The year 2020 has been nothing short of spectacular for Ethereum. Between Ethereum two.0 and the quest for scalability, the decentralized finance explosion, and the successes of interoperability and coin settlement — just to name a few — the richness of narratives underpinning Ethereum has arguably surpassed Bitcoin itself. Whereas Bitcoin is the reliable, stoic uncle, Ethereum can exist described as the maverick cousin of the crypto globe.

Only of class, a volatile surround hits hard both ways. Peaks of excitement and success almost demand to be counterbalanced by troughs of disappointment and failure.

Ethereum had plenty of both this year, and it's useful to reminisce and highlight major events that shaped the project in 2020.

The biggest achievement: Ethereum 2.0 launch

Ethereum two.0 has been the dominant story of the projection since fifty-fifty before its actual launch. The upgrade promised two major improvements: moving abroad from proof-of-work consensus, which was seen as wasteful, and introducing scalability through a technique called sharding.

Sharding, in a nutshell, creates a prepare of parallel blockchains that are coordinated by a reference chain, chosen the Beacon Chain. In 2020, we finally saw the launch of the Ethereum 2.0 Beacon Chain, enabling Ether (ETH) staking for the first time.

The launch occurred on Dec.one without a hitch. Progress was palpable throughout the year, with several testnet iterations.

The formal pre-launch testnet, chosen Medalla, was launched on Aug. four. While it wasn't a perfect start, the team drew invaluable lessons from the experience and steadily fixed all the bugs and issues that cropped up.

The launch was an unquestionable success for Ethereum, as it finally marked the official outset of an upgrade that was five years in the making. "I call back nosotros've been delighted with how it's gone," said Ben Edgington, ConsenSys product owner for Ethereum 2.0 customer Teku, in an interview with Cointelegraph.

Subsequently years of development, the teams were anxious to send something tangible. "The volition to deliver in 2020 emerged by consensus amongst the teams. And yeah, we committed to it," Edgington said. "The 'when Eth2' meme has been effectually for a long time and we were groovy to motility on from that and demonstrate that nosotros tin can meet a target."

Nonetheless, Edgington reassured that there were no corners cut during development. "If nosotros [had been] enlightened of significant flaws, we wouldn't have pushed on the basis of simply a engagement," he said.

The roadmap promises a faster scalability timeline

Despite launching Phase 0, much remains to be washed to feel the practical benefits of the new blockchain.

The community was traditionally more excited almost the later phases: Phase i, which would introduce the first class of sharding for data storage, and Phase 2, which would brand sharding fully usable by decentralized applications building on Ethereum. Somewhere along the way, the existing Ethereum one.0 blockchain would have been merged as a shard and proof-of-work would have been phased out.

During 2020, the Ethereum development community converged on an alternative vision: the rollup-centric roadmap. Rollups are a class of layer-ii solutions promising to scale blockchains by taking abroad much of the computational burden

But it'southward not just about the rollups. Every bit Edgington explained, the concept of phases and linear development has been entirely superseded by a more flexible approach:

"Stage 0 hasn't changed, that's washed. Merely now we're building the rest in parallel. So in that location's been a decoupling between the sharding for scalability and the merger of Eth 1.0 and Eth 2.0. So they can be worked on in parallel and it may happen that the Eth ane.0 merge happens first, or sharding happens first. They can be delivered independently of each other."

All of this means that Ethereum 2.0 might get a lot more heady sooner than expected — provided, of course, there are no meaning delays.

The success of DeFi and its positive effect on Ethereum

While Ethereum'southward base layer saw slow just constant progress, DeFi has taken the crypto world by storm in 2020 — and almost of it, by far, has been on Ethereum.

During the "summer of DeFi" and 2020 as a whole, we have seen many tremendous achievements: Uniswap became one of the highest volume exchanges in the earth, more than than $13 billion in value entered the Ethereum ecosystem in the search for yield, and entirely grassroots projects based on decentralized autonomous organizations became heavyweights in the crypto infinite.

DeFi's significance has, so far, come non so much from what it does but how it implements financial infrastructure. Concepts like composability, where one protocol effortlessly integrates some other, or noncustodial trading and lending have proven their potential this yr.

For Ethereum itself, the fact that DeFi infrastructure notwithstanding remains stubbornly spring to its application layer cements the blockchain's potential. In a future where DeFi grows even further, Ethereum is and then far poised to reap the benefits.

The ugly underside of the DeFi boom: Blockchain congestion

The domination of DeFi has had one clearly negative impact on Ethereum: the weakening of virtually other types of DApps. While one could perhaps justify paying $50 to interact with a smart contract that grants some form of yield, this is a much less attractive proposition for buying an in-game item or other smaller interactions.

Ethereum suffered its worst congestion yet in the summer of 2020, owing to a combination of DeFi, stablecoin utilise and some alleged Ponzi schemes. That led to a sharp drop in activity for blockchain gaming and many other DApp categories that previously thrived on Ethereum.

Edgington has a bittersweet feeling about DeFi's dominance, noting:

"Three or four years ago, in that location was a huge vision about what Ethereum could do as a social base layer. All sorts of identity solutions and things like that, which are just being pushed out past DeFi because of the rising gas costs on Eth 1.0. And I'one thousand hopeful that when we have enough of available bandwidth on Eth two.0, we'll be able to back up a much wider range of solutions that go across DeFi."

Fixing the congestion with layer-two technologies

Medium-term scalability solutions based on layer-two technology, including Plasma and rollups, all made strides this year. Networks based on Plasma, spearheaded by OMG Network and Matic, were launched this yr afterward several years of evolution.

Rollups promise even amend platforms that would allow DeFi smart contracts. Zk-Rollups, in the form of Matter Labs' zkSync and Loopring's decentralized exchange, saw fully functional launches in 2020. Optimistic Rollups, another type of second layer, published several proofs-of-concept and is making steady progress for a 2021 launch.

The next year will probable marker the adoption stage of fully developed layer-2 solutions.

ProgPow and the governance hell of Ethereum

The ProgPoW proposal, which sought to modify the mining algorithm to eliminate specialized ASICs, generated commotion and biting political battles within the community in February.

For Edgington, governance is a clear Achilles' heel of Ethereum. "If nosotros want to talk about negatives of Eth 2.0 or the challenges alee, and then governance is written in upper-case letter letters at the top of the list."

The ProgPoW debacle highlighted a worrying dynamic for the future of the project: its inability to formally reject or accept contested proposals. The debate raged for two years, seemingly ending only due to sheer exhaustion.

Edgington is all the same optimistic that the community will brainstorm addressing governance issues:

"Now nosotros demand to start converging and thinking through how governance around Eth 2.0 developments looks similar, and how practice we intersect with Eth 1.0 governance? And perhaps there'south an opportunity here to practice a bit of a reset and deal with some of these questions."

A brief but notable incident: Miscommunication results in a chain split

Ethereum briefly suffered an unintentional hard fork this year. For several hours on Nov. eleven, at that place were two Ethereum networks, each with its share of nodes and mining ability. Notably, the node provider used past many Ethereum developers, Infura, was stuck on the minority chain.

The problem occurred when developers for a major Ethereum client, Geth, fixed a validation problems without notifying anyone of the issue. Some researchers unwittingly triggered the problems, resulting in older software — including Infura's — to be stuck on some other network. This could take resulted in money being stolen from exchanges or other serious consequences.

The incident triggered discussions near proper disclosure of futurity bugs of this magnitude, as the issue was hidden to avoid evil actors exploiting it. Nearly customs members argued that major ecosystem players should be made aware of such issues in the future.

Ethereum becomes Bitcoin'southward largest second home

An unexpected trend of 2020 has been the phenomenon of tokenized Bitcoin (BTC) on Ethereum. Between Wrapped Bitcoin (WBTC), RenBTC and tBTC, there is at present more than than 134,500 BTC bridged to Ethereum, worth over $2.7 billion.

Bitcoin's native layer-two solutions such every bit the Lightning Network, Liquid Network and RSK combined hold just about iv,100 BTC, or $84 million.

The ascent of tokenized Bitcoin on Ethereum was swift, spearheaded by Wrapped BTC being adopted beyond nigh major DeFi protocols and exchanges. Despite existence a centralized tokenization solution, the market clearly spoke in favor of using Bitcoin on the Ethereum blockchain.

Ethereum becomes the primary venue for Tether (and other stablecoins)

In a similar vein to Bitcoin, stablecoins saw fertile basis for planting their roots on Ethereum. For Tether (USDT), its ERC-20 iteration left all competing blockchains in the dust as the year progressed. USDT has consistently been the largest gas guzzler on the Ethereum blockchain, where more than than 12 billion USDT is currently located.

Combined with other stablecoins such as USD Money (USDC), Binance USD (BUSD), Dai, Paxos Standard (PAX) and others, there is more than $17 billion in tokenized dollars on Ethereum. The adjacent closest competitor is Tron, with its $6.iv billion USDT supply.

A bad year for Ethereum conferences

The cryptocurrency industry has remained relatively shielded from the pandemic and its aftershock. Just events in the real world accept withal left their mark on the crypto scene, and nowhere is that more apparent than with Ethereum's conferences.

Back in early March, many prominent Ethereans were gathering in Paris for EthCC, otherwise known as the Ethereum Community Briefing. The briefing ended upward being the virtually famous COVID-xix superspreader result in the crypto manufacture, with at least 17 confirmed cases among its attendees.

Many other events needed to be held most or canceled. Most notably, the Ethereum Foundation canceled its Devcon event this year and rescheduled it for Baronial 2021.

Curiously, Edgington was non entirely unhappy with foregoing tradition this year. "Of form, I miss seeing everybody. But on the other hand, we've got a lot of work done this yr that might not otherwise have been done," he said.

The twelvemonth of the smart contract hacks

With the ascension of DeFi, there has likewise been a rise in opportunistic hackers who accept tuckered smart contracts for millions of dollars at a time.

Some of the nearly notable hacks this yr have been the 3 exploits confronting bZX, the $25 meg hack of dForce, Balancer'south $500,000 loss and the four hacks in only one week in November. Some of these blur the lines betwixt a hack and market place manipulation, simply overall, 2020 has highlighted the many possible pitfalls of managing money through smart contracts.

Writing secure software is challenging, and Ethereum's programming language, Solidity, does non really assist. The linguistic communication's documentation features an extensive list of security all-time practices that could lead to the loss of funds if not heeded. Ethereum smart contracts can also be coded in another, more secure linguistic communication called Vyper, but this language is not particularly widespread. With more expertise under the developers' chugalug, 2021 should hopefully see fewer impactful hacks.

The Ethereum influencer scandal

In the later stages of the DeFi smash, around September, airdrops were all the rage. Uniswap'due south "stimulus cheque" of $1,200 was the nearly famous, only there was likewise Meme, whose more exclusive airdrop concluded up being worth $650,000 at one point.

It appears that some Ethereum influencers attempted to recreate a similar path to riches by launching FEW, a token referencing the popular Twitter meme of adding "few understand" to a tweet that supposedly says something clever.

Leaked Telegram conversations suggested that some of the group's more active participants saw information technology as a manner to make a quick cadet by leveraging their combined follower count. Following the leak, some were quick to distance themselves from the project and downplay their participation.

Whatever intentions the group may have had, the leak quickly put an end to the FEW project and resulted in a significant hitting to the reputation of those involved.