Bitcoin’s success eventually led to the development of Ethereum, ushering in “blockchain 2.0” and the smart contract revolution. The team behind Ethereum, most notably Vitalik Buterin, understood that Bitcoin was limited. The Bitcoin blockchain stored merely financial transactions — what if it could instead store any arbitrary data, and what if there was a way to run computations and logic on this data within a transaction?
 OK so technically Bitcoin can run scripts as part of a transaction, but their functionality is limited.
This insight led to smart contracts — actual code that can run in any transaction — and can access the state of the blockchain at the current block. It can both read from and write to, the blockchain.
The data stored can be any coding primitive (think of these as building blocks) — from a single blockchain address, a timestamp, an arbitrary number or string of characters. And from these building blocks, more complex data structures can be formed.
In order to work, each and every Ethereum miner has to execute the code on their own machine — in order to be truly decentralized (a word we’ll come back to), every node has to validate the code itself, not trust others as to its content. Don’t trust, verify — one of the core tenets of crypto purists.
Lesson #3: The introduction of smart contracts and associated data with Ethereum ushered in a new era of blockchain development — on-chain applications
The smart contract revolution created the concept of a blockchain application — one whose entire state and computation lived on-chain. One of the most common blockchain applications were custom tokens, themselves a precursor to ICOs and crowdfunding.
Instead of forking bitcoin, launching it as a new blockchain and token, and convincing a large number of miners to support your new chain, you could write a simple smart contract on Ethereum that contained a mapping of addresses to numerical balances and a way to transfer between them. Once you’d deployed it, you could use that contract’s deployed address as your “token”. Tokenomics was born.
Lesson #4: By leveraging Ethereum, anyone could launch their own token easily. This led to the coining of Tokenomics — leveraging custom tokens to financially incentivize users to behave in certain ways
This represented a profound shift: up until recently, startups would create free services — search, email, social networking, file sharing — with the hopes of drawing in new users; perhaps they would even offer early access to new features as an incentive to users who spread the word. Yet with custom tokens, once created and valued, crypto startups had denominated value with which to reward users for their actions. They could leverage financial incentives without all the hassle of having to launch their own chain. How would these tokens be valued? By issuing a fixed supply and raising other crypto (typically bitcoin and ether) in an ICO, or some other fundraising mechanism.
Moreover, once these token-based startups launched, instead of using equity to raise funds or attract new employees, they could reach into their supply of tokens. You can see why it quickly became the preferred investment vehicle of startups — a way to distribute value without relinquishing any ownership. Though as you’re not doubt aware, this method of fundraising comes with its own public disclaimer.
Lesson #5: Custom token ownership became a mechanism by which companies could raise funds and attract employees without giving away equity
Now, while Ethereum’s power to enable blockchain-based applications has been hailed as the future of blockchains by many (but not all), it has one major downside — slow transaction speeds. The popularity of CryptoKitties, a collectibles game on Ethereum, showed how susceptible the network was to congestion. And congestion is anathema to a startup trying to scale.
So now, a few years after Ethereum’s release, we have third generation of competitors under the banner of “blockchain 3.0”. Not to be confused with Web 3.0, blockchain 3.0 refers to those blockchain 2.0 platforms that also manage real scale — to be able to process hundreds if not thousands of transactions per second (and thus compete with the Visa network — as taking down the bloated and aging incumbent is the holy grail of cryptocurrencies). Those that claim this title are EOS, Cardano, Zilliqa, the upcoming 2.0 version of Ethereum (titled Serenity) and a number of worthy adversaries.
Now it’s important to note that while we now have this so-called “third generation” of blockchains, their ancestors are still very much alive and kicking. Those aforementioned 3.0 upstarts are struggling to challenge Ethereum in terms of market capitalization of their native tokens compared with ether (ETH), and Ethereum itself still falls far short of its predecessor in market cap terms (see image below). Bitcoin shows no sign of disappearing. On the contrary, as a cryptocurrency it’s the longest living and least volatile (with the exception of stablecoins). And, not to be outdone by transaction speeds of hot new blockchains, Bitcoin is being complemented by a “layer-2” solution (i.e. not a change to the core protocol but rather an additional software layer) in the form of the Lightning Network.
Not without my data
The movement away from just simple financial transactions to a more fully fledged “global computer” as Vitalik referred to Ethereum, combined with the open access to all, and the enforced prohibition that every action be accountable to a immutable transaction, meant the very real possibility of an open data future with blockchain 2.0.
Lesson #6: By making available any arbitrary data on the blockchain, smart contracts further opened up the possibility of an
open data revolution. Like open source, open data lives in the public domain, readily available to everyone
For years, publications such as the Economist and think tanks have lamented how quick we were to relinquish our data to the tech empires of today. Facebook, Google, Twitter et al, all make money by monetizing our online activities. We concede that value for the services they provide. And yet, as we’ve seen in 2018 with the revelations on Facebook’s data sharing, the lock-in criticism of Google Chrome, and the introduction of GDPR felt across the entire globe, it’s clear that many of us underestimate how much that data is worth.
Ethereum has paved the way for creating and managing data in the public domain. Some data — such as anonymized studies or voting records — are obvious candidates. But even consumer tech has applications. Imagine a social network where users band together in communities, making money off their shared usage to the highest bidder? Or what if your digital ID lived on a blockchain, finally promising to be everything OpenID was always meant to?
It’s this exact concept that has lead to the coining of Web 3.0 — the era when we as users reclaim the right to our data — and vote with our feet about which services we use. Better yet, due to the peer-to-peer nature of the blockchain, there is real potential of this same movement to enable a true share economy without a corporate middleman.