∙ Architecture
Ethereum is another example of a decentralized type of platform used for the running of smart contracts which are mostly based and operate under blockchain technology. The Ethereum platform was developed and delivered to the general public in the year 2013 by an individual known as Vitalik Buterin [2]. Later, in the year 2014, it is when the Ethereum project was funded via crowd sale, and just one year later during 2015, the system went public and live. The Ethereum platform aims at the improvement of the concepts brought about by Satoshi Nakamoto. Ethereum platform is currently identified to be using the currency inside its inbuilt network known as Ether. Where the Ether coins have the possibility of being used in “paying for the computations used for EVM” – Ethereum Virtual Machine.
Same as that of Bitcoin, Ethereum also happens to be a blockchain-based protocol. However, Ethereum has been identified to contain several advanced blockchain technologies within its structure used in enabling it to be programmable, which can simply be understood as it is not pre-defined, thus allowing its users to create operations having different levels of complexity. Serving as a platform system that aims at becoming a generalized technology for applications, communities, etc., Ethereum has also been identified to
allow its users to create various applications which exclude the various limitations regarding cryptocurrencies. Ethereum team states, that ether is not necessarily used as a primary token for the Ethereum network, but it was mainly created as a means of payment for the computations.
similar to that of the Bitcoin Core, the Ethereum Virtual Machine aims at executing code of algorithmic complexity Wood 2017 [7]. When dealing with the developers, EVM allows for the creation of applications that are written using a programing language that happens to be compatible with the Ethereum Virtual Machine itself. EVM is also identified to be one of the key innovations in the cryptocurrencies business environment – such software’s which are considered to be compatible with several programming languages, and that it enables developers to run the applications on a single platform instead of the creation of several separate blockchains.
∙ Features
- Simplicity: a major key feature found in cryptocurrency is simplicity. It’s designed with simplicity so that the programmer may be able to follow and implement the technology quickly.
- Universality: the most important feature that is designed in Ethereum is that it does not have a fixed mechanism. It allows the principle of universality that means that any programmer can use their creativity to advance the design of Ethereum. Therefore, the design does not have constraints that are a must follow, but it gives freedom to the programmer to do whatever they want.
- Modularity: it means that Ethereum is designed to be modular and separable. The design shown in features that will allow fault tolerance and consequently any changes made to Ethereum will be allowed and the design will continue functioning. Modularity means that the entire system is developed in parts that can function independently.
- Agility: this has been done to accommodate future changes. The design of the Ethereum Virtual Machine (EVM) makes it more adaptable, scalable and such during the development period.
Non-discrimination and non-censorship: this are to give freedom to all the people who are willing to use the protocol, and this makes it available for all to use. There are no specific
- groups of people who are restricted from using the system.
∙ Challenges
Thefts
Over time, both Ethereum and Bitcoin have been affected by the increasing situations involving theft cases. Where the total amount of the money stolen is estimated to be totaling almost $ 520 million). Thefts are considered to being a huge reason behind Bitcoin not being as a platform for the storage of value [1]. Thefts, related to the major cryptocurrencies, are mostly as a result of the security breaches of the digital wallet providers, digital exchanges, or crypto-related projects.
Scalability
One of the crucial issues affecting cryptocurrencies is the of scalability problem. The problem happens to be one of the most highly debatable in the Bitcoin community where several different ways of overcoming this issue have been developed. In the Bitcoin network, every block is limited to using a total of 1 megabyte per block, so with the increased rate of adoption, transactions queue will inevitably grow; thus, the transaction fees will also increase so as to prioritize certain payments [4].
Low adoption
Although cryptocurrencies have recently become one of the biggest trends in the technology industry and gained immense growth and popularity in the last years, its adoption and use still happens to be the key threats and challenges to the cryptocurrencies development, in particular,
Energy crisis
Major cryptocurrencies, such as Ethereum and Bitcoin have been identified to use the PoW blockchain algorithm. Where such an algorithm requires a mining process to be used in approving and verifying the transactions. Assuming the radical jump in prices, the mining process has been identified to being one of the trending best practices.
Part 2: Applications of Bitcoin
∙ Token Systems
Narayanan et al. discuss the application of token systems in the Bitcoin system [6]. There is a various application that is used with the token systems which may range from the sub-currencies which are used to represent assets to tokens that are not tied to any value at all. Most of the tokens are used to act as banks which can be used to store value and other assets which may be owned by the specific person. This the major application of the token systems when applied in the Bitcoin protocols.
∙ Decentralized file storage
The major idea and application of the decentralized file storage are to act as cloud storage. Bitcoin offers the opportunity of developing their cloud storage services which they can rent to people who want to have an online storage platform. This application is taken from the many startups that have introduced the idea of offering cloud storage to random users. many storage spaces should be from 20-200 GB of data. The same has also been implemented in the Bitcoin core where programmers can create their storage file storage and share them with their client for a specific fee. One has to first split their data into a various block which are then encrypted with private keys to provide privacy. Then they have to build a certain tree called the Markle tree which is the form of storing the data in the file storages. The data has to be stored in the form of trees to reduce space and also a time when retrieving the data.
An important feature that can be identified in the protocol is, although it may seem like one is trusting many random nodes not to decide to forget the file, one can reduce that risk down to near-zero through the splitting of the specific file into many pieces through the watching the contracts to see each piece is still in some node’s possession and secret sharing [3].
Part 3: Compare Ethereum and Bitcoin
There are various similarities and differences that we find between the two cryptocurrencies. Bitcoin was first created, and the Ethereum Virtual Machine (EVM) came later to improve on some of the issues that Bitcoin had not considered carefully. The major similarity shared between the two is that they are blockchain protocols [5]. However, Ethereum has advanced blockchain technology making it programmable, in other words, it is not pre-defined and allows users to create operations
References
[1] Bal, A. & Lee, D. K. 2015. Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data. Amsterdam: Elsevier.
[2] Buterin, V. 2018. Ethereum scalability research and development subsidy programs. Ethereum blog. Available: https://blog.ethereum.org/2018/01/02/ethereum-scalability-research-development-subsidyprograms/.
[3] Baldwin, C. 2016. Bitcoin worth $72 million stolen from Bitfinex exchange in Hong Kong. Reuters. Available: https://www.reuters.com/article/us-bitfinex-hacked-hongkong/bitcoin-worth-72-millionstolen-from-bitfinex-exchange-in-hong-kong-idUSKCN10E0KP.
[4] Buterin, V. 2013. Ethereum White Paper. GitHub. Available: https://github.com/ethereum/wiki/wiki/White-Paper.
[5] Böhme, R., Edelman, B., Christin, N. & Moore, T. 2015. Bitcoin: Economics, Technology, and Governance. The Journal of Economic Perspectives, 29, 213-238.
[6] Narayanan, A., Bonneau, J., Felten, E., Miller, A. & Goldfeder, S. 2016. Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction. Princeton, New Jersey: Princeton University Press.
[7] Wood, G. 2017a. Ethereum: a secure decentralized generalized transaction ledger. Gavin Wood Official website. Available: http://gavwood.com/paper.pdf.
