The scripting language in bitcoin is restricting application development, which is something that Ethereum can change, according to Fred Ehrsam, co-founder of Coinbase, which recently added Ethereum trading.
Ehrsam, writing in Medium, noted that in its first nine months, Ethereum’s level of app development already outpaces bitcoin’s. Ethereum has finally delivered rapid app layer iteration. Hence, the development of a decentralized organization, the DAO, focused on code and operations that humans run, as opposed to the other way around. DAO has raised $150 million in the largest ever crowdfunding campaign.
Ehrsam does not advocate a contest between the two cryptocurrencies. He sees a significant overlap between them, making the comparison useful. He noted there is potential for competition between the two.
Bitcoin was revolutionary when its white paper emerged in 2008.
When the network quietly launched in 2009, many were skeptical. To ensure its utility, bitcoin’s scripting language was restrictive. It was designed as an easy-to-use programming language.
Bitcoin’s language actually is not scripting language; it uses a stack with script operators.
Within every bitcoin transaction is the ability to write a small program. A user can write a program saying the transaction is not valid except for a certain date. This allows funds to move automatically using computer code, and everyone can view the rules by which the money moves and be certain the rules will be followed.
Bitcoin remains the first network to enable anyone to access an open financial system via free software. It has never experienced an unfixable systemic issue.
But seven years later, there are few apps and no “killer app” other than speculation and store of value. The bitcoin scripting language has hardly expanded and is restrictive. As bitcoin faces a block size debate that is not likely to halt progress, Ethereum charts new territory executionally and intellectually.
Make no mistake — Ethereum would never have existed without Bitcoin as a forerunner. That said, I think Ethereum is ahead of Bitcoin in many ways and represents the bleeding edge of digital currency.
Since bitcoin’s scripting language is intended to be restrictive, its functionality is limited. It can be viewed as programming with an advanced graphing calculator. A user can only do basic functions, and it is difficult to use. Most modern programming languages have code that is readable like a sentence, but bitcoin code looks like machine code.
Hence, it took developer Mike Hearn eight months to write an initial version of a simple crowdfunding application.
Coinbase developers have written simple Ethereum apps in one or two days.
The combination of full programming functionality and ease of use is very important. Users are doing things in Ethereum not possible in bitcoin at present. Ethereum has created a new generation of developers who never worked with bitcoin.
It would require a series of layers that work with the bitcoin protocol that have not yet been created for bitcoin to have this functionality. Ethereum, by contrast, has this functionality.
In addition to the scripting languages difference, Ethereum has better tools for developers. Bitcoin developer tools never caught on. Such tools are badly needed since bitcoin is difficult to work with out of the box. Ethereum has a welcoming home page for developers and its own development environment (Mix IDE).
Bitcoin’s developer community feels dormant. Development never extended beyond simple exchanges and wallets. The Lightning Network (a way of making transactions more efficient) release of Thunder is the most notable recent bitcoin release. Thunder is an additional protocol layer, not an application, which both bitcoin and Ethereum can use.
Ethereum’s developer community is growing. New things are being tried. Most experiments are currently toys, but one can view a list of apps developers are expanding worldwide.
Developer mindshare is the most critical thing to have in digital currency. The networks and their tokens have value because there is an expectation that people will seek to use the networks and acquire the tokens. Developers build the applications that drive the demand. Minus a reason to use the network, both the currency and the network are worthless.
The creator of Ethereum, Vitalik Buterin, shows promise as the open source project leader. Buterin is comfortable as a technical and community leader. When Coinbase added Ethereum to GDAX, Buterin sent an inspiring message.
Bitcoin, in contrast, has suffered a leadership vacuum since Gavin Andresen left after other core developers rejected his arguments to increase the block size. The core developers are now fragmented.
Bitcoin’s leadership is unclear. Greg Maxwell, Blockstream’s technical leader, referred to core developers working with miners on a block size compromise as “well meaning dips***s.”
A second discussion board formed on reddit on account of the original board’s censorship. The content on these boards is squabbling while Ethereum’s board includes discussion of new ideas.
Ethereum’s leadership and community are moving forward. With bitcoin, things will have to get worse before they improve.
The mindset of the two communities differs. Those in bitcoin carry a false sense of having a valuable network needing protection. In reality, bitcoin is much smaller in magnitude than the big financial networks that conduct $200 million daily in transaction volume. Daily bitcoin transactions are increasing at a healthy clip, but the transaction dollar volume is hardly growing.
Ethereum’s core development team is focused, as evidenced by the Ethereum blog. Ehrsam observed that when he began reading the blog, it offered everything he was thinking concerning bitcoin’s future, but didn’t see being discussed much elsewhere: the viability of proof of stake, what a blockchain-based company (DAO) would look like, scaling the network, how to create a stable digital currency, and more.
Some of the ideas will work while others won’t. Ehrsam sees moving to proof of stake and removing physical mining among the most promising ideas.
Bitcoin has been stuck on the block size debate for the last year and a half. Minor improvements have been accomplished (such as CHECKLOCKTIMEVERIFY to allow time locking functionality) while other improvements are being developed (Segregated Witness to allow a more efficient network). None of the changes have drawn much application development.
Ethereum, beyond its more robust programming language, makes advances that are core to basic transactions. The mining allows for faster blocks, hence, transaction confirmation times are about 14 seconds compared to 10 minutes for bitcoin (not an apples-to-apples comparison, but a comparison nonetheless.) This is due largely to miners getting paid as they indicate whether or not they are first to solve the next block. This system (“uncle blocks”) is not yet perfect, but it represents significant progress towards faster transaction confirmations.
Also read: Coinbase adds Etherum to trading; set for rebrand
Ehrsam added that it was prudent to acknowledge Ethereum’s risks.
• Ethereum has been able to take more risks with features as there is less to lose. It has held hundreds of millions of dollars while bitcoin has held billions. As Ethereum expands, it may not be able to move as fast and “beak things” as it has. This depends on the core development team’s quality. It must continue to progress and build trust and maintain rapid community execution, as demonstrated by Linus Torvalds with the Linux open source project.
• There has not yet been a governance crisis. Buterin noted this during an Ethereum meetup at Coinbase. Any successful project encounters bumps as peoples’ vested interests increase.
• There is increased regulatory risk since Ethereum allows more to be done than does bitcoin. This is less a systemic risk than a risk of specific applications. One example would be decentralized organizations like DAO and regulation applicable to a corporation.
• Ethereum has greater security risks. A more robust programming language brings a bigger surface area for things to go wrong. Bitcoin has been more battle tested. While there have been no major issues yet with Ethereum, issues can exist that people are not aware of. This becomes less of an issue over time. There will be smart contract bugs. But it won’t be due to a core Ethereum protocol failure, just as Mt. Gox’s error was not a bitcoin protocol error.
• Ethereum might try to move to proof of stake. It would mark a big breakthrough since it would remove the need for proof of work and the electricity and hardware it brings, but it also brings a big risk. Ehrsam believes the risk is manageable since there would be extensive testing.
• Network scaling is harder when it supports small programs along with basic transaction processing. This was the biggest question Ehrsam had when he began reading about the idea in 2014. There is no “silver bullet,” but a combination of solutions will emerge in time. Possibilities include sharding the network, networks and computer power naturally getting faster with time, and blockchain economics running the most critical things as a forcing function.
An argument, articulated by Andresen in an article in Bit-thereum, holds that it is better to maintain the base transaction layer dumb for scaling purposes, with advanced logic in higher layers. This is not how interesting things are getting built presently since it is harder to create and to get good adoption of multiple layers in the stack than to have it all out of the box in Ethereum.
Bitcoin can remain the protocol that people are comfortable storing value in since it is more reliable and stable. Ethereum would continue to take more risks by attempting less tested advancements. Under such a scenario, bitcoin acts as a settlement network while Ethereum runs decentralized applications where most transaction volume takes place in the air. The scenario is complementary.
The possibility exists that Ethereum exceeds bitcoin completely. Bitcoin can do nothing Ethereum can’t do. Ethereum is less battle tested, but moving faster, has more developer mindshare and better leadership.
The bottom line is digital currency has a bright future. Ethereum is pushing the envelope. Competition and new ideas bring progress for everyone. Even if Ethereum fails, the collective digital currency knowledge increases. Ehrsam has not given up on bitcoin and considers the network highly resilient. Coinbase will support both networks and will likely support things that have not yet been invented.
“Taking a step back, it feels like the rate of change in digital currency is accelerating.”
Digital currency is unique since its scope is ambitious. It creates a better transaction network for assets, currency, online identities and more. It is not one company selling a proprietary product, but a series of low-level protocols that will include everyone at some point in time.
Like the Internet, digital currency has and will take time to develop, but its impact will be immense.
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Last modified: March 4, 2021 4:48 PM