Ethereum Price Prediction: What Will ETH Be Worth in 2025?

Ethereum is a decentralized, open-source blockchain system that features smart contract functionality. It was proposed by programmer Vitalik Buterin in late 2013 and development was crowdfunded in 2014. Ethereum went live on 30 July 2015.

The launch of the Ethereum network

Buterin became interested in Bitcoin's potential beyond a simple digital currency. He recognized the limitations of Bitcoin's scripting language in terms of developing more complex applications. Bitcoin's scripting language is intentionally limited to ensure security and avoid potential vulnerabilities. However, this limitation also restricts the types of applications that can be built on the Bitcoin blockchain.

Inspired by Bitcoin's underlying technology and its limitations, Buterin proposed the idea of Ethereum in late 2013. He outlined his vision for a more versatile blockchain platform that would support smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. This would allow for the creation of decentralized applications (dApps) that could automate processes and eliminate the need for intermediaries.

Buterin's Ethereum white paper, titled "Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform," was published in late 2013. It attracted significant attention and interest from developers and enthusiasts in the cryptocurrency community.

In 2014, Buterin and a team of co-founders, including Gavin Wood, Joseph Lubin, and others, began working on developing the Ethereum platform. Ethereum's development was crowdfunded through a token sale (initial coin offering or ICO) held in mid-2014. Participants in the ICO purchased Ether (ETH), the native cryptocurrency of the Ethereum platform, which would be used to power transactions and smart contracts on the network.

Ethereum officially went live on July 30, 2015, with the release of its first version, called Frontier. Since then, Ethereum has undergone several upgrades and protocol improvements, including the transition to Ethereum 2.0, which aims to improve scalability, security, and sustainability through the implementation of a proof-of-stake consensus mechanism.

Ethereum Consensus Mechanism

Ethereum initially operated on a proof-of-work (PoW) consensus mechanism, similar to Bitcoin. In this system, miners compete to solve complex mathematical puzzles to validate transactions and add new blocks to the blockchain. Miners are rewarded with Ether (ETH) for their computational efforts. This PoW mechanism was utilized until the transition to a proof-of-stake (PoS) consensus mechanism with the launch of Ethereum 2.0.

Upgrades and development milestones 

After the initial launch (Frontier), Ethereum transitioned to the Homestead release in March 2016. This release marked Ethereum's maturity and stability, with improvements to the protocol's security and performance.

In March 2017, the Enterprise Ethereum Alliance was formed. It's a consortium of companies and organizations working to advance the adoption of Ethereum for enterprise use cases. Members include tech giants like Microsoft, Intel, and JPMorgan Chase, among others.

In June 2016, a decentralized autonomous organization (DAO) built on the Ethereum blockchain was exploited, resulting in the theft of a significant amount of Ether. To mitigate the damage, the Ethereum community decided to hard fork the blockchain to reverse the transactions, leading to the creation of Ethereum Classic (ETC), which continued on the original blockchain without the reversed transactions.

Metropolis is a major Ethereum upgrade that was divided into two phases: Byzantium and Constantinople. Byzantium was implemented in October 2017, bringing several improvements such as enhanced security, privacy, and scalability. Constantinople followed in February 2019, introducing further enhancements and paving the way for future upgrades.

Ethereum Virtual Machine

The Ethereum Virtual Machine (EVM) serves as the execution environment for transactions within the Ethereum network. Operating as a stack-based virtual machine, the EVM features an instruction set tailored specifically for Ethereum's needs. This set encompasses various functions, including stack and memory operations, along with the ability to examine the ongoing execution context, such as available gas and transaction details. Designed to ensure consistency across different hardware and operating systems, the EVM facilitates network-wide consensus by guaranteeing that each node produces identical post-transaction states given the same pre-transaction state and transaction. For a formal definition of the EVM, refer to the Ethereum Yellow Paper. EVM implementations exist in various programming languages such as C++, C#, Go, Haskell, Java, JavaScript, Python, Ruby, Rust, Elixir, Erlang, and soon, WebAssembly.

Ethereum and DeFi

Ethereum has become the foundation for a burgeoning ecosystem of decentralized finance (DeFi) applications. DeFi encompasses various financial services and products, including lending, borrowing, decentralized exchanges, derivatives, and more, all built on Ethereum's blockchain using smart contracts.

While Bitcoin was designed primarily as a digital currency, Ethereum was built as a platform for decentralized applications (dApps) and smart contracts. Smart contracts are digital programs that autonomously execute the terms of an agreement between multiple parties online. They were created to minimize reliance on trusted intermediaries, thereby cutting down transaction expenses and enhancing transaction dependability.

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically enforce and facilitate the performance of credible transactions without the need for intermediaries.

To address Ethereum's scalability issues before the full rollout of Ethereum 2.0, various layer 2 scaling solutions have been developed. These include solutions like Optimistic Rollups, zkRollups, and Plasma, which aim to increase Ethereum's transaction throughput and reduce fees by offloading transactions from the main Ethereum chain while maintaining its security.

Ethereum 2.0 (Eth2) represents a series of significant upgrades aimed at enhancing the Ethereum network's efficiency and scalability. These upgrades are pivotal advancements for Ethereum.

One key change is the transition from the energy-intensive proof-of-work system to the more sustainable proof-of-stake mechanism. This transition, known as "The Merge," occurred on September 15, 2022, and resulted in a remarkable 99% reduction in Ethereum's energy consumption. While this shift contributes positively to environmental sustainability, it may not entirely address broader energy consumption issues if the computing power previously allocated to Ethereum mining transitions to other energy-intensive cryptocurrencies.

Subsequently, on March 13, 2024, Ethereum introduced its second major upgrade, referred to as "Dencun" or "Deneb-Cancun." This upgrade was focused on reducing transaction costs across the various Layer 2 networks integrated with Ethereum. It's akin to optimizing the infrastructure of Ethereum, making it more cost-effective and accessible for users interacting with decentralized applications and protocols.

ETH supply

As of April 29, 2024, the circulating supply of ETH is 122,054,908 tokens. 

Of the total 72 million Ethereum (ETH) initially issued, a significant portion, 60 million, was allocated to backers participating in the 2014 crowdfunding campaign that kickstarted the project, while 12 million was set aside for development purposes. The rest of the ETH has been gradually issued to miners as block rewards since the genesis block, with the original reward set at 5 ETH per block in 2015, later reduced to 3 ETH in late 2017, and then further decreased to 2 ETH in early 2019. The average time to mine an Ethereum block typically ranges from 13 to 15 seconds.

In the August 2021 London hard fork upgrade, Ethereum introduced the Ethereum Improvement Protocol (EIP-1559) as part of its protocol. This protocol change replaced the traditional first-price auction mechanism with a base fee system for transactions, supplemented by optional "tip" or "priority fees" for users seeking faster processing. While this adjustment aims to stabilize gas fees by dynamically adjusting the base fee according to network activity, it does not directly impact the overall cost, which can still surge during periods of high congestion.

Unlike Bitcoin's deflationary model, Ethereum does not impose a fixed supply limit, as developers prefer flexibility in adjusting issuance rates to ensure network security. However, with the implementation of EIP-1559, a portion of the base fees is burned, effectively removing ETH from circulation. This mechanism, combined with increased network activity leading to more ETH being burned, has the potential to make Ethereum deflationary, a prospect that excites ETH holders anticipating potential price appreciation.