Ethereum was not only the first layer one blockchain to encourage other developers to build on top of it, but its founding team also created seven important innovations used by many other blockchains today. Many more have been invented by developers who use Ethereum blockchain, but these are the most important foundational innovations without which the blockchain industry would be unrecognizable:
- Solidity, a software language was designed by Gavin Wood, one of the founders of Ehtereum in 2014 to support inheritance, libraries, and complex user-defined types on the blockchain. It is now one of the most used languages by blockchain developers. Influenced by C++, Python, and JavaScript, the language relies on static text.
2. DAOs were created as a form of governance for Ethereum, originally called “The DAO.” DAOs actually have two main functions, first, they automate the rules for creating proposals to vote creation and the vote itself. Second, they automate the execution of decentralized distributed real-time payments or revenue distribution, critical to the most stable DeFi networks and also to Web3 concepts that incentivize thousands or millions of users to contribute to a final product, for example, an important data stream, by distributing tokens based on rules designed to assess value contributed. For example, DIMO allows users to place a computer in their car to earn tokens by sending movement data into a stream that can be sold to customers down the line. Valueless as tiny increments of individual data, collected data sets of 10,000 in real-time can be invaluable information in numerous industries.
3. Smart contracts, also created by the original Ethereum team, not only record agreements on the Blockchain but also execute them when certain conditions are met. This innovation allows expensive third-party brokers, sellers, banks and credit providers to be eliminated from the transaction. Buyers and sellers never meet. There is no negotiation and the rules are the same for everyone.
4. ICOs, or Initial Coin Offerings, were first used to launch Etherium are the tokenized equivalent of an IPO, and allowed projects to be funded without massive investment in SEC filings, third-party law firms, and other specialized institutional agents from the highly regulated stock market. Stipulating that as a non-profit, and because its tokens did not represent ownership as Ethereum was set up as a foundation, founders stipulated that the tokens were no more of a security than a GoFundMe project. Since then, the closer relationship of tokens to the valuation o a cryptocurrency organization has led the SEC to define Ethereum as a security although not proceeding to regulate it, while hinting that Bitcoin may be treated as a commodity. Before Ethereum first ICO which raised an unexpected $150 million, ICOs did not exist.
5. Layer 2, the ecosystem built on top of any blockchain was Ethereum’s pivotal idea. Bitcoin’s core development team while experimenting with a few elements such as name coins and colored coins, believed in keeping the integrity of Bitcoin’s original vision. The process to add to the Bitcoin blockchain is controlled: Submit a BIP (Bitcoin improvement proposal) to Bitcoin Core Developers on Github, after testing, approved by the community The Lightening Network, a second layer that can process consumer transactions, was added to the Bitcoin blockchain in 2018, and a number of developers are working out layer 2 applications. Blockspaces, based in Tampa, for example, has integrated The Lighting Network with Quickbooks.
Still, Ethereum’s layer two is open to anyone. A rookie with $500 can develop a token on Ethereum using a contractor from Upwork. As a result the blockchain houses thousands of layer 2 entities, including the largest swapping exchanges, Uniswap and Sushiswap, and composes about 40% of the value in the industry overall.
6. Hard Forks. Cryptography solved the problem of creating a permanent record of transactions that cannot be altered, unless, that is, there is a fork. Then Ethereum launched its first ICO, it voluntarily created the first hard fork, which is one that splits off and is not recognized by the original blockchain, when a hacker figured out a way to divert millions in cash per hour. To prevent further losses, developers bought out the ICO and forked the chain. Bitcoin also had a hard fork in 2017, when some developers who wanted Bitcoin to become more responsive to emerging issues developed Bicoin Cash; however that project remained a tiny splinter.
7. Soft forks. soft fork on the other hand is a split off of the blockchain that is recognized by the original blockchain and interacts with it. Examples of these include the Polygon fork off of Ethereum designed to provide a lower-cost alternative to Ethereum gas fees prior to the launch of ETH2 in August 2022. ETH2 is also a soft fork approved and designed by the community to solve the problem of high gas fees by switching from Proof of Work to Proof of Stake. Some people think of a soft fork as a kind of software upgrade.