Why wont my iphone 2g update any more than ios 3.1.3?

I recently bought an iPhone 2g from a friend because I cannot afford one of the new ones. I seem to have the problem that it will not update.. It is currently at ios 3.1.3. When I try to update it, it says that 3.1.3 is the current version. Is there a reason for that? Is there any way i can update it to at least ios 4? I've also encountered the problem that occasionally when entering an app, it exits automatically after a few seconds. I try reinstalling the app but for the most part, it doesnt work. Im becoming quite aggrivated seeing as i paid for certain apps that I cant use.