Co-founder of BearTax
What is Bitcoin
Bitcoin can be described as digital money. Bitcoin has been around for eight years and is used to transfer money from one person to another. It is commonly used as a store of value and has been a critical way for the public to understand the concept of a decentralized digital currency. If you want me to Explain Bitcoin Like you’re Five year old — Read this
What is Ethereum?
According to the Ethereum website, “Ethereum is a decentralized platform that runs smart contracts.” This is an accurate summary but in my experience when first explaining Ethereum to friends, family, and strangers it helps to compare Ethereum to Bitcoin since a lot of people have at least heard about Bitcoin before.
Ethereum is different than Bitcoin in that it allows for smart contracts which can be described as highly programmable digital money. Imagine automatically sending money from one person to another but only when a certain set of conditions are met. For example an individual wants to purchase a home from another person. Traditionally there are multiple third parties involved in the exchange including lawyers and escrow agents which makes the process unnecessarily slow and expensive. With Ethereum, a piece of code could automatically transfer the home ownership to the buyer and the funds to the seller after a deal is agreed upon without needing a third party to execute on their behalf.
The potential for this is incredible! Think of the numerous applications that act as a third party to connect you with others based on some set logic (e.g. Uber, Airbnb, eBay). Many of the centralized systems we use today could be built in a decentralized manner on Ethereum. With Ethereum you can make these transactions trustless which opens up an entire world of decentralized applications. Decentralization is important because it eliminates single points of failure or control. This makes internal collusion and external attacks impractical. Decentralized platforms cut out the middlemen which ultimately leads to lower costs for the user.
Use-cases of Decentralization
Follow me on Twitter for updates regarding Cryptocurrency & Blockchain.
If you found this article useful, feel free to leave at a tip of any amount at these addresses:
Create your free account to unlock your custom reading experience.