Why Ethereum is outpacing Bitcoin
venturebeat.com
venturebeat.com
Whatever that is. (It seems to be a scheme for monetizing StackOverflow rankings.[1] Or something like that. If it even exists. The web site is all pretty pictures with no content.)
Most altcoins crash after a while. See Coin Market Cap.[2]
EDIT: looks like they do now: https://blog.colony.io/colony-beta-product-summary-2121a357d...
This already happened to eth when the creators hard forked the chain in an effort to roll back operations of an eth application that was used in a way that the creators did not anticipate. If this didn't kill ethereum why would it be a problem for bitcoin? Fortunately for bitcoin, there isn't a highly influential and transparently self-interested creator lording over the project.
> Bitcoin transactions can take anywhere from tens of minutes to several hours, depending on how busy the network is.
An unsolved growth problem for the reining incumbent that remains unsolved by ethereum. Transactions take a long time because decentralized proof of work verification is slow. A lot of people will say "proof of stake is coming!!!" but it's essentially vaporware and all signs point to the conclusion that it will remain that way for the foreseeable future. Yeah, people are working on it, like all vaporware.
> Ethereum is actually a platform for new kinds of decentralized (often financial) applications (dApps) that run on a peer-to-peer network of computers
Except this isn't actually happening in practice. I am yet to see any "new kinds of decentralized applications", just toy applications that have no practical purpose besides internet roulette
> TL;DR: Bitcoin’s dominance is slipping because its utility is limited and weakening versus other more recently developed, less politicized cryptocurrencies.
Bitcoin's dominance is not slipping because it's utility was marginal to begin with and eth certainly doesn't offer much in the way of compelling improvements over bitcoin.
Invest now! Someday the network is gonna be really useful. You'll see!
However, I think I should share this because the above two comments seem to have not caught wind of it. A number of enterprise-level organizations both within and without this org are working on projects and experiments both utilizing the public blockchain and private chains using the technology.
I think there is some validity to the project that is simply not yet mainstream yet.
The situations simply aren't analogous. At the time ethereum was still seen as speculative and didn't have another project nipping at its heals for dominance in the turing complete contracts space. But now, ethereum is nipping at the heels of bitcoin to be the dominant blockchain currency. If bitcoin falters and money starts flowing out of bitcoin and into ethereum, there is no reason to be confident that it'll retain dominance.
Here's the ethereum proof of stake code that will go live on ethereum sometime this year: https://github.com/ethereum/research/blob/master/casper4/sim...
This is the actual production code (though of course still in draft form, under review)
> just toy applications that have no practical purpose
The UN uses an ethereum app to send aid to Syrian refugees via vouchers: http://www.coindesk.com/united-nations-sends-aid-to-10000-sy...
Until it goes live, it's vaporware. The issue isn't "can proof of stake code be written" the question is "will eth continue to function safely and correctly using a proof of stake system"? We'll talk when it hits production.
> The UN uses an ethereum app to send aid to Syrian refugees via vouchers:
The details are not really clear from the article. How does this work? Why was this possible with eth but not with bitcoin or dogecoin or any other cryptotoken? How do displaced Syrian refugees accept, manage, and spend digital currency? I am highly skeptical of this without lots of details.
That's a ridiculous definition. So nobody can advertise that they plan to add a novel feature to a piece of software, even if the code already exists in draft form, without being labeled a vaporware peddler?
That could be worse than vaporware. There probably needs to be a term for touting a feature that may turn out to be like the DAO.
SchrodingerWare?
Here's the World Food Programme referencing the system with no technical details: https://www.wfp.org/news/news-release/wfp-introduces-innovat...
Here's a Coindesk article (who are obviously very pro-crypto, but more pro-Bitcoin and less pro-Ethereum) from today on some vague details: http://www.coindesk.com/united-nations-sends-aid-to-10000-sy...
I'm still trying to find out how this all worked. There have been articles saying this was their plan in various sources for over a month, though. I'd like to know as well. It's at least clear there was a program involving digital vouchers.
Found one --- here's Wired Germany outlining that it was in fact Ethereum the UN/WFP used with IrisScan to provide a benefit payment method for refugees. They are still scant on specific technical details, but if you are really starved, then it sounds like you should contact Parity.
https://www.wired.de/collection/tech/blockchain-fluechtlinge...
It's not a rollback since the original contract is still on chain, just without money. If you fuel it with some money you can use it.
So, uh, how about all those ERC20 ICOs? I admit that you may wish to classify them as "Internet roulette."
This is plausibly better than if they had just rolled it by hand outside of Ethereum for a few reasons, e.g.
- You automatically have a way for users to trade real value for your currency via ETH. (This is probably easier for devs than setting up Paypal or Stripe integration, but harder today for users.)
- The currencies are something you have that's more tangible and auditable than an entry in some company's bespoke centralized database. Everyone can see it and believe in it.
- Users can easily send the currency to each other by default without all the transactions having to go through you. (I don't actually know whether this is a pro or a con for many use cases.)
- It's trivial to make interoperable software that accepts or holds or sends these currencies, like exchanges and wallets.
- The above facts probably mean that there is something like an open liquid market for your currency, if anyone cares about it. That means people can perform mutually beneficial trades! Mutually beneficial trades are mutually beneficial.
As to whether it's useful to have a bunch of currencies for different things, I think so? I mean, there already are a ton of things like this in software which behave as de facto currencies -- free-to-play games and MMOs are a good example -- and those seem like they would be well-suited to be ERC20-style tokens. And as someone who believes in incentive structures, I'm excited about the prospect of quantifying more things which are currently vagaries ("attention", "reputation", "compute time") into currencies with a market. Augur's design is a good example of this.
There are a few very interesting things in the pipeline. Here are a few: https://golem.network/ https://status.im/ https://gnosis.pm/ https://basicattentiontoken.org/ https://augur.net/
And that's the crux of it. As I said, I'm yet to see anything that's actually useful. There are a lot of claims about all the amazing things that will be possible at some point in the future, but besides internet gambling, I've yet to see a demonstration or even a coherent explanation of something useful that these systems are capable of that isn't already possible and less complex with existing systems. (Just so you know, I was already aware of status and augur, but I examined your other links as well before responding)
Wait for the hype to run out, then look at it again when it's not at a peak value.
What? Look at all the ICOs:
and this:
http://www.coindesk.com/150-million-tim-draper-backed-bancor...
and here more:
Sound great, like most cryptocurrency marketing hype... where is the product? How do I get my hands on it? Let me guess "coming soon".
> http://www.coindesk.com/150-million-tim-draper-backed-bancor...
Ok, so a bunch of people spent their money on eth internet tokens... what exactly is the practical use case here?
> https://www.coingecko.com/ico?locale=en
So you've linked to a huge list of projects begging for donations. If you don't mind, can you pick just one project out of that list that actually has a product or service I can use today and explain to me why this wasn't already possible without cryptocurrencies?
Use case here is that there is smart contract that guarantees you that you are the owner of those specific tokens.
How you want to solve that with bitcoin?
It's going to be a big mess, one this bubble pops.
At some point you have to admit that this isn't tulip bulbs.
The valid counterargument would be that the tulips are largely being used for something other than trading tulips.
Gold has SOME intrinsic value. It is very good for certain applications, I believe trace amounts are used in compute parts. Worst case you can make something shiny to look at, that will be rust proof and easy to shape.
What is the intrinsic value of ETH or Bitcoin? It literally has nothing to back it.
computing power is inherently valuable. the value of AWS is less than zero because you could just buy a computer and do the computation cheaper at home. duh.
Gasoline allows one to use large amounts of power at the same time, say, to run a generator, start a power plant or run power tools for construction.
Bitcoin is not useful in and of itself as the current system of transactions is perfectly workable.
On the other hand, try running power tools on solar power... (including making the huge batteries and plastics)
The value of AWS is greater than zero because spending my day monitoring my server would be exponentially more costly than paying Amazon to do it at scale.
And Ether is worth less than zero (as a computation engine) because I could develop and run the computation in less time by opening vim, even if the Ether was free.
That's an argument that they don't have intrinsic value, but only value contingent on their ability to look pretty or eat them, both things which themselves will depend on where you are on the Maslow hierarchy and your needs for food vs. decoration.
Same for your argument about gold.
Intrinsic value is not contingent on your needs, and, well, this is why it does not exist and there isn't anything that has intrinsic value and indeed the very concept is incoherent when you try to nail it down. Nothing has intrinsic value; it is all relative to some entity's desires or needs.
For gold, scarcity is enforced by laws of nature, which encourages networks to treat it as valuable. For BTC, is there a similar constraint? I'm pretty sure the tokens can be reverse-transmutated by the software that counts it. This is true for all cryptocurrencies. Gold today and pyrite (or worse) tomorrow, which would make all of them unsuitable as long-term stores of value.
[1] http://nakamotoinstitute.org/reciprocal-altruism-in-the-theo...
The brand and the places where you can pay or donate with it, or exchange it. The fact that it can't be seized by the authorities, the limit on inflation wired into the software and system. And thats most likely not all of it.
Coins are strange, because appetite for non-speculative legal use seems to remain low, but appetite for coins continues to be strong. It does seem to be valuable as an unregulated speculation platform...
If bitcoin prices crashed to 1000$, everyone would call THAT a "pop", but it would still leave anyone who bought in a year ago ahead on their investment.
Obviously partial to bitcoin but has no more "street cred" that I do: "a California fine artist, UI designer, with a passion for Ethereum."
That is to say I am using Ethereum for my art catalog or Catalogue raisonné as an ad hoc copyright tool and historical archive. What does he or most people use bitcoin for?
There is neither evidence, nor motive, for "insider trading".
All he did was troll the moneychanging/parasite class, which is a beautiful thing.
Edited: Ahh. Fake news announcement. http://bitsonline.com/fluffypony-speaks-troll-monero-market/
Bitcoin was ment to be money which is good in the store of value part. Etherum has a higher inflation for all I know, and it is not primarily meant to be money.
My best estimate is that the ICO market as a whole will have to be at least 3-4 times more successful than VCs if the house of cards is to stay standing. We're talking about a process that has to churn out unicorns to stay afloat.
Do you think smart contracts really make every business that uses them 3 to 4 times more valuable?
> That is to say I am using Ethereum for my art catalog or Catalogue raisonné as an ad hoc copyright tool and historical archive.
I honestly can't tell if you're taking the piss.
These are some of the companies, banks and countries interested in the technology. J.P. Morgan Credit Suisse CME Group British Petroleum UBS ING Microsoft Thompson Reuters
Countries: Singapore Russia China
The United Nations even sent aid to 10,000 Syrian Refugees Using Ethereum Blockchain. http://www.coindesk.com/united-nations-sends-aid-to-10000-sy...
...And I am not "taking a piss" and neither are all of the above Ethereum businesses, countries and banks.
The coins that stand to benefit most from this are the ones traded on GDAX -- Ether and Litecoin. And Ether has the most breathless hype going for it right now. And this is the same advice I give to the non-technical people in my life who've jumped in late and don't have a Poloniex or Bittrex account to trade other coins (sign up for GDAX, balance things with a wait-and-see attitude towards August 1st).
BTW - my 89 year old farmer grandpa who can't even get wired internet at his house now has a crypto portfolio, in case you're looking for bubble indicators. (And if you ask why my advice wasn't to avoid an investment you don't understand -- well, I am bullish on crypto long term and they really wanted to get in, and view it as a gamble, so . . .)
In this regard, I see it as inevitable that a chain will emerge that permits greater transaction throughput, and that consensus will organize around this chain. If it doesn't, then in a very real way the experiment will have concluded.
The "whales" are buying ICOs left and right, and dumping their Bitcoin/other altcoins. That's the main reason for ETH's rise.
Eventually some of these ICOs will prove to be scams, or will get hacked with catastrophic results, and ETH's price will fall again. It doesn't necessarily mean it won't rise back-up again, but by then we'll just have to see if ETH is still a top 2 coin to get.
s/some/most/
This seems like a plausible theory to me.
The skepticism is healthy, the optimism interesting, the discussion unfortunately remains fairly immature, on both sides. I hope we'll get more academic and professional insight soon.
With hundreds of ICOs popping up, it's difficult to say what impact they have on the market. Bancor raised approximately 400,000 ETH in their recent ICO, or 0.4% of all ETH outstanding, and the BAT sale raised 156,250 ETH. Prior to the attack, the DAO had attracted over 11 million ETH, or nearly 14% of all ETH outstanding at the time.
Hoping to get a better answer here than on reddit. /r/bitcoin and /r/btc are both biased echo chambers.
The people involved aren't the most admirable folk. For instance, this is the leader of the biggest mining company- https://twitter.com/jihanwu/status/731902686379933697?lang=e...
A good contrast is that Vitalik Buterin, one of the founders of Ethereum recently said the gas fees for Ethereum are too high (they were still quite low compared to bitcoin) and the miners voluntarily just lowered the gas fees, which determine the transaction costs. It seems to be a very different community running each currency.
The 1 MB limit is set by the bitcoin software. The software that most everyone runs is developed by a group called the "bitcoin core". That group has mostly been taken over by the company Blockstream (this is my opinion, others would argue the team is diverse and not controlled by any one company). Blockstream's business is based on off-chain transactions (i.e. the Lightning network).
It is in Blockstream's interest to get a feature that enables Lighting into the Bitcoin software (SegWit). Miners have been refusing to upgrade. One theory is that SegWit will disable a special optimisation that one of the biggest miners uses (ASCIBoost). In any case, Bitcoin core team refuses to increase the block size and the miners have been refusing to enable SegWit.
The SegWit upgrade is a good thing, IMHO, even though it seems like a pretty complicated feature. Having the ability to open "payment channels" and make cheap transactions off the main chain would be great. However, I feel that a block size increase to 2 MB or 4 MB is long overdue. I don't understand all the technology issues so maybe there is some really good reason not to do it.
It is clear to me that Satoshi (founder of Bitcoin) and Gavin (previous leader of Bitcoin core group) felt that the block size could be scaled to keep fees low. Both software improvements and hardware/network improvements would progress quickly enough to scale with demand. The current core team does not think so and think off-chain transactions are the only way to scale now.
There are arguments for and against increasing the blocksize.
For:
- Support more transactions per second
- Lower fees for users
Against:
- Hardfork requires all full node operators to upgrade, or they could see incorrect balances
- Lower fees mean that miners make less money
Also, generally, there are some philosophical differences between the sides. The big-block side usually wants bitcoin to be more like a payment network, wherease the small-block side typically views it more as digital gold and store of value.
1. The congestion would mean bigger fees
2. In bigger blocks there will be more transactions - so more fees in the block
Actually the big miners seem to be in favour of the Bitcoin Unlimited big blocks. What they want to stop is SegWit which is needed for scaling bitcoin off chain with Lightning etc. There is a conspiracy theory about that - and it actually makes sense to me - which is that SegWit would eliminate ASICBoost (which is an optimization technique that is implemented in some ASIC miners). But there is also another narrative that Lightning would mean banking entering the Bitcoin community - and that is why it should be stopped.
Bitcoin can never become a good payment processor - this would require many orders of magnitude bigger blocks (now bitcoin can process about 7 transactions per second, VISA can process 50K transactions per second). And while storage for bigger blocks grows linearly - the other algos have probably worse complexity.
Wrong date, it was July 2010 I believe.
It's kind of like the situation with airliners: If there are empty seats left, it's cheap to add another flier. However, once the seats are all taken, it gets extraordinarily costly to get another passenger on board, to the point that they have to violently evict someone to make a spot available.
https://en.bitcoin.it/wiki/Block_size_limit_controversy
First, most people want Bitcoin to scale such that more people can use it. This can be done directly on the blockchain by allowing more transactions to be recorded in each block. Or it could be done with '2nd layer' solutions that periodically resolve on the Bitcoin blockchain. Such solutions require some changes to the Bitcoin clients people operate; the current 'most popular' version of this is called Segregated Witness, aka SegWit.
Right now, more people want to create transactions than can actually do so, thus a fee market has formed to get transactions included in blocks. This is why fees have increased.
It's a debate that sounds like a technical detail, but in reality it goes straight to the core of what Bitcoin is and how it will work. There is the debate over what changes will be made, but there is also a debate about how this decision will be made. Some feel that all changes to the Bitcoin protocol should be made with strong consensus, a conservative approach that has worked alright up to this point. Some still hope that this can be done, but the deep ideological division that belies this debate makes that seem unlikely. The alternative view is that Bitcoin is designed to handle these disagreements naturally by hard fork.
A hard fork is a split of the Bitcoin blockchain into different incompatible chains. In this case, it would be a split over the maximum permissible block size; one group would allow larger blocks, and another would refuse them. This would lead to a situation where miners choose which chain to mine on. Miners are incentivized by mining rewards (coinbase rewards), and thus have an economic incentive to mine on the chain they believe will have the greatest market value. This will likely result in a positive-feedback mechanism where one chain dominates the other; this has played out on the Ethereum chain where 'classic' ether is worth far less. A stable split is also possible, and thus there would be two versions of Bitcoin with different rules. Any coins generated or transacted pre-fork would be valid on both chains, but post-fork would commit to one chain or the other.
As for the bigger blocks, it comes down to predicting how the network will behave with larger blocks. It would permit more transactions, without question. It would also increase the bandwidth and data storage requirements of full-node operators. Basically, it would be more expensive to operate the Bitcoin network (which is distinct from the cost to secure it, which is scheduled coinbase inflation and txn fees). It would also mean that miners that are closer to each other on the network (via latency and throughput) would have a competitive advantage as they would confirm each other's valid blocks more quickly, and thus there are concerns about miner centralization. Such centralization presents a point of failure for the network.
Make no mistake; it is very difficult to predict what will happen with different protocol parameters. There's a lot of game theory that you can do to try to understand it. For instance, miners may mine larger blocks to include more transactions, and thus transaction fees, but risk slower propagation of their valid block through the network. In the case of valid blocks being found at the same moment, the one that propagates faster will 'win' and the other will be orphaned. Some argue that the risk of orphaned blocks is an effective limit to blocksize, and thus no blocksize limit is needed. It would also peg transaction fees to the marginal risk of a block being orphaned.
Bitcoin is facing an existential crisis August 1st (UASF) that some view as liberation and others as extortion. As if BTC wasn't high risk enough!
Yes we haven't seen a single ICO that has resulted in anything worth anything yet and we probably shouldn't any time soon. Yes the rise in ETH the last few months is comical. Yes there are plenty of scams out there right now and some we don't even know are scams yet. But it's damn exciting.
Anyone with an imagination can see this. It's the wild west and it's fun and crazy. And there's a real opportunity here to do something different. 99.9% of these early things are going to fail but there will be a breakthrough eventually I believe. And when that happens...
And we should add to that that the exciting parts of ethereum may never fully exist in ethereum itself: It's totally plausible that this tech could instead be adopted by another project before becoming wildly successful. However, this doesn't make ethereum tech any less interesting.
I'm not saying this article is wrong, but that it offers little substance.
My pet theory is that Ethereum will transiently surpass Bitcoin in market cap in the next weeks, triggering a 5x surge in Bitcoin's price. Ethereum will then follow, and what happens next is anyone's guess. Why do I think that? Uh..heuristics.
If those dapps are so great, why isn't there a single one that regular people are using today?
This was already possible before cryptocurrencies, hence how I'm able to buy anything online at any time of day and have it delivered to me within 24 hours.
It seems to be too risky for big companies to build DApps for the authentic Ethereum when they can't predict that the price of gas won't quadruple again. Creating their own blockchain could mean cheaper or free gas with all of the upsides to using ethereum and an added customization ability.
If this is true, then the price increases in ethereum have been unfounded.
Statements like these frustrate me, because they paint a picture as though Ethereum is a strict upgrade to Bitcoin, without depicting the many sacrifices that Ethereum has made to get its advantages. The word blockchain in general has completely changed meaning - no longer does it specify systems where there is no trust involved, instead it specifies systems that create a high interoperability between money and applications.
There's a huge difference in the security and decentralization model of Bitcoin and Ethereum. Bitcoin has no central leadership, actively rejects the pursuance of one, and works hard to build a network that simply can't be attacked.
Ethereum on the other hand has a powerful central leadership, and moves faster and does things that are in general far less secure. When they hit road bumps like the DAO attack, the 'Spurious Dragon' chain split, or other major network events, they fall back on their central leadership to resolve the issue quickly.
That's really not decentralized, and it's completely different from the vision that Bitcoin originally painted. It's a completely valid model, and it's a step up from using a fully centralized platform like the Google Cloud, but ultimately the Ethereum foundation and surrounding leadership has the ability to push through controversial changes, something that is strictly rejected by the Bitcoin philosophy. It's also not clear what will happen if someone like the US Government leans into the Ethereum Foundation asking for things like capital controls. Bitcoin doesn't have a leadership for the government to lean into - it's going to be a lot harder to add captial controls to Bitcoin than to Ethereum. Depending on who you are, that's either an advantage or a disadvantage, but at the very least it's a very clear distinguisher.
For that reason, Bitcoin is far more interesting to me as a technology. It's the first and really only, technology that allowed something like a monetary system to stand completely independent of a leadership or a governance structure. Ethereum hasn't achieved the same thing, that much is made obvious by the fact alone that they don't know what the core consensus algorithm of the network will be in 18 months (maybe it will switch to a yet-undefined Proof-of-Stake, maybe not).
Don't get me wrong. Ethereum is doing interesting things. They've completely changed the way people thing about money and applications, and made it possible to apply money to everything. But it's far less secure, and it Ethereum today simply wouldn't work without its central leadership. To me, that makes it not much different from any other technology out there - its giving us new and more efficient ways to do things that we have already been doing.
But anybody who thinks that Ethereum is a strict upgrade to Bitcoin has completely missed the point, because Ethereum does not have the core value proposition that Bitcoin provides. Bitcoin is a complete financial system that you can use without needing to trust anybody. Not the developers, not the miners, not the government. Bitcoin is extremely impressive, and definitely is a technology in a class of its own.
Online payments (via traditional means) are by no means "confirmed instantly". The authorization happens more-or-less instantly, but that's only the first of multiple steps in the transaction process; the actual transfer of funds often takes at least one business day, if not more.
However, I suspect the author meant Venmo/Paypal etc.; that's certainly how I interpreted the sentence. I'd argue that those services are better comparisons for P2P payments, especially in the US, where most consumers are not able or inclined to give out their bank information to receive an ACH payment.
Compared to those incumbent online P2P payment services, Bitcoin really is starting to lag behind in that regard.
And my remark is still applicable there, since they're basically just frontends to the traditional ACH/wire payment system (at least in the case of Paypal; I haven't used Venmo much, so I'm not as familiar with how it works). Unless Paypal is paying the seller before receiving actual funds from the buyer, I'm not really seeing how this would be any different of a situation.
From a user's perspective, the transaction is confirmed when the app says "transaction confirmed", i.e. the second you press the "send money" button. I think that's what the OP was getting at.
As you correctly point out, the transaction could still bounce if the user has insufficient funds, but that's not in the happy path. Most users' experience with Venmo/Paypal is that they get a "confirmation" immediately, and then they move on. The happy path for a BTC transaction involves minutes to hours of time without even getting a _provisional_ ACK from the network, at any point in which your payment could fail and require a retry, or the payor could cancel.
(The time taken to finalize the payment is much less with BTC, but since modern payment systems paper over that detail, I argue it is not relevant to the user-facing concern that the OP is commenting on. Perhaps it is something that users _should_ be more concerned about, but consider the use-case of trying to buy a cup of coffee with BTC. Nobody is going to wait 2 hours for a transaction to complete in that use-case.)
Incredibly untrue, many exchanges and a couple derivative platforms allow this.
I haven't the chutzpah to short crypto, but plenty of people do.
There very are ways to do so, at least against other cryptocurrencies.
Please advise.
The pace of adoption leaves much to be desired. And if you think bitcoin is hard for the layperson to understand, ethereum is a whole other can of worms.
True, it does not have the name recognition that Bitcoin has, but its not just a price bubble that is driving this.
This site has real time updates as to the status of the "flippening": http://www.flippening.watch/
Can someone explain to me why one alt coin like etherum gets more attention/value than others? What is it doing that is novel, or makes it more secure, or more anonymous than say Monero?
But its also trivial to issue fiat-backed tokens on Ethereum (at least from a technical PoV). See Digix who is doing this with Gold.