Bitcoin Was Not The Last Cryptocurrency

The Bitcoin whitepaper closed twenty-seven years of cryptographic work, but it left three problems unsolved. Proof-of-work consumed enormous electricity for arbitrary computation. The network could only transfer value, with no capacity for any other kind of agreement. And the consensus mechanism had a hard speed ceiling, with ten minutes between blocks and a global throughput a fraction of a Visa rail. Each problem became the explicit design target for a subsequent protocol. From 2009 through 2022, integrators looked at Bitcoin and concluded that the work was not yet done.

This entry covers the second half of the lineage, from 2013 through 2022. It ends in a tight window in the fall of 2022, when a sequence of events across roughly eleven weeks closed the first era of cryptocurrency and pivoted the entire culture of the technology toward whatever comes next.

Ethereum And The Second Problem

In late November 2013, a nineteen-year-old Russian-Canadian programmer named Vitalik Buterin sent an email to a small group of contacts with the subject line "Introducing Ethereum: a generalized smart contract/DAC platform." Buterin had been writing for Bitcoin Magazine since 2011 and had spent enough time inside the Bitcoin community to identify what he considered its central limitation. Bitcoin was a payment network. He proposed a general-purpose computing network instead, a blockchain that could execute arbitrary programs called "smart contracts," a phrase coined by Nick Szabo in 1994 but never realized in code until then. The proto-whitepaper became the canonical Ethereum whitepaper in December 2014.

Buterin did not build Ethereum alone. The network had eight named co-founders. Gavin Wood wrote the Ethereum Yellow Paper and created Solidity, the programming language smart contracts were written in. Joseph Lubin founded ConsenSys, which built MetaMask and Infura. Charles Hoskinson, Jeffrey Wilcke, Mihai Alisie, Anthony Di Iorio, and Amir Chetrit each contributed to the early architecture or the legal structures around the launch. A 2014 token sale raised approximately thirty-one thousand Bitcoin, worth about eighteen million dollars at the time. The Ethereum mainnet went live on July 30, 2015.

Bitcoin had proved a peer-to-peer network could maintain a shared ledger without a trusted party. Ethereum proved the same network could execute any computable function. Decentralized finance, decentralized identity, decentralized organizations, tokenized assets, automated market makers, lending protocols, gaming mechanics, voting systems: all of these became theoretically possible. The platform that emerged was not a currency but a programmable substrate, and within a few years it had grown into the second-largest cryptocurrency by market capitalization.

It also inherited a problem. In the spring of 2016, an Ethereum-based decentralized autonomous organization called The DAO raised approximately one hundred and fifty million dollars in ETH from more than eleven thousand participants, making it one of the largest crowdfunding campaigns in history. The DAO was a smart contract designed to function as a venture capital fund without managers. The contract contained a reentrancy attack vulnerability, and on June 17, 2016, an attacker began draining funds. Roughly sixty million dollars in ETH was moved into a wallet the original holders could not access. The Ethereum community had to choose between two outcomes. Either the blockchain was immutable, in which case the attacker kept the funds, or the community could roll back the chain and restore the funds, in which case the blockchain was not actually immutable. On July 20, 2016, at block 192,000, the network executed a hard fork and restored the funds. A minority of users rejected the fork and continued on the original chain, which became Ethereum Classic. The "code is law" faction took the position that a contract's bugs were part of the contract. The forked majority took the position that smart contracts were a human institution and could be amended by human consensus. Both factions were ideologically coherent. Only one of them controlled the chain that everyone else now calls Ethereum.

Solana And The Third Problem

By 2017, the third Bitcoin problem, throughput, had become the dominant constraint on what the lineage could become. Ethereum at the time processed about fifteen transactions per second under normal load. Visa processed more than twenty-four thousand. Every proposed decentralized application that required real-time interaction hit a wall the moment users tried to use it at scale.

A software engineer named Anatoly Yakovenko had spent twelve years at Qualcomm leading operating system development, with a background in the distributed systems work that telecommunications networks require. In November 2017, after a sleepless night in a San Francisco café, he published a whitepaper introducing a concept called Proof of History. The insight was simple. Existing blockchain consensus required validators to constantly communicate to agree on transaction order, creating enormous coordination overhead. Yakovenko proposed embedding a verifiable cryptographic clock directly into the blockchain itself, allowing every validator to know the order of events independently without coordinating. Proof of History was not a consensus mechanism. It was a clock that made consensus dramatically faster.

Yakovenko cofounded Solana Labs in 2018 with Greg Fitzgerald, a former Qualcomm colleague, and Raj Gokal, Stephen Akridge, and Eric Williams. After a two-year build through the crypto winter and a twenty-million-dollar Series A led by Multicoin Capital in July 2019, the Solana mainnet beta went live on March 16, 2020. The architecture combined Proof of History with a Byzantine fault tolerant consensus algorithm called Tower BFT, plus a transaction propagation protocol called Turbine. The theoretical throughput approached sixty-five thousand transactions per second under ideal conditions, several orders of magnitude faster than anything that had come before.

Solana also made an explicit architectural trade. The high throughput required more powerful validator hardware than Ethereum or Bitcoin, which raised the cost of running a node and concentrated validation among fewer participants. The decentralization-versus-speed tension that had been latent in every prior protocol became, on Solana, an explicit design choice. Whether that trade was right is an argument that will not be settled in this entry. Solana represented the third major integration. Bitcoin solved consensus without trust. Ethereum added arbitrary computation. Solana added speed.

The Fall Of 2022

For most of the period from 2009 through 2022, the cryptocurrency lineage moved forward in a continuous arc. Each new protocol picked up problems the prior generation had left unsolved. The cultural moment around crypto, the speculative cycles and the NFT bubbles and the institutional adoption, kept pace with the technical progress. Then, between mid-September and the end of November 2022, a sequence of events closed the first era.

On September 15, 2022, Ethereum executed the largest single technical transition in cryptocurrency history. The Merge swapped out proof-of-work, the consensus mechanism that had defined cryptocurrency since the Bitcoin whitepaper, and replaced it with proof-of-stake, a fundamentally different system in which validators are chosen based on the amount of ETH they have locked into the network rather than the computational work they perform. The energy consumption of the Ethereum network dropped by approximately ninety-nine point ninety-five percent overnight. Proof-of-stake was not without its own problems. Serious researchers have argued that proof-of-stake creates new vulnerabilities that proof-of-work did not have, and that argument is its own entry. The second-largest network in the space had decided proof-of-work was not the right mechanism going forward, and had pulled it out without breaking the chain.

On November 11, 2022, FTX, one of the largest cryptocurrency exchanges in the world, filed for Chapter 11 bankruptcy. The exchange and approximately one hundred and thirty affiliated entities, including its sister trading firm Alameda Research, collapsed in a single week after revelations that customer funds had been commingled with Alameda's trading positions. Approximately eight billion dollars in customer funds were missing. Founder Sam Bankman-Fried resigned the same day. He was later convicted on seven counts of fraud and sentenced to twenty-five years in prison. The pattern was the one the lineage had seen repeatedly: DigiCash failed because of business decisions, e-gold failed because of its centralized custody model, and FTX failed because the largest centralized exchange of the era could not honor its obligations. The third major centralized failure in the lineage hit its largest target.

On November 30, 2022, nineteen days after FTX filed, OpenAI released ChatGPT to the public as a free research preview. The cultural attention that had been pointed at cryptocurrency for most of the prior decade pivoted within days. ChatGPT reached one million users in five days and one hundred million in two months, the fastest consumer technology adoption in history. The capital, the engineering talent, the venture interest, and the public imagination that had circulated around crypto since 2017 moved en masse to artificial intelligence.

The window did not end cryptocurrency. The protocols kept running. Ethereum and Solana are still operating, still processing transactions, still hosting applications. What ended was the first cultural era of the technology, the moment when "cryptocurrency" meant a singular movement with shared aesthetics and shared ambitions. The arc that began with David Chaum in 1981 found its first working synthesis in Bitcoin, its second in Ethereum, its third in Solana, and then turned a corner. The work continues. The cultural attention that drove the previous decade moved elsewhere. What the next era looks like is the question this publication exists to answer.