Remember the excitement and ferocious speculation that surrounded bitcoin, Ethereum and all their brothers at the turn of 2017 and 2018 ? Since then, the world of cryptocurrencies has gone into crisis: the value of most coins has dropped by up to 90% , showing how even the most solid and credible companies were unable to produce results and how many of these projects were crap (in some cases just a scam).
This does not mean that the blockchain , the invention of the person behind the pseudonym of Satoshi Nakamoto , was a flop. On the contrary, the digital and automatic register has found important uses in the world of logistics (as Reuters recalls ), it is at the basis of ambitious projects such as the Chinese digital currency and like Libra , the Facebook cryptocurrency . In short, the most concrete applications of the blockchain are in the hands of those same entities that the pioneers of this world aimed to overthrow.
Yet, now far from the spotlight, there are still many realities that continue to experiment, with the aim of maintaining – 12 years after the birth of bitcoin – the revolutionary and libertarian promises of the blockchain. Among these, one of the most promising is still Ethereum , the platform that hosts the second cryptocurrency by value (ether) and which has given life to a potentially revolutionary tool such as smart contracts , contracts that – through the blockchain – are automatically executed in the moment. in which the conditions signed by the parties are met.
On July 30, 2020, Ethereum turns five . The birth dates back to 2015, when its creator Vitalik Buterin shapes (digitally) the insights contained in the previous year’s white paper. Buterin himself – who incredibly is still only 26 years old today and continues to live as a wanderer in the computer world – is always steadfast at the helm of his creature, after having faced the very steep roller coaster that characterized these first five years.
Rollercoaster marked first by the never made promises to change the world – using smart contracts to buy and sell clean energy, to provide documents to refugees or to vote from their home computers – and then by the success of a highly speculative tool such as the ICO ( initial coin offering ) : the blockchain equivalent of stock market listings that took place largely on the Ethereum platform and that for almost two years gave rise to a far west of finance with a very high risk rate.
The push of the Ico
It is precisely the success of the ICOs that allows the value of the Ethereum cryptocurrency to grow at unprecedented speeds: in January 2017, an ether was worth 10 dollars . Exactly one year later it touches $ 1,300 , turning many of those who believed in Buterin’s creation into millionaires. However, ICOs are risky material: wild finance, without rules, around which a sea of money revolves ( 3 billion dollars in January 2018 alone). Inevitably, scams multiply and more and more people find themselves with the match in hand and zero money in their pockets.. The regulatory bodies of the financial world begin to raise their antennas and then intervene with a straight leg, making a clean sweep of most of the ICOs.
Also thanks to the collapse of bitcoins , the value of ether plummets: from the 1,300 peak to around 100 dollars a year later. The value of the Ethereum cryptocurrency loses more than 90% of its value. To cause the collapse are not only the speculative bubbles, the unrealizable promises, the financial scams and everything that characterized the blockchain world in those years, but also the trivial technical problems. Ethereum is slow : it allows you to process just over twenty transactions per second. Too low a number, which causes blockchain to clog every time a project – even a Tamagotchi-style game like the CryptoKitties – is successful.
Furthermore, Ethereum pollutes . The mining mechanism – which allows you to conquer cryptocurrencies by exploiting the highest possible computational power to solve very complicated computer puzzles – requires enormous amounts of energy . At the height of its success, the Ethereum blockchain consumes a little less than the whole of Ireland (around 25 terawatts). It is Buterin himself who poses the problem: “It is a huge waste of resources. There are people of flesh and blood whose need for electricity is being displaced by this stuff ” .
Between abandoned projects, excessive energy consumption , financial speculation and a collapse in value , at the end of 2018 it seems that the ambitious projects of Ethereum – and of cryptocurrencies in general – are destined to end in nothing. Vitalik Buterin himself begins to show signs of fatigue and it is suspected that he is ready to abandon the boat (on the other hand, for those who accumulated bitcoins as early as 2011 and then invented Ethereum, money will never be a problem).
Some might think that this is the end of everything, but the Ethereum developers – with Buterin remaining at the helm – continue to work on the project as employees of the foundation based in Zug (Switzerland) and with operational teams in London, Berlin and Amsterdam. A development that is fundamentally based on two aspects: making the blockchain faster and more energy efficient.
The new spring
And it is precisely in the days of the fifth anniversary , after a long and bumpy journey, that we are preparing to launch the first version of what will become Ethereum 2.0 . Without going into the very complicated technical details, it is enough to know that thanks to a mechanism known as sharding (which divides the blockchain data into smaller subsets, making it easier for computers to manage them) and the transition to proof-of-stake ( which randomly selects to whom, among the Ethereum holders, to temporarily entrust the keys of the blockchain) it will be possible to process thousands of transactions per second consuming very little energy.
These innovations will allow Ethereum to solve the age-old “blockchain trilemma” , according to which it is not possible to have security, speed and decentralization at the same time . Ethereum, if all goes well, will therefore be efficient and sustainable. A direction rewarded by investors: the value of Ethereum’s cryptocurrency has more than tripled from its 2018 lows and today reached $ 320.
Meanwhile, the Ethereum blockchain has surpassed that of bitcoins and has become the most used of all. Also thanks to the latest fashion in the blockchain sector: Defi , decentralized finance that allows you to lend money and make investments, and which in the future could also allow you to obtain mortgages. A new financial far west that takes place largely on Ethereum and which according to some experts could give life to a new gold rush similar to that of ICOs.
While Defi is certainly playing a role in the growth of the value of ether, it is still the usual high- risk speculative practice typical of cryptocurrencies. Nothing to do with Vitalik Buterin’s ambitions to create a mature, serious and reliable ecosystem. At the very least, however, this new trend – which has already reached $ 6 billion in market capitalization – shows that it is still too early to give digital coins for death.