What is Bitcoin vs. Ethereum?

Satoshi Nakamoto is the name used by the person or people that created Bitcoin and wrote the Bitcoin white paper. 


The name first appeared on the paper “Bitcoin: A Peer-to-Peer Electronic Cash” that was distributed by a cryptography mailing list in 2008. The very first Bitcoin transaction took place between Satoshi and Hal Finney, a cypherpunk and programmer. While some suspect that Hal Finney may be the person behind the Satoshi pseudonym, it was never proven. After a five-year battle with ALS, Hal Finney passed away in 2014.

In 2010 Satoshi handed over control of bitcoin to the community members and stopped working on it himself. Up to that point, all of Bitcoin’s code had been written by him and him alone. Bitcoin’s goal is to act as a payment processor with its own cryptocurrency. Bitcoin’s evolution has shown to be a reliable way to send money anywhere in the world, all while avoiding the high fees and long settlement times associated with transferring currency across borders.

Ethereum is able to compute anything computable given enough resources and is therefore Turing-complete. In simpler terms, it can simulate a computer. Bitcoin’s main focus is payments and is not Turing complete. It only provides a very simple mechanism to distribute money. This reflects Ethereum’s main goal, to become the so-called “World Computer”, allowing rules to be written in any way that can be expressed by code and enable smart contracts.

While Bitcoin has transaction fees, Ethereum uses a pricing mechanism known as gas. Each smart contract or transaction requires a set amount of gas, which must be purchased with ether at the time of the transaction. The price of gas varies based off of network activity and congestion.

Eth Gas

Gas is not a token or coin. Gas is a pricing mechanism used to determine how much Ethereum should be required to purchase computing power on the Ethereum Virtual Machine. When someone pays for a transaction or smart contract execution, the gas price is determined based on current network volume. The user then pays for gas with their Ethereum in order to execute the transaction or smart contract computation.

It may help to think of gas as a computing credit, which can be purchased initially to fund a smart contract, but which changes in value over time depending on network availability.

What Can Blockchain Do?

While blockchain was created as a solution for the Bitcoin payment network, the concept has been adopted across a range of sectors and is expected to make a major impact in the way that we handle data storage. This technology even has the possibility to change the underlying structure of the internet. Currently, there are many projects exploring how blockchain technology can create change.

Communication

By using encryption and decentralization, true privacy can be achieved in messaging and communication. Currently, communication services rely on central servers that can store your information, ultimately making it prone breaches. Decentralized communication offers a more secure alternative.

Identity

Identity theft is a major problem. With so many hacks occuring, chances your information has been compromised at least once. Decentralized applications are being created that give the user complete control over their self-sovereign identity, and are able to prove who they are to interact digitally.

Supply Chain

The supply chain describes the process of getting a created good or commodity from its point of creation until it ultimately ends up in the hands of the consumer. This is a long process and many parties are involved in the transfer of these goods and the data on where those goods, came from, have been or currently are. Blockchains offer more transparent and auditable supply chain data that can provide accountability if a problem arises.

Real Estate

Currently, assets are being digitized into tokens, where the owner has complete digital control over the tokenized asset. This process could ultimately end ownership disputes, as the true owner would be able to prove that the asset is theirs. This tokenization of assets allows for a much more cost efficient and a quick property transfer process.

Blockchain technology’s impact is not limited to these fields. There is constant innovation concerning blockchains, and new use-cases are popping up regularly.

What is Decentralized Computing?

Distributed computing has been around for a long time in computer science, but in 2015 the Ethereum foundation changed that. Ethereum’s innovation was to create an economic incentive for nodes to join and help maintain a global, distributed, computer system.

Since 2015, Ethereum has risen to be the second largest cryptocurrency community, and a range of other similar projects have launched to provide more specialized versions of the same concept. Visit our downloads section for a full list of decentralized computing resources!

Also see Decentralized Storage for more interesting ideas about building distributed computing ecosystems.

What is Decentralized Storage?

The data transmitted over the internet is often processed and stored in large-scale servers controlled by internet service providers and web services like Google and Amazon. This is the most efficient way to send information back and forth between users. Data is sent from one user, funneled through a centralized server, and is then sent to the intended recipient; the centralized server does most of the processing and is the key facilitator in this transfer.

However, there have been many recent hacks and other data breaches by businesses and organizations that have custody of our personal information. This data loss puts customers at risk of their identity being compromised. Since all customer data is stored in one place, it is an easy target for hackers, as illustrated by the Equifax and Facebook hacks.

Blockchain Technology offers an alternative known as peer-to-peer storage. Instead of a centralized, vulnerable server, information is duplicated and stored by every single user of the network.  When information is recalled by a user, pieces of the desired file are gathered from several users storage. While this isn’t the most efficient way to store data, it is the most secure.

Check out our IPFS Demo here, or our free Decentralized Storage course here!

What is Forking?

A public blockchain can only exist by many node computers running the same software, which collectively maintains the record of the past of the network. Public blockchains offer completely open-source code, which allows any developer to iterate off of the existing code and make any changes that they desire. If either the collective record or the software that maintains it is questioned, there can be a fork in the network. There are three main types of forks:

Temporary Forks:

The most common way in which a fork occurs is when there  separate groups of nodes reach have different copies of the blockchain ledger. This can happen when there’s a high transaction volume, and nodes find multiple new blocks which can be confirmed within the rules of the system. In Proof of Work models, the longest chain will always win, so the network will ultimately return to a global consensus quite quickly.

Permanent Forks:

Soft Forks:

A soft fork is a network upgrade which can be thought of a non-mandatory. Nodes running old versions of the software will still be able to interact with and maintain consensus on the network.

Hard Forks:

A hard fork is a network software upgrade or change that either forces nodes on the network to upgrade or results in a permanent split in the network.

If nodes running the old version of the software they will end up of their own network, with their own version of blockchain data, separate from the nodes that upgraded. This situation results in two separate networks.