only smart contract supporting blockchain currently running in real-world production – Ethereum – to define enterprise-grade software capable of handling the most complex, highly demanding applications at the speed of business.’ – the EEA
The EEA has since become the world’s largest open-source blockchain initiative, and in early 2018 appointed its first executive director. Ron Resnick, a 12-year veteran of Intel, has taken the reins of the organisation and its 200-strong membership, supported by representatives from the organisation’s impressive member group which sit on the board.
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