Ethereum has taken what was a four function calculator of a programming language in Bitcoin and turned it into a full fledged computer. We now stand only 9 months out from the beginning of the Ethereum network and the level of app development is already faster than Bitcoin’s. We are finally getting rapid iteration at the app layer. In one early example, people have designed a decentralized organization (The DAO) — a company whose heart is code and peripheral operations are run by humans, rather than the other way around — that has raised $150m so far in the largest crowdfunding ever.
To be clear, I don’t think this needs to be a contest between Bitcoin vs. Ethereum and Coinbase plans to strongly support both. I think this is about advancing digital currency as much as we can. There is a significant amount of overlap between the two, however, so the comparison is valuable and the potential for competition is real.
How did we get here?
First, some history. When the Bitcoin white paper emerged in 2008 it was completely revolutionary. The amount of concepts that had to come together in just the right way — computer science, cryptography, and economic incentives — was astonishing. When the actual Bitcoin network launched in 2009, no one knew about it, and many of those who did thought it would surely fail. Just to make sure the thing worked, the scripting language in Bitcoin was intentionally extremely restrictive. “Scripting language” is a fancy way of saying an easy to work with programming language (in fact, Bitcoin doesn’t exactly have a scripting language, it uses a stack with script operators — more on that later). The scripting language in Bitcoin is important because it is what makes Bitcoin “programmable money”. Within each Bitcoin transaction is the ability to write a little program.
It was, and still is, incredible that Bitcoin got off the ground and is alive after 7 years. It is the first network ever to allow anyone in the world to access a fundamentally open financial system through free software. It has ~$7bn in market cap and has never had a systemic issue which could not be fixed. To some this is already a great success.
Make no mistake — Ethereum would never have existed without Bitcoin as a forerunner. That said, I think Ethereum is ahead of Bitcoin in many ways and represents the bleeding edge of digital currency.
Ethereum has a growth mindset while Bitcoin has a false sense of accomplishment
The general mindset of the two communities feels different as well. Many in Bitcoin seem to have a false sense of “we’ve got this really valuable network we need to protect!”. In my opinion that view is wrong and dangerous. Bitcoin is still orders of magnitude smaller than the major financial networks of the world at ~$200m/day in transaction volume (Visa $18 billion/day, SWIFT wire $5 trillion/day) and ~10 million users (5 billion in banks). And while transactions per day on Bitcoin seem to be increasing at a healthy pace, the actual $ volume of transactions on Bitcoin is not growing much.