Not All Blockchains Are Created Equal: Comparing Bitcoin, Ethereum and Metaverse
Written by Phoebe Chua
Blockchain and cryptocurrency technology has existed for a while now — 31st October 2017 will mark the 9th anniversary since the release of Bitcoin’s famous white paper. Even before that, various academics and researchers recognized the value of decentralized digital currencies and proposed primitive implementations such as David Chaum’s ecash and Wei Dai’s b-money.
However, in recent years we have witnessed a meteoric rise in the news, activity and interest surrounding blockchains and even if you’ve never touched a news article about blockchain, you’ve probably heard about Bitcoin and Ethereum. What are the differences between them (if any), and how does Metaverse match up?
What is a blockchain?
While the technology is complex, the blockchain concept itself is simple — think of it as a copy of the same database located on many different computers, which makes it much harder to hack. Blockchains are massive “distributed ledgers.” Let’s define both terms:
- Distributed means that the data is replicated on millions of computers globally.
- A ledger is a record of every single transaction ever processed by the network of computers.
New transactions are periodically packaged into blocks of data, which are broadcasted to the network and added to the database when consensus is reached. Over time, a chain of data blocks is formed that lend the Blockchain its namesake. High-level encryption and extremely complex algorithms make the Blockchain extremely hard to modify. This allows for the creation of a immutable and persistent record of every single transaction ever performed on the computer network. Furthermore, Blockchain allows transactions to be performed securely and with integrity. Lastly, these transactions don’t necessarily have to be traditional purchases — anything can potentially be registered on the Blockchain from personal information to artwork or money.
Bitcoin vs. Ethereum vs. Metaverse: what’s the difference?
Bitcoin is arguably the most well-known application of blockchain technology for being the first application of distributed ledgers. However, other projects such as Metaverse and Ethereum have emerged to solve issues not addressed by Bitcoin. Metaverse and Ethereum are blockchain-based platforms that users can develop applications on top of and each platform has defining characteristics that set them apart.
Smart Contracts
A Smart contract is a piece of code that is used to simplify, verify or execute contracts. Smart contracts are similar to paper contracts. However, the key difference lies in the fact that once smart contract code is run, the contract terms are automatically executed whereas paper contracts would require the contracting parties to agree and manually execute the terms of the contract. For example, a contract could grant you access to licensed software on the condition that payments are received in a corporate bank account before a certain date each month. In this case, one of the contract terms would specify that the user agrees to his account being automatically charged every month.
Another difference is that on Ethereum, digital assets require a smart contract to come into existence. However, on Metaverse, digital assets must first be registered on the Blockchain before they can interact with other implementation methods similar to smart contracts.
Oracles and Digital Identities
Anonymity is a key feature of many blockchain applications (including Ethereum) today. Nevertheless, the rising market capitalization of cryptocurrencies (above US$75 billion) has attracted the attention of taxation and law enforcement agencies. These organizations are trying to better understand these technologies and how to regulate their usage.
Additionally, Ethereum’s blockchain is designed with a built-in, Turing-complete programming language called Solidity to facilitate the development of smart contracts and decentralized applications. However, one of the disadvantages of Ethereum lies in the fact that it is hard to determine the trustworthiness of third parties.
Unlike Ethereum, Metaverse bridges the real and virtual worlds, allowing for easy third-party identification:
1. Digital identities are linked to real-world entities (such as individuals or organizations)
2. Value intermediaries called Oracles are registered under digital identities that act as trusted third parties, bringing external data to the blockchain
Metaverse’s value proposition is based on the ability to record transactions, assets and identities on a distributed tamper-proof ledger. Furthermore, the amount of personal information you must share with service providers is greatly reduced because Oracles guarantee your trustworthiness and due to the nature of Blockchains, transactions are faithfully executed.
Method in the madness
Although Blockchain technology is still not yet mature, it holds great potential to revolutionize the way we do business. Areas related to intellectual property, financial assets, the underbanked and the Internet of Things will all benefit from a giant distributed ledger that makes markets more efficient and compels users to act honestly. As with any new technology, issues are inevitable. It is important to learn from ICO scams and hacking scandals to make sure we strengthen industry security and best practices.
Various organizations and governments have thrown their weight behind R&D efforts, which further highlights the technology’s potential. This year, IBM deployed a blockchain in collaboration with Northern Trust to streamline private equity fund administration. In this context of constant innovation and experimentation, platforms like Metaverse and Ethereum continue to build on Bitcoin’s legacy and will form the building blocks of the next Internet era.
[1] https://bitcoin.org/bitcoin.pdf
[2] https://coin.dance/stats/blockchain
[3] http://www.abc.net.au/news/2017-05-30/bitcoin-cryptocurrencies-and-rise-of-ethereum/8573416
[4] http://www.abc.net.au/news/2017-05-30/bitcoin-cryptocurrencies-and-rise-of-ethereum/8573416
