Ethereum and Bitcoin Layers Compared
Bitcoin and Ethereum travel at different speeds: many are wondering if Achilles will catch up with the tortoise.
Bitcoin is older, but was born perfect: it does not have the need to change, and we even like it the way it is.
Ethereum was born several years later and has already changed its skin two times since then (three, actually, if we consider the painful hard fork of Ethereum Classic).
On the one hand, there’s the immutability of a monolith. On the other, there’s the desire to keep up with the community and steal the show once and for all.
While with Bitcoin it is almost impossible to work at a higher level of abstraction, Ethereum can easily stack up various layers.
Layers Layers Layers
Layer 2 stands at a higher level of abstraction but has a lower level of security: its scope is essentially to provide speed, reduced cost and more functionalities.
Lightning Network is the most widely used Layer 2 on Bitcoin’s blockchain, and was created with the aim of making transactions faster and cheaper.
Last year, it overtook the number of transactions on Bitcoin’s Layer 1, although it is impossible to get official proof, since Lightning transactions are not public.
Supposedly, the real success of this network was recognized when El Salvador proclaimed Bitcoin legal tender, after distributing a Lightning wallet called Chivo to every citizen.
The Layer 2 solutions available on Ethereum are instead numerous, but the Layer 2 activity is basically in the hands of the Polygon network (stronger now with its Metamask software wallet) and by the NFT-related marketplace Opensea.
Newer Layer 1 cryptocurrencies such as Solana or Tron perform as well as Bitcoin and Ethereum Layer 2 solutions, but register extremely low traffic in comparison, either because of habit issues or because the classic cryptos are actually more secure and worry-free.
A new privacy-proof Layer 2 for Bitcoin
Okay, I spoiled it, but let’s start from the beginning.
The laundering on Tornado Cash of the stolen Axie tokens (over $455M) was the last bit of the total of 7 billion dollars fraudulently mixed during the years, so the U.S Treasury added the platform to the OFAC list in what we could define “special surveillance”.
Tornado Cash shut down shortly thereafter, raising issues of privacy in a Bitcoin Layer 1 solution, since transactions can be unencrypted, with teams of volunteers and researchers scouring the network in their spare time looking for present and past crimes.
Well, you don’t have to be a criminal to want some privacy: we may not agree with the Canadian truckers’ cause, but I find it excessive that their GoFundMe account was blocked with $7M in it.
The answer to this call for more privacy could be given to us by the guys on CoinJoin and Mercury Wallet teams.
CoinJoin is an upper layer of Bitcoin that blends multiple payments from multiple users into a single transaction, in order to make it more difficult for outside parties to determine which spender paid which recipient.
It is considered by many to be more ethical than its spiritual father Tornado Cash, as it has been blacklisting «suspicious» addresses and users for a long time.
Mercury Wallet is a new Bitcoin Layer 2 scaling technology, based on the concept of Statechains, which allow the private keys of BTC deposits to be securely transferred between owners without requiring an on-chain transaction.
This allows users to transfer the custody of an amount of BTC to anyone almost instantly, with greater privacy and less fees.
A Layer 4 for Ethereum?!
Oops, I spoiled again.
Starkware announced the emergence of this ecosystem in late 2021. All clear, except perhaps the meaning of Rollups and Validiums.
Rollups are a «hybrid» Layer 2 scheme: they move computation off-chain, but keep some data per transaction on-chain. To improve efficiency, a lot of compression is used wherever possible.
Rollups themselves are divided into Optimistic and ZK, where the former are slower but require less computational effort, just the opposite of the latter.
Validiums are used to verify calculations, leaving the availability of the data to a trusted third party or committee.
While Vitalik Buterin just recently described Ethereum’s Layer 3 functionalities in a blog post, Layer 4 is just merely mentioned.
The paradox of Achilles and the tortoise applies
Zeno would be pleased to know that his paradox is still valid after 2,500 years.
At first glance, it might seem obvious that the Bitcoin tortoise will sooner or later be caught by the Achilles Ethereum, but there are a series of factors that must be taken into account.
The tortoise left quite some time before Achilles, and it has been roaming lonely in the crypto wasteland prairies for years.
The tortoise may be simple-minded and unfit for certain tasks, but it does exactly what it was born to do: go straight, no matter what.
Achilles, on the other hand, is a complex character with enemies, distractions, and many weaknesses. Going straight is probably the last thing he can do, caught up as he is in patching (Achilles’) heels.
Who knows what they said to each other in January 2021, when they were so close.
I imagine the tortoise turning around surprised, before escaping again, whispering “I am perfect, you are done!”
“Better done than perfect!”, replied Achilles.
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