6. Ethereum vs. Bitcoin.
So what are the biggest differences between Ethereum and Bitcoin?
Smart Contracts – the main difference between Ethereum and Bitcoin is that Ethereum allows for smart contracts and DApps instead of just payments.
Faster Transactions – the time for a single Ethereum block to be mined is measured in seconds vs. minutes (Bitcoin).
Purpose – Bitcoin is more like a store of value, whereas Ethereum allows decentralised apps to be developed on it’s platform.
Functionality – Ethereum’s technology is designed to allow DApps and smart contracts for developers. Ethereum is more versatile than Bitcoin in this respect.
Proof Of Work Vs Proof Of Stake – Whilst Bitcoin and Ethereum are both currently mined using Proof Of Work, this could change soon.
Vitalik Buterin (creator of Ethereum) has actually released details of the Casper Protocol, which would integrate Proof Of Stake instead.
I’ve compared both models in my guide to cryptocurrency mining.
7. Examples Of How Ethereum Can Be Used.
7.1. Decentralized Autonomous Organizations (DAOs).
DAOs are decentralized and autonomous organizations that operate using smart contracts.
The smart contracts contain the rules and operating structure of the organization, eliminating the need for centralized control and leadership.
For example, members could submit proposals, which are then voted on by the whole organization. If a proposal gains enough votes, it is automatically approved without the need to count votes or move the initiative forward.
While a DAO is decentralized, it is “owned” by those who purchase its tokens. The tokens give members voting rights in proportion to the percentage of the organization’s tokens members hold. Perhaps the most famous example of a DAO is The DAO, which was a decentralized venture fund. Investors in The DAO received voting rights on investment proposals proportional to the amount of DAO tokens that they held. Unfortunately, The DAO was hacked (as mentioned earlier).
7.2. Initial Coin Offerings (ICOs).
Initial coin offerings, or ICOs, are one of the most famous uses of Ethereum. Though ICOs take place on other platforms too, the overwhelming majority are Ethereum-based. ICOs really took off in 2017. According to ICOdata, ICOs raised $6.1 billion in 2017. Similar to initial public offerings (IPOs), ICOs allow companies to raise funds from investors. The difference is that instead of issuing shares, ICOs issue digital tokens. Also, unlike IPOs, ICOs don’t require giving up any equity. Investors purchase ICO tokens with the hope that their value will appreciate. However, the tokens can also be purchased to simply use the platform that the ICO team releases. Though ICOs have emerged as a great way for projects to get funding without giving up control of their companies, the ICO model has come into question.
For one, most ICOs are scams.
Another thing to consider is that some ICO projects have raised hundreds of millions of dollars. But this level of funding is often unnecessary for the development being proposed. The DAO at the time of its ICO was the largest crowdfunding campaign in history ($120 million). Since then, other projects have eclipsed that already huge number. Yet some don’t even have working products!
Useful Resource: If you’d like to learn more about ICOs, check out my guide here.
7.3. Decentralized Applications (DApps)
As mentioned, Ethereum hosts many DApps.
State of the DApps lists over 1,500 DApps (May 24, 2018), but those are only the ones that State of the DApps has chosen to highlight. There could be many more out there too.
7.4. OmiseGO.
OmiseGO was one of the biggest Ethereum ICOs of 2017 and raised $25 million. The company behind the project, Omise, is a Southeast Asian payment services company. With OmiseGO, the company aims to develop a platform that allows for value exchange and various payment solutions across different currencies (both cryptocurrencies and fiat currencies like the dollar).
Omise itself is already a well-established company with over 100 employees, offices throughout Asia, and recognition like being named a “” by Forbes Thailand in 2016.
Plus their platform won’t require a bank account or international transaction fees. This would be especially useful in places like Southeast Asia, where many people don’t have traditional banking services. While there are plenty of ICOs, and even ICO projects doing similar things as OMG (great acronym), the OmiseGO project stands out because of its team.
7.5. CryptoKitties.
No mention of Ethereum DApps would be complete without the infamous CryptoKitties. CryptoKitties is an Ethereum-based game that allows players to buy, collect, breed, and even sell virtual cats. Each cat is unique and can’t be destroyed thanks to blockchain technology storing Ethereum’s blockchain on nodes across the world. While the game sounds like somewhat of a joke, it has taken off like other similar games in the past (Tamagotchi, Pokemon, etc.)
Some of these virtual cats have sold for over $100,000.
Not only that but the CryptoKitties company itself has raised $12 million from investors, including top investment funds like Union Square Ventures and Andreessen Horowitz. CryptoKitties’ popularity has even slowed down the entire Ethereum network, raising transaction fees and increasing unprocessed transactions.
7.6. Golem.
Golem is another Ethereum-based project. Like Ethereum itself, Golem aims to be a decentralized “supercomputer”. However, instead of storing smart contracts and DApps that can be run using computing power from Ethereum nodes, Golem users can rent computing power from others. People with extra computing power let others use it while collecting a fee. This model has led to Golem being nicknamed the “Airbnb of computing”. Since heavy computing can be expensive, this could be useful for people who need heavy computing resources but have limited finances. Use cases that come to mind include artificial intelligence, CGI rendering, and medical research.
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