My Facebook friend Dorothea Carney asked me to give my take on Bitcoin vs Etherium and asked whether I preferred one of these alt coins over another. That’s a simple question to ask, but it’s not easy to answer.
Without getting over complicated, this is my best shot.
Ethereum or Bitcoin – Which is Better?
The simplest take I can give you on this is to compare crypto currencies or “Alt coins” (as they are becoming known) to ordinary to gardening tools.
Garden Fork vs Spade
Both these tools are used for digging and apply the laws of physics in the form of leverage to enable the user to lift and move clods of earth from one part of the garden to another.
The spade is pretty much limited to digging holes or a trench with straight even sides.
The fork can also be used for digging holes, but because it has multiple prongs the holes don’t have such even sides. On the other hand it’s also useful for breaking up clods of earth and leveling the soil. And again, because of it’s multiple prongs it can be used for turning compost and lifting straw, etc. So it’s more versatile, though in some respects not as strong as a spade
Ethereum vs Bitcoin
Both these tools are used for storing data and apply mathematics in the form of cryptography to enable the user to move value from one part of the internet to another via a blockchain (distributed ledger).
Bitcoin is pretty much limited to transferring one type of data in a form that is known as a “store of value” – more commonly “money”. As a result various financial institutions around the world are beginning to introduce financial instruments (derivative, futures etc.). The irony here is that Bitcoin is directly negotiable, so it will trade outside of the exchanges as a proxy based on its spot price. This feed back loop will prove that the more valuable it becomes the more valuable it will become.
So in these respects, Bitcoin is like a garden spade
To understand Ethereum it’s helpful to understand how the internet works.
Today, our personal data, passwords and financial information are all largely stored on other people’s computers – in clouds and servers owned by companies like Amazon, Facebook or Google. Even this post is stored on a server controlled by a company that charges me to hold this data should it be called upon.
This setup has a number of conveniences, as these companies deploy teams of specialists to help store and secure this data and remove the costs that come with hosting and up time.
But with this convenience, there is also vulnerability. As we’ve learned, a hacker or a government can gain unwelcome access to your files without your knowledge, by influencing or attacking a third-party service – meaning they can steal, leak or change important information. And nothing you ever post on Facebook belongs to you – NOTHING.
Brian Behlendorf, creator of the Apache Web Server, has gone so far as to label this centralised design the “original sin” of the Internet. Some like Behlendorf argue the Internet was always meant to be decentralised, and a splintered movement has sprung up around using new tools, including blockchain technology, to help achieve this goal.
Ethereum is one of the newest technologies to join this movement.
So while bitcoin aims to disrupt the likes of PayPal and online banking, Ethereum has the goal of using a blockchain to replace internet third parties — those that store data, transfer mortgages, effect contracts and keep track of complex financial instruments.
So in these respects, Ethereum is like a garden fork – it’s more versatile.
Lots of businesses around the world are experimenting with Ethereum to see how it might be applied in their particular field or discipline, which means it’s not so easily understood by the masses, ergo, demand is not so great.
Bitcoin is more like money than any other money. The masses think they understand money, ergo, demand is big and getting bigger.
As with my original comparison, there are many other garden tools that employ applied physics and there are many other Alt coins being introduced that use applied mathematics in the form of cryptography. At some time in the future I would expect that something will supersede Bitcoin, just as paper did with gold.
However, gazing into my crystal ball I would expect that Bitcoin will remain the favoured “currency” for a while yet. Just don’t ask me: “For how long?”