Ethereum was created by Vitalik Buterin with the vision of being able to execute smart contracts on a blockchain. Even though Bitcoin has a smart-contract platform, it is very limited in scope. The goal with Ethereum is to be able to write exceedingly complex programs that are executed by the blockchain in a decentralized manner. The programming language used in Ethereum smart contracts is Turing complete, which means theoretically it could solve any computational problem given enough space and time. In practice, the execution of a smart contract happens as long as the contract has enough fees to cover its running and operation.
The first Ethereum release, called the Frontier Release, has the tools for developers to build ‘decentralized applications’ on the Ethereum network. It is a command-line only interface.
Ethereum currently uses a proof of work scheme, with plans to switch to proof of stake in the future. In the current proof of work stage, Ethereum uses Ethash as the hashing algorithm. Ethash was derived from Dagger-Hashimoto but has undergone a lot of changes in the process.
Ethash was specifically chosen as the hashing algorithm to make it more ASIC resistant, since the algorithm consumes nearly the entire available memory access bandwidth. The algorithm is also GPU-friendly for mining.
Ethereum has a much more comprehensive fee system than other cryptocurrencies, since it supports not just basic transaction types but arbitrarily complex ones via its smart-contract execution. The fees are based on the computational and memory resources required to execute the smart contract. The Ethereum fee guide is posted here
Transaction fees in Ethereum are denoted in ‘gas’ which is the fuel for the smart contracts to run. The price of gas, converted to Ether, is a variable amount depending on the price of computational resources and the price of Ether. The current price of 1 gas is 0.00001 Ether.
Ethereum had a very successful presale and was the second-highest amount of money raised, at the time of its completion, among all crowdfunded projects recorded. Ethereum’s 42-day public crowdsale raised 31,591 Bitcoin, worth over $18 million at that time, although the Ethereum foundation ended up with a lower dollar value because of a subsequent drop in the price of Bitcoin before the foundation decided to sell their Bitcoin.
Ethereum was already quite popular and promising, considering the high profile of the founders involved in the project, and the ‘Bitcoin 2.0’ race was heating up right around when the crowdsale began.
Community and Founders
Ethereum was first publicly described by Vitalik Buterin in a post in Bitcoin Magazine that garnered considerable attention. The original founding team consisted of Vitalik Buterin, Charles Hoskinson, Mihai Alisie, Joseph Lubin and Anthony Di Iorio.
A Yellow Paper was subsequently published by Gavin Wood, which formalized many of the initial ideas and implementations. Several developers are working on the core Ethereum protocol through the Ethereum Foundation and new decentralized applications are being built through Consensys, a Brooklyn based startup founded by Joseph Lubin.