Cryptocurrency Giants-Ethereum and Bitcoin

This report provides a brief description of Ethereum and Bitcoin, including their architecture, features, and challenges. It also explores the applications of Bitcoin for token systems and decentralized file storage, as well as the differences and similarities between Ethereum and Bitcoin.

Running head: ETHEREUM AND BITCOIN
Cryptocurrency Giants-Ethereum and Bitcoin
Name of the Student
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Table of Contents
Introduction...........................................................................................................................................2
Discussion..............................................................................................................................................2
Part 1: Architecture, Features and Challenges of Ethereum..............................................................2
Part 2: Applications of Bitcoin for Token Systems and Decentralized File Storage............................4
Part 3: Differences and Similarities between Ethereum and Bitcoin.................................................5
Conclusion.............................................................................................................................................5
References.............................................................................................................................................7

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Introduction
The crypto currency is the digital asset, which is being designed to work as a basic money
exchange medium [3]. The crypto currency eventually uses a strong cryptographic algorithm to
secure the various financial transactions and hence creating an additional unit is controlled and an
asset transfer is easily verified. These crypto currencies can also be defined as the digital currency,
alternative currency or virtual currency types. There are few decentralized controls for all crypto
currencies and these specific crypto currencies work through the distributed ledger technology such
as blockchain technology. The respective databases of all the public financial transactions are served
with this blockchain technology. There are two important or vital examples of the crypto currencies
are Bitcoin and Ethereum [8]. Both of these are digital currencies that are utilized worldwide for any
type of virtual money transaction. The following report would be providing a brief description about
the details related to Bitcoin and Ethereum. The architecture, features and challenges of Ethereum,
the applications of Bitcoin with various differences and similarities will also be given here.
Discussion
Part 1: Architecture, Features and Challenges of Ethereum
The crypto currency of Ethereum is a typical crypto currency, in which the blockchain could
be generated by this platform of the Ethereum [12]. The Ether is easily transferred in the accounts of
the users and hence the participant mining nodes are using for compensations of the computations
that are performed eventually.
i) Architecture: The basic architecture of this Ethereum crypto currency is much different
than any other crypto currency. The complete infrastructure of Ethereum then shares each and
every record of transactional history. All the network nodes can store this transactional history and
the most significant architecture factor is that these nodes are responsible for helping to store the
current smart contract state, thus adding up the remaining ether transactions [7]. The basic network
needs to be kept in the recent state and update it as per required. Moreover, the recent data of the
applications are included in the user’s balance, codes of the smart contract and location to store the
balance storage. The major purpose is to make future transactions and thus the Ethereum network
is added with altered pieces and then is being classified as unspent and spent.

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Figure 1: Architecture of Ethereum
(Source: King 2013)
The above figure clearly depicts the respective architecture of the crypto currency of
Ethereum. There are two instances present in the Ethereum DApp or Decentralized Applicaton [1].
Each comprises of a virtual machine, known as the EVM and then the contracts could be written in
the smart contract specific programming languages. These programming languages compile the
smart contracts to byte codes. EVM helps to read and execute the byte codes.
ii) Features: The most important characteristics or features of Ethereum crypto currency are
given below:
a) Distributed Ledger: The first and the foremost feature of Ehereum is that it comprises of
the respective open distributed ledger that is being utilized to record the various transactions within
two parties efficiently although in a verified method [10]. The distributed ledgers are the shared and
synchronized digital data, which is being stored in the centralized administrator.
b) Smart Contract: The second characteristic of the crypto currency of Ethereum is the
presence of smart contracts. There is a specified platform that is eventually built to create the
contracts and for this purpose, Ethereum allows the programming developers for easily functioning
with the multi signature account [2]. Furthermore, these types of agreements could be controlled by

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the users and hence a perfect utility is being provided to all other contracts. The information about
the applications such as domain registration information and membership records is solely stored
here.
c) Presence of Cryptography: Another important feature of Ethereum is that the crypto
currency is secured with the help of cryptography and hence with encryption, the security issues are
easily eradicated and Ethereum becomes safer [5].
d) Decentralized Applications: Ethereum is a decentralized application, which runs on the
decentralized networks with several trustless protocols. The single point of failure is properly
avoided by this feature and few tokens are provided to the users for giving computing power [11].
Moreover, the data or records are easily stored here with blockchain technology.
iii) Challenges: In spite of having various advantages or features, few challenges are present
for Ethereum and these are given below:
a) Higher Latency: The latency of Ethereum is very high and this often becomes an issue for
the users [9].
b) Much Slow: Ethereum does not provide enough speed to the user and hence is often
avoided.
Part 2: Applications of Bitcoin for Token Systems and Decentralized File Storage
The crypto currency of Bitcoin is the digitalized and decentralized currency that does not
have any administrator. The network is peer to peer and thus the intermediaries are not included
here. The security is extremely high for the Bitcoin [4]. The respective transactions could be verified
by several network nodes and then these are recorded in the public distributed ledger, called the
blockchain.
Various important applications are present for the Bitcoin and are collectively known as
Crypto 2.0 or Bitcoin 2.0. These applications are being utilized worldwide and in several
multinational organizations [6]. The two applications of Bitcoin for Token systems as well as
Decentralized File Storage domains are given below:
i) Token Systems: The basic and the most significant application example of Bitcoin for the
domain of token system is the Crypto Currency Token. This is an extremely and highly secured
application of Bitcoin that comprises of zero complexity [8]. This particular token is the specific
amount of the digital resources, which could easily managed by users. The Crypto Currency Token is

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then passed a Howey Test and only passing that test, this token is termed as secured. Another
significant feature of this Crypto Currency Token is that it contains encrypted data and thus there is
no chance of data theft or data loss. The need for the middle men is eliminated solely in this specific
application of Bitcoin [1]. Furthermore, for removing the various complexities, the overall speed of
Crypto Currency Token is incremented significantly.
ii) Decentralized File Storage: The significant application of the Bitcoin crypto currency in
decentralized file storage domain is the Storj Coin or SCJX. It helps in decentralizing the financial
transactions as well as the computing power [4]. The centralized entities are more liberal and
localized within the system and this token is used by users to pay for storage of the nodes. This is
extremely popular and vital application of the crypto currency of Bitcoin and thus the domain is
being used by each and every user of Bitcoin.
Part 3: Differences and Similarities between Ethereum and Bitcoin
i) Differences: The first and the foremost difference between the crypto currencies of
Ethereum and Bitcoin is that the Bitcoin is being designed perfectly as the digital currency; whereas
Ethereum is a general implementation of the technology of blockchain.The next difference is that
the average time of block for Bitcoin is about 10 minutes, whereas in Ethereum the block time is less
than 12 seconds [5]. About 65% of the total monetary supply of Bitcoin is already mined, whereas in
Ethereum, the percentage is below 50%. The fourth difference within Ethereum and Bitcoin is that
the Bitcoin is an alternate currency; whereas, ethereum can facilitate only P2P contracts and
applications. The block limit of the Bitcoin crypto currency is less than 1 MB; whereas Ethereum does
not comprise of block limit.
ii) Similarities: The first similarity is that both Ethereum and Bitcoin are the proper examples
of the crypto currencies. Furthermore, these are systems of open block chain. The other similarity is
that both of them sit on the P2P networks and all the users can easily view the transactions and then
participating within the transactions [7]. Both Ethereum and Bitcoin are highly secured and this is
another important similarity between them.
Conclusion
Therefore, conclusion could be drawn that the crypto currencies are the digitalized
currencies that use the significant technology of encryption to secure various processes that are
involved in few transferred that are being conducted. These crypto currencies are the subsets of the
digital currencies as there is lack of representation. Various famous examples of crypto currencies
are present within the digitalized transactional world. Within these crypto currencies, the famous

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examples are Ethereum and Bitcoin. The protocol of Bitcoin can enable the P2P or peer to peer
exchange in the respective decentralized system that is not being linked with financial institution.
The digital transactions are conducted by all the encrypted hash codes in the peer to peer networks.
The users’ digitalized wallet helps in the maintenance of the two crypto currencies. The above report
has properly described the several details regarding Bitcoin and Ethereum crypto currencies with
relevant details. The applications, features and challenges are being analyzed for Ethereum and
similarities and differences between them are provided in this report. Moreover, the two application
examples of the token systems and decentralized file storages are also given here.

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References
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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] King, Sunny. "Primecoin: Cryptocurrency with prime number proof-of-work." July 7th (2013).
[4] Park, Sunoo, Krzysztof Pietrzak, Joël Alwen, Georg Fuchsbauer, and Peter Gazi. Spacecoin: A
cryptocurrency based on proofs of space. Vol. 528. IACR Cryptology ePrint Archive 2015, 2015.
[5] Gandal, Neil, and Hanna Halaburda. "Competition in the cryptocurrency market." (2014).
[6] 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.
[7] Fry, John, and Eng-Tuck Cheah. "Negative bubbles and shocks in cryptocurrency
markets." International Review of Financial Analysis 47 (2016): 343-352.
[8] Gandal, Neil, and Hanna Halaburda. "Can we predict the winner in a market with network
effects? Competition in cryptocurrency market." Games 7, no. 3 (2016): 16.
[9] Scott, Brett. How can cryptocurrency and blockchain technology play a role in building social and
solidarity finance?. No. 2016-1. UNRISD Working Paper, 2016.
[10] Abraham, Ittai, Dahlia Malkhi, Kartik Nayak, Ling Ren, and Alexander Spiegelman. "Solidus: An
incentive-compatible cryptocurrency based on permissionless byzantine consensus." CoRR,
abs/1612.02916 (2016).
[11] Sompolinsky, Yonatan, Yoad Lewenberg, and Aviv Zohar. "SPECTRE: A Fast and Scalable
Cryptocurrency Protocol." IACR Cryptology ePrint Archive 2016 (2016): 1159.
[12] Iwamura, Mitsuru, Yukinobu Kitamura, Tsutomu Matsumoto, and Kenji Saito. "Can we stabilize
the price of a Cryptocurrency?: Understanding the design of Bitcoin and its potential to compete
with Central Bank money." (2014).