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.

What are Coins vs. Tokens?

In the brave new world of cryptographic assets, it can be confusing to determine what is what. When talking about cryptocurrency, the terms “coin” and “token” are often used interchangeably, even though this is not quite correct. There are several subtle differences between coins and tokens.

Coins – Bitcoin, Ethereum, Monero etc.

  • Are highly divisible and can be traded
  • Have their own blockchain network
  • Can be earned as rewards for mining or maintaining the network

Tokens – Golem, 0x Protocol, Gemini Dollar

  • Do not have their own blockchain network
  • Cannot be earned for mining or network maintenance
  • Can be earned for providing specific on-chain services

Assets Cryptokitties, Property Titles

  • Are not divisible but can be traded
  • Cannot be earned for mining or network maintenance
  • Can represent real-world items

Blockchain vs. Cryptocurrency

What’s A Blockchain?

Blockchains are distributed ledgers secured by cryptography. They are essentially public databases which everyone can add to and read. Instead of the data residing on a single centralized server, the data is copied across thousands and thousands of computers worldwide. The consecutive string of every block ever executed makes up a blockchain: a distributed database of chronologically ordered transactions. More on blockchains here.

What’s A Cryptocurrency?

A cryptocurrency is a digital store of monetary value with the primary use of which is for buying and selling goods, services, or property. Popular examples include bitcoin, litecoin, and Dash. Cryptocurrencies are cryptographically secured against counterfeit and often are not issued or controlled by any centralized authority. Cryptocurrencies can be referred to as tokens or coins. More on cryptocurrencies here.

What’s The Difference?

Blockchains enable decentralized platforms which sometimes require a cryptocurrency. The blockchain is the technology that serves as the distributed ledger and allows a network to maintain consensus. Distributed consensus enables the network to track transactions, and enables the transfer of value and information.

Cryptocurrencies are the tokens used within these networks to send value and pay for these transactions, or to provide network incentives. Furthermore, you can see them as tool on the blockchain, in some cases serving as a resource or utility, or to digitize the ownership of an asset.

Learn More

For more in-depth information about blockchain and cryptocurrencies, please be sure to visit out downloads and links pages, and be sure to subscribe to our mailing list below.

For full course material and information about in-person seminars and training events please visit our education portal.

NEXT: What is Decentralization?

What is Decentralization?

Decentralized networks are made up of computers, also known as nodes, that interact on a direct, peer-to-peer basis without the need for third parties. Within a decentralized network, information is distributed to every single “node” on the network. Each node has an updated copy of the recorded data. Decentralized networks can also distribute data in such a way that information can be validated without that information being transferred to a third party by reaching an agreement among nodes. Data is validated by using an agreed-upon consensus mechanism, which often involves the other computers on the network checking the validity of the data before it becomes permanently imprinted onto a blockchain.

In a decentralized network, each participating node is independent of the others. Rather than following the instructions of a central authority, decentralized nodes connect using common rules, but maintain their sovereignty and manage their own privacy. This helps keep the network secure, while also ensuring relatively democratic governance.

Centralized
Decentralized

A consensus mechanism is a way for nodes to come to an agreement about the integrity of data before it becomes part of a blockchain. Once the block contains this data, it is distributed amongst nodes, making it near impossible to change data that has already been recorded to the ledger. Instead of changing data in one centralized database, to change the data on a decentralized network (blockchain), a majority of nodes would have to be updated to reflect fraudulent information within a short amount of time. Otherwise, such information will be rejected by validating nodes.

More Information

The Blockchain Institute was founded to help teach people how to build the next wave of decentralized technology. You might find our web3 and downloads section useful, or for more in-depth content please check out our courses portal.

What is Cryptocurrency?

Background

Cryptocurrencies such as bitcoin or ether are scarce digital assets which exist on a decentralized network of computers. The currencies, which are referred to as coins or tokens, can be used within their network as a digital store of value or a medium of exchange.

Digital Ownership

In the same way that ownership of a house or a car is controlled by whoever holds the deed, a cryptographic asset is owned by whoever holds the private cryptographic key that is registered with the network. The difference with cryptographic assets is that instead of a central registry, a network of many peers keeps track of who owns each asset.

Transferring Digital Assets

When a cryptocurrency transaction occurs, the sender broadcasts a message to the network indicating that they are transferring assets under their control to another user on the network. They specify the receiver’s public address within the network, and the owner can only access assets transferred to that address if they have the corresponding cryptographic key.

Fun Fact: The first ever purchase of physical goods using cryptocurrency was on May 22, 2010, when Laszlo Hanyecz purchased two Papa John’s pizzas on the Bitcoin network for 10,000 BTC. These may also have been the most expensive pizzas ever purchased. The total value of those 10,000 bitcoin is now over $65M USD.

Network Security & Blockchain
A blockchain is a digital file which new information can be added to over time. Data is added to this file in blocks, which are linked together with an encryption function to form a chain. Most blockchains are shared between a wide network of peers, which means that once the data is confirmed by a majority of the network, it cannot be edited.

The original concept of the blockchain was first proposed in the Bitcoin whitepaper. The Bitcoin blockchain is used to keep a record of all transactions which have ever occurred in that network, and thereby acts as a communal registry of ownership of all the Bitcoins that have ever been created. When a participant in the network wishes to make a transaction, they must wait for all of the nodes in the network to update their copy of the record before they can spend their assets. Our free Blockchain Security course covers these issues and more.

Learn More

For more in-depth information about blockchain and cryptocurrencies, please be sure to visit out downloads and links pages, and be sure to subscribe to our mailing list below.

For full course material and information about in-person seminars and training events please visit our education portal.

NEXT: What is Blockchain?

What is Blockchain?

A blockchain is a decentralized ledger that records all transactions. Each transaction that is conducted leaves a permanent record that can be referenced at any time. The structure of the blockchain allows these transactions to be self executing and immutable. Once validated, data is permanently recorded to the blockchain and cannot be altered in any way.

The name blockchain largely refers to the structure of the technology. Blocks contain data that represents transactions, and when a block is created or “mined”, all the data contained in the block is added to the chain. Permanently. All ledgers are updated to include this new data. When all of the computers on the network have the same data in their copy of the ledger, this is called reaching consensus. Blocks are then linked together to form a chain and can be referenced at any time, hence the name blockchain.

Because a blockchain is designed as a distributed ledger, many computers directly connect to form a peer-to-peer network. If someone wants to hack the network, they would have to maintain control the majority of the network for a certain duration of time. The chances of a successful hack are extremely low, which illustrates the security surrounding blockchain technology.  Blockchain tech can be used to manage to grant others access to your personal data. This has the potential to be a very important tool in regaining control of your digital identity.

Learn More

For more in-depth information about blockchain and cryptocurrencies, please be sure to visit out downloads and links pages, and be sure to subscribe to our mailing list below.

For full course material and information about in-person seminars and training events please visit our education portal. Our free Blockchain 101 course covers all of this and more in great detail.

NEXT: Blockchain vs. Cryptocurrency