Discussion
Crypto currency can be defined as the digital asset that is eventually designed for working as the most basic medium of money exchange. This crypto currency utilizes the strong cryptography for the purpose of securing several financial transactions, controlling the creation of the additional units and finally verifying the asset transfer [3]. The crypto currencies are the types of digital currencies, virtual currencies or alternative currencies. The decentralized controls are being used here for reducing the complexities of centralized banking system and centralized electronic money. These decentralized controls of each and every crypto currency eventually works via the technology of distributed ledger like blockchain, which is serving as the database of public financial transaction. The two most popular and significant examples of crypto currency are Ethereum and Bitcoin. Ethereum is the public and blockchain based distributed computing platform that is used in the virtual money transactions. Bitcoin is the second popular example of crypto currency that is used worldwide. It is sent from user to user over the peer to peer bitcoin network [12]. The following report will be outlining a brief discussion on the two most popular and significant crypto currencies that are based on blockchain. The various details like architecture, features, and applications about these two crypto currencies will be described here. Moreover, the several differences as well as simililarities between them will also be provided in this report.
Ethereum is the specific crypto currency, where the blockchain is being generated by the platform of Ethereum [7]. Ether could be easily transferred within the users’ accounts and then utilized for compensating the participant mining node for all the computations being performed.
- i) Architecture: The significant architecture of Ethereum is quite different than the architectures of other crypto currencies. The entire structure of this particular crypto currency shares the records of the total transaction history [10]. Each and every node present on the specific network eventually stores the copy of the transaction history. The main or the noteworthy point of the architecture of Ethereum is that the nodes help in storing the recent state of the smart contract, and hence adds all the other ether transactions. For each and every significant application, the typical network requires to keep the track of that current state or even the updated as well as current data of all these applications, which includes the balance of every user, location of the storage of balance and also the respected smart contract codes [5]. For the purpose of making the future transactions, the network of Ethereum adds up the changed pieces and is classified as spent or unspent.
Figure 1: Working Procedure of Ethereum
(Source: Dannen 2017)
The above figure clearly demonstrates the working procedure of the Ethereum crypto currency. A virtual machine is present within the architecture of Ethereum and this particular virtual machine is termed as EVM or Ethereum Virtual Machine. The contracts are written within the smart contract specified programming languages, which are then complied into a byte code [8]. The byte codes are read as well as executed with the help of Ethereum Virtual Machine. The contract is executed with EVM with various rules that are being programmed by the developer in the initial phase.
- ii) Features: There are some of the major and the most significant features or characteristics of the popular crypto currency of Ethereum [1]. The major and the noteworthy features of this Ethereum are as follows:
- a) Decentralized Application: The first and the foremost feature of the Ethereum crypto currency is that it is a decentralized application. It is the type of application, which is subsequently run by the several users over any decentralized network with the trust less protocols [9]. The decentralized application or Ethereum is designed for the core purpose of avoiding the single point of failures. There are certain tokens for rewarding the users to provide the respective computing power. The code of Ethereum is completely of open source and could be autonomously managed. This is mainly the application is decentralized. Moreover, another significant advantage of this decentralized application is that the records as well as the data could be easily stored with the help of blockchain and hence it helps in providing the trust less interactions and avoiding the single failure point [4]. Due to the presence of decentralized application, the cryptographic tokens are being utilized and these tokens are generated by a specific cryptographic algorithm.
- b) Distributed Ledger: The next significant feature of the Ethereum crypto currency is that it is the open distributed ledger, which helps in recording the transactions amongst two distinct parties effectively and within a permanent as well as verifiable method [6]. This distributed ledger is the respective consensus of the replicated, synchronized or shared digitalized data that is stored in no centralized data storage or central administrator.
c)Smart Contracts: Another important feature of the Ethereum crypto currency is the smart contracts. Ethereum is the specific platform, which is built properly for the creation of smart contracts. This particular crypto currency enables the developers for programming the smart contracts and these smart contracts could easily function as multi signature accounts [11]. Moreover, the agreements are managed within the users and proper utility is provided to the other contracts. Smart contracts are also responsible for storing information regarding the application, like membership records or domain registration data.
- d) Security with Cryptography: The fourth noteworthy feature of this Ethereum is that it is highly safe and secured and the security is because of the presence of cryptography. The technique of cryptography helps to hide any confidential message or text and thus turning them to a cipher text or cipher message [8]. It is a basic algorithm that converts the plain text to cipher text without involving any complexity.
Architecture, Features and Challenges of Ethereum
iii) Challenges: Although, Ethereum comprises of several features and advantages, there are some of the major challenges that make this crypto currency extremely vulnerable for the users [2]. The major challenges of Ethereum are as follows:
- a) High Latency: The first and the foremost challenge of Ethereum is the latency of this particular crypto currency is extremely high. Since, the nodes of this crypto currency is distributed globally, these blockchains have high latencies [16]. The high latency refers to the specific time that the data is taken for replicating throughout the networks.
- b) Slower: The second challenge of the Ethereum crypto currency is that it is extremely slower in respect to the other crypto currencies [12]. Thus, this is often avoided by the users and it makes the Ethereum a comparatively slower decentralized computer.
- c) Lack of Flexibility: The next important challenge of this Ethereum crypto currency is that there is lack of flexibility as well as scalability within the Ethereum [5]. Hence, a significant issue arises when the users try to utilize this crypto currency for an excessive huge amount of money.
Bitcoin is the crypto currency that can also be referred to as the decentralized digitalized currency without any single administrator. This type of crypto currency could be eventually sent from any one user to another over the Bitcoin network of peer to peer and hence not involving the requirement of intermediaries [15]. The transactions are thus verified by the network nodes with the help of cryptography and then recorded within the public distributed ledger, known as blockchain.
There are several distinct applications of the Bitcoin crypto currency that are utilized by the rest of the world. All of these applications are termed as the Bitcoin 2.0 or Crypto 2.0. These applications are even referred to as the decentralized applications [13]. The several organizations like IBM, Amazon, Overstock, and EBay have been utilizing the blockchain of Bitcoin and hence the applications are extremely important and significant for any company.
The applications for Bitcoin for the two domains of Token systems and Decentralized File Storage are as follows:
- i) Token Systems: The token in the Bitcoin is the typical amount of digitalized resources that are controlled by the users [1]. These users then require for applying for the token based economies. The specific application of Bitcoin is significantly based on security. The application of Bitcoin for the domain of token systems is the Crypto currency Token. This particular Crypto currency Token can easily pass the respective Howey Test and is then considered as the security token. Encrypted data is present in this token and hence a contract is being established eventually. For the presence of these security tokens, the most significant requirement of middle persons is eradicated and the total expenses of the middlemen are removed without any complexity [9]. Moreover, due to the removal of complexities, the speed of this particular application is increased properly.
- ii) Decentralized File Storage: The next domain is the decentralized file storage, where the transfer of the authorities subsequently form the central entities to the more localised or liberal system. For the Bitcoin crypto currency, this particular type of file storage decentralizes the financial transaction as well as computing power [14]. The application of Bitcoin for the domain of decentralized file storage is the Storj Coin or SCJX. This token is utilized by the users for the purpose of paying for the storage or even acting as the incentive for the nodes, which are keeping part of the files.
- i) Differences: There are few differences between Ethereum and Bitcoin. The first difference is that Bitcoin is designed completely as a specific digital currency; however, the Ethereum crypto currency is the generalized implementation of the blockchain technology [3]. The second difference between these two is that the average block time of Bitcoin is around 10 minutes; however, that of the Ethereum is only 12 seconds. The next important difference is in the monetary supply. More than 65% of the Bitcoin technology had been mined; however, not more than 50% of Ethereum had been mined. Bitcoin is considered as the alternate currency, whereas Ethereum facilitates only peer to peer contracts or applications through the currency vehicle [7]. Another important difference is in the block size. The block limit of Bitcoin is only 1MB; however, Ethereum does not have any block limit.
- ii) Similarities: There are some of the major similarities as well for Ethereum and Bitcoin. The most basic similarity is that both of them are examples of crypto currencies. Moreover, both of them are the open block chain systems [4]. The second similarity is that they sit on their own peer to peer networks and every user could easily view transactions and then participate within it. Security is the third important similarity; both of them are extremely safe and secured and hence are utilized in worldwide.
Conclusion
Therefore, from the above discussion, it can be concluded that a crypto currency is the digitalized medium of exchange, which utilizes encryption technology for securing the several procedures included within the conducting transactions. The crypto currency is the subset of digital currency, since there is no physical representation. This is utilized for the transactions with all types of vendors, who are accepting them. The in person transactions could be easily conducted by mobile payments from the digital wallet. Several popular crypto currencies are present in the digital transactional world. Amongst them, the popular examples of crypto currencies are Bitcoin and Ethereum. The Bitcoin protocol eventually enables the peer to peer or P2P exchange within the decentralized system, which is not linked with the financial institutions. These types of transactions could be conducted by the heavily encrypted hash code within a peer to peer network. The digital wallet of the users is responsible for maintaining the Bitcoin and Ethereum. The above report has clearly outlined a brief description about the crypto currencies of Ethereum and Bitcoin. The features, architecture and challenges of Ethereum are described in the report, with proper relevant details. The second part of the report has analyzed and discussed applications supported by Bitcoin in token system and decentralized file storage domains. The various noteworthy differences and similarities between Ethereum & Bitcoin are also given in the report.
References
[1] Narayanan, Arvind, Joseph Bonneau, Edward Felten, Andrew Miller, and Steven Goldfeder. Bitcoin and cryptocurrency technologies: a comprehensive introduction. Princeton University Press, 2016.
[2] Delmolino, Kevin, Mitchell Arnett, Ahmed Kosba, Andrew Miller, and Elaine Shi. “Step by step towards creating a safe smart contract: Lessons and insights from a cryptocurrency lab.” In International Conference on Financial Cryptography and Data Security, pp. 79-94. Springer, Berlin, Heidelberg, 2016.
[3] Gandal, Neil, and Hanna Halaburda. “Competition in the cryptocurrency market.” (2014).
[4] Hayes, Adam S. “Cryptocurrency value formation: An empirical study leading to a cost of production model for valuing bitcoin.” Telematics and Informatics 34, no. 7 (2017): 1308-1321.
[5] Wood, Gavin. “Ethereum: A secure decentralised generalised transaction ledger.” Ethereum project yellow paper 151 (2014): 1-32.
[6] Atzei, Nicola, Massimo Bartoletti, and Tiziana Cimoli. “A survey of attacks on ethereum smart contracts (sok).” In Principles of Security and Trust, pp. 164-186. Springer, Berlin, Heidelberg, 2017.
[7] Hirai, Yoichi. “Defining the ethereum virtual machine for interactive theorem provers.” In International Conference on Financial Cryptography and Data Security, pp. 520-535. Springer, Cham, 2017.
[8] Dannen, Chris. Introducing Ethereum and Solidity. Berkeley: Apress, 2017.
[9] Corbet, Shaen, Brian Lucey, and Larisa Yarovaya. “Datestamping the Bitcoin and Ethereum bubbles.” Finance Research Letters (2017).
[10] Bogner, Andreas, Mathieu Chanson, and Arne Meeuw. “A decentralised sharing app running a smart contract on the ethereum blockchain.” In Proceedings of the 6th International Conference on the Internet of Things, pp. 177-178. ACM, 2016.
[11] Huh, Seyoung, Sangrae Cho, and Soohyung Kim. “Managing IoT devices using blockchain platform.” In Advanced Communication Technology (ICACT), 2017 19th International Conference on, pp. 464-467. IEEE, 2017.
[12] Eyal, Ittay, and Emin Gün Sirer. “Majority is not enough: Bitcoin mining is vulnerable.” Communications of the ACM 61, no. 7 (2018): 95-102.
[13] Yermack, David. “Is Bitcoin a real currency? An economic appraisal.” In Handbook of digital currency, pp. 31-43. 2015.
[14] Antonopoulos, Andreas M. Mastering Bitcoin: unlocking digital cryptocurrencies. ” O’Reilly Media, Inc.”, 2014.
[15] Decker, Christian, and Roger Wattenhofer. “Information propagation in the bitcoin network.” In Peer-to-Peer Computing (P2P), 2013 IEEE Thirteenth International Conference on, pp. 1-10. IEEE, 2013.
[16] Böhme, Rainer, Nicolas Christin, Benjamin Edelman, and Tyler Moore. “Bitcoin: Economics, technology, and governance.” Journal of Economic Perspectives 29, no. 2 (2015): 213-38.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
