Tag: Bitcoin

Digital Ledger

A distributed ledger is a database that can securely record financial, physical or electronic assets for sharing across a network through entirely transparent updates of information. Its first incarnation was ‘Blockchain’ in 2008, which underpinned digital cash systems such as Bitcoin. The technology has now evolved into a variety of models that can be applied to different business problems and dramatically improve the sharing of information.

A shared ledger is essentially a database that keeps track of who owns a financial, physical or electronic asset: a diamond, a unit of currency, or items inside a shipping container, for example. Crucially, every participant can keep a copy of the block chain, which is updated automatically every time a new transaction occurs. The security and accuracy of the information is maintained through mathematics — specifically by cryptography — to ensure that all copies of the ledger match each other. Almost anything that exists on paper today could exist on a shared ledger.

Ethereum

Ethereum is an open-source, public, blockchain-based distributed computing platform featuring smart contract (scripting) functionality. It provides a decentralized Turing-complete virtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. Ethereum also provides a cryptocurrency token called “ether”, which can be transferred between participants and is used to compensate participant nodes for computations performed. It is a part of the vision of a fully decentralized web.

First of all, it is a non sense to call Ethereum the Bitcoin rival. If both are crypto currencies built on blockchains, Ether will be used more as a mean of exchange as it is at the heart of the smart contract system. Bitcoin can thus be viewed more as a store of value.
Bitcoin is a digital currency which was originally created as an alternative monetary system. On the other hand, Ethereum is created as a blockchain 2.0 platform that can be used to create and execute smart contract applications over blockchain. Bitcoin platform’s crypto token is called bitcoin (which can get confusing) and Ether is the crypto token used on Ethereum platform. Ethereum is essentially Bitcoin with a Turing-complete scripting language. A Turing complete code means that given enough computing power and enough time. Ethereum has its own Turing complete internal code, when Bitcoin has not this form of flexibility.

Smart contracts are applications with a state stored in the blockchain. They can facilitate, verify, or enforce the negotiation or performance of a contract. Ethereum contracts can be implemented in various Turing complete scripting languages. The Ethereum system has been described by the New York Times as “a single shared computer that is run by the network of users and on which resources are parceled out and paid for by Ether.”

Both Swarm and Whisper are complementary technologies contributing to the vision of Ethereum as a “world computer”. When imagining Ethereum as a metaphor for a shared computer, it should be noted that computation alone is not enough. For a computer to be fully useful, it also needs storage to “remember” things and bandwidth to “communicate” them. This could be summarised as such:

Contracts: decentralized logic
Swarm: decentralized storage
Whisper: decentralized messaging