Ethereum's path to the forefront of the blockchain world

Over the past 3 years of Bitcoin development, we have seen the emergence of many infrastructure applications, most of which were exchanges and wallets. But on this list of practically significant and truly new developments based on Bitcoin ends. How can this situation be explained?

There is a theory that the Bitcoin scripting language — the very part of every Bitcoin operation that allows you to run a small program during this operation — is too limited in capabilities. In this context, Coinbase co-founder Fred Ehsem (Fred Ehrsam) proposes to pay attention to Ethereum, the appearance of which, in his opinion, can be compared to the invention of a full-fledged computer, replacing the 4-time calculator named Bitcoin. At first glance, we at Wirex , a Fintech startup providing payment and remittance services without banking intermediation and using blockchain, compared Esema with a bit rude, but have to agree that such a point of view has the right to life. Who needs arguments, we invite under kat.

9 months have passed since the launch of the Ethereum network, however, the level and speed of application development in it already now exceed the corresponding Bitcoin figures. Here we can finally talk about achieving fast iterations at the application level. As one of the early examples of autonomy that can be achieved with Ethereum, a decentralized organization was created, called the DAO (Distributed Autonomous Organization). The main activity of the company, which collected $ 150 million in the largest crowdfunding company in history, is controlled by means of an automated code, while real employees perform only auxiliary operations.

Essem notes that they do not consider it necessary to organize competitions like “Bitcoin vs. Ethereum”. Instead, it will focus on the promotion and development of digital currencies in general. Nevertheless, both technologies have much in common with each other, and the very rivalry between them is quite realistic, therefore, in this material, the author somehow compares them.
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How did the current situation?

First, a little history. At the time of the appearance in 2008 of a formal technical description of Bitcoin, the technology was revolutionary. It was also surprising at the junction of which areas of knowledge (computer science, cryptography and economic incentives) it appeared. When the real Bitcoin network was launched in 2009, nobody knew about it, and many of those who knew thought that it would almost certainly be a failure. Bitcoin scripting language was intentionally limited in order to guarantee simplicity and efficiency. “Scripting language” is an intricate name for that simple programming language used in Bitcoin. Actually, Bitcoin does not have a scripting language. It uses a set of script operators, more about which will be discussed later. The scripting language Bitcoin plays an important role: it is he who turns Bitcoin into "programmable money." Each bitcoin operation contains the possibility of writing a small program. For example, you can write a program that would say that “the operation being performed is valid only after June 15, 2016”. This is a very powerful tool, as it allows you to automatically transfer money using computer code in such a way that everyone else will see the rules by which money moves and will know that they are executed.

Surprising was the fact that Bitcoin took off and is still alive, after 7 years of existence. It turned out to be the first network in the world that allowed everyone to access the initially open financial system using free software. The capitalization of the Bitcoin market today is estimated at $ 7 billion, and he himself has never encountered systemic problems that could not be solved. According to some people, this alone is a huge success.

Nevertheless, 7 years later, not many applications appeared on the base of Bitcoin, among which there is not a single truly revolutionary one. Existing solutions do not go beyond solving the problem of storing funds and speculation. The Bitcoin scripting language for all this time has received almost no improvements and remains very limited. Yes, there have been and remain disputes over the block size - an important issue for network operability, the solution of which, however, will in no way affect the young and fast-growing direction, such as Ethereum. The latter, in turn, opens up new horizons for the development of cryptocurrencies, both theoretical and practical.

Undoubtedly, without such a pioneer as Bitcoin, Ethereum would never even be born. Yet, in many ways, Ethereum outpaced Bitcoin, actually becoming today the advanced technology of the world of digital currencies. And that's why:

Ethereum programming languages ​​allow you to do much more than Bitcoin

As mentioned above, the limitations of the Bitcoin scripting language were introduced purposefully. The language itself can be compared with an advanced graphing calculator, the functionality of which, despite the advanced, is still limited. This calculator allows you to perform only basic operations. In addition to this, learning to work with him is not easy, however, as well as working with him in general. Unlike most modern programming languages, where the code reads almost like a sentence, this one looks like illegible machine code . As a result, even the talented former Google developer Mike Hearn took as many as 8 months to write the first version of a fairly simple crowdfunding application.

Ethereum programming languages ​​such as Solidity (for those who love Javascript) and Serpent (for those who love Python), on the contrary, allow you to do absolutely everything available in modern advanced programming languages. That is why they are called turing-full . An equally important factor is the simplicity of their use: any modern developer will be able to learn them and quickly write their first applications.

Here is an example Bitcoin script:

OP_DUP OP_HASH160 62e907b15cbf27d5425399ebf6f0fb50ebb88f18 OP_EQUALVERIFY OP_CHECKSIG 

But his counterpart from the "Esserium" Solidity:

 contract Simple { function() { var two = 1 + 1; } } 

Writing simple Ethereum applications takes only a day or two from Coinbase developers.

The importance of this combination of full functionality and ease of use can not be overemphasized. People do things with Ethereum that are simply unavailable in Bitcoin today. And this difference has grown a whole generation of developers who have never worked with Bitcoin, but are interested in working with Ethereum.

You can add the same advanced functionality to Bitcoin only by including third-party layers that work with it directly, which no one has suggested so far. In Ethereum, these features are available by default.

In addition to the fundamental differences in scripting languages, Ethereum offers more convenient development tools. At the same time, given the complexity of working with Bitcoin, the need for tools to work with it is more acute than ever, but it still remains unmet. Ethereum has made life easier for developers. For them, created not only a special welcome page , but among other things, a separate IDE Mix Development Environment.

Ethereum has a stronger developer community.

The Bitcoin community of developers seems to be dormant. Bitcoin has not overcome the stage of development of simple wallets and exchanges. The most noticeable thing recently released is Thunder . This is a practical implementation of the Lightning Network concept, which allows you to increase the speed and other parameters of blockchain operations, especially microtransactions. However, it is also an additional protocol, not an application, and it can be used in both Bitcoin and Ethereum.

As for the Ethereum community, it, on the contrary, gives the impression of a full of strength and growing community. But the most important thing is that the developers working with Ethereum are trying to create something new. Most of the developments at the moment are experiments or toys . However, you should not lose sight of the constantly growing list of applications that developers from all over the world are working on.

The fame of technology among developers is the most important factor in the success of digital currency. The only reason why such systems as Bitcoin and Ethereum and their money symbols (bitcoins and ethers) have any value is in the future demand for them and the desire of other people to purchase them for use within the system. And the developers of Ethereum create applications that increase this demand. Without this, both the network and its currency lose their value.

The main development team of Ethereum works smoothly and efficiently. Bitcoin developers are fragmented and this affects their operations.

Acne Buterin , creator of Ethereum, shows the true signs of the leader of the open-source project. He looks confident both in the role of technical manager and in the role of community leader. Take a look, for example, at his response to a Coinbase letter about the inclusion of Ethereum support on the GDAX exchange.

Bitcoin, on the other hand, is experiencing a managerial vacuum since Gavin Anressen ceased operations after other members of the core development team disagreed with his arguments in favor of increasing the block size . The “main team” in its current form is relatively fragmented.

In addition to the mess with the leadership is not all smooth and in the Bitcoin community itself. Greg Maxwell, technical director of Blockstream , a company with a substantial part of the core development team, recently allowed to call his colleagues in the workshop, who worked with miners on the compromise on the size of the block, “ assholes who wanted the best .” Censorship on the main reddit / r / bitcoin led to the emergence of a new section / r / btc . The general content of discussions about Bitcoin gives the impression of an empty clarification of relations, while Ethereum discussions are aimed at analyzing topical issues and new ideas. In general, while Bitcoin is experiencing a crisis in anticipation of better times, the leaders of Ethereum, and as a result the community itself, are moving forward.

Ethereum community is set to grow. The bitcoin community revels in a false sense of completion

Different ways of thinking are two communities. From the outside, it seems that many members of the Bitcoin community treat it as a kind of valuable exhibit that needs protection. According to Fred Esem, this attitude is wrong and dangerous. Bitcoin is still much less than the main international financial networks, both in terms of the volume of operations, which is only about $ 200 million a day (for comparison: Visa has $ 18 billion) and the number of users (10 million against 5 billion from banks ). In addition, despite the steady increase in the number of daily operations in the Bitcoin network, the actual amount in dollar terms cannot boast of the same healthy growth.


The peak indicator of the volume of daily operations Bitcoin in comparison with other networks. There is still a long way to go.

The core team of Ethereum, meanwhile, is focused on work. This can be seen on her blog , where you can find arguments about the present and future of Bitcoin. Among other topics discussed in the blog, there are such pressing issues as network scaling, the effectiveness of the proof-of-stake concept, thoughts on how to create a stable digital currency, what a blockchain-based company (DAO) should be. All these are very ambitious ideas, and some of them will not work. However, some others, especially such promising things as a practical transition to proof of stake and the elimination of physical mining, are likely to earn and play their important role.

Faster, more stable growth of the Ethereum core

The last year and a half bitcoin stuck at the stage of discussing the size of the block. The system has implemented some minor improvements, for example, CHECKLOCKTIMEVERIFY , which implements the functionality of the lock on time. There are others that are still under development, but still not added in practice. For example, Segregated Witness , which increases network efficiency. Be that as it may, all these improvements are loosely connected with the writing of new applications.

The structure of Ethereum is initially open to change even in the basic operations of the network. Mining at Ethereum allows you to get blocks faster, thus reducing confirmation intervals to about 14 seconds compared to 10 minutes on the Bitcoin network, although such a comparison is, of course, not entirely appropriate. This is largely due to the fact that miners make a profit for the contribution they made to the mining process, regardless of whether they were the first to solve the problem of a particular unit ( uncle blocks system). Although this approach is far from ideal, it represents a significant step forward in speeding up the confirmation of operations.

Counter arguments and arguments against

Due to the youth of Ethereum, it would be reasonable to take into account the main risks associated with its use:

• Ethereum is easier to take risks, because for him the size of potential losses is not so great: the cost of the system is estimated at millions of dollars, while Bitcoin, for example, is worth billions. As Ethereum grows, it may well face the inability to grow as quickly and efficiently as before. In practice, it all comes down to the level of professionalism of the core development team. The example of Linus Torvalds and Linux shows that the desire for further progress and increased support from the community will help any open-source project not to lose its effectiveness.
• Ethereum has not yet gone through a management crisis. Acne noted this point on ethereum-mitap . Like any project that has achieved some success, in the future it will inevitably face problems related to the growth of the personal interests of its participants.
• Ethereum allows you to do more than Bitcoin and this creates more serious regulatory risks. It is not so much about the system risks for Ethereum as a network, but about the problems that can arise from applications developed on its basis. In this sense, the fate of the same DAO does not seem so obvious, because now it is not completely clear how much the activities of such companies meet the legal norms.
• An even greater risk is related to security issues. Improving the efficiency of a programming language opens up much more possibilities for something to go wrong. Bitcoin has 7 years of constant strength tests, while Ethereum has only been in existence for 9 months and now its value does not exceed $ 1 billion . There have been no serious incidents yet, but this does not mean that there are no pitfalls in his work. The likelihood of difficulties with time will increase. And, of course, people will create “holey” smart contracts in Ethereum, but this will not happen because of any malfunction in the core of the system’s protocol, but rather for the same reasons that are not directly related to the system itself. to major incidents like the Mt.Gox bitcoin exchange.
• Ethereum can try to move to proof of stake , and such a transition would mean a serious breakthrough, eliminating the need to use proof of work, and with it all the equipment and electricity spent on it. In addition to the obvious positive aspects, it can entail tangible risks, which can be controlled with the help of advanced advanced testing .
• Scaling the network, which, in addition to basic work with operations, also supports mini-programs, is not an easy task. When in 2014 the author became acquainted with the main idea of ​​the project, the issue of expansion seemed to him the most critical. There are no universal solutions, and as the project develops, the developers will gradually come to some combination of them. One of the possible options is network segmentation . Constantly and naturally growing computing power and speed of data transmission in the modern world, as well as the structure features of the Ethereum blockchain, contribute to this. There is another proposal, the essence of which was best expressed by Gavin Andresen in his article Bit-thereum . It consists in making the basic level of work with operations non-extensible, applying more advanced logic at higher levels. However, despite the potential viability of this idea, it is very difficult to implement.

Wait, it all sounds like obvious competition between the two systems. So, are they allies or allies?

An unequivocal answer to this question is now impossible. It is possible that, because of its stability and reliability, Bitcoin will remain a more convenient means of saving capital. This will allow Ethereum to take more risk by introducing much less reliable improvements. In this scenario, Bitcoin will most likely play the role of a certain reciprocal network, while Ethereum will be used to launch decentralized applications in which the fate of the main volume of operations will not be as unequivocal. Thus, in this scenario, both technologies can complement each other well.

However, the likelihood of Ethereum completely replacing Bitcoin is great, because using it you get all the same opportunities as in the case of Bitcoin. Even though Ethereum is not so well tested in combat conditions, it nevertheless develops faster, boasts the best team of leaders and is at the ear of developers. Yes, Bitcoin retains the first-mover advantage and will not be easy to overcome, however, given the current rate of development of Ethereum, it is quite possible.

What does all of this mean?

All this is good news for digital currencies. Ethereum expands the horizons of the possible and opens up very interesting perspectives. Competition and new ideas will benefit all participants. But even if suddenly Ethereum “burns out”, thanks to the experience that we have accumulated in the course of working with it, our collective knowledge in the field of digital currencies will still reach a much higher level.

As for Bitcoin, I did not turn away from him, - says Fred Esem. - Yes, and it is difficult to argue with such a fault-tolerant network. Together with other developers from Coinbase, we are planning to support both technologies. The same applies to any other, yet non-invented technologies: perhaps we will support them, because I, in the end, never swore allegiance to any particular technology, but just want to bring maximum benefit to the world.

The sphere of digital currencies stands out among other areas of knowledge due to the scale of the main task that it is trying to solve - creating an improved international network for working with currencies, assets, online personal identification and other things. As in the case of the Internet, this is not about any one company selling its own patented product, but about a whole series of low-level protocols that once allow people all over the world to have a direct connection with each other.

In the next part of a series of articles devoted to the works of Vitalik Buterin, we will talk about the first “decentralized autonomous organization” The Dao. Recently, The Dao completed the most successful crowdfunding campaign in history, which resulted in more than 150 million dollars (almost 12% of the total broadcast that is in circulation). What caused the interest in the platform, how it is arranged, what functions it carries out and which pitfalls are fraught with, read the next issue.