Why Ethereum over Bitcoin?
by Héctor Ugarte
Bitcoin is a good, very good platform for money (bitcoins) transactions. But for more transactions than just money may not be the best choice, at least from the point of view of Vitalik Buterin: founder of Ethereum.
Blockchain 2.0 platforms, like Ethereum offers the possibility to handle Descentralized Autonomus Organizations (DAOs) very well. Defined as: –autonomous entities that operate on the blockchain without any central control whatsoever, eschewing all dependence on legal contracts and organizational bylaws in favor of having resources and funds autonomously managed by a self-enforcing smart contract on a cryptographic blockchain. There are other platforms, like Colored Coins, Master coins, etc. Working over bitcoin ledger, but those are limited, for different reasons.
Some of the reasons to use Ethereum vs Bitcoin blockchain based 2.0 protocols for Blockchain 2.0 applications are:
1. Most of the protocols that have been invented have been specialized, attempting to offer specific and rich feature sets targeted toward specific industries or applications usually financial in nature. Ethereum intends to be as generalized as possible, allowing anyone to create specialized applications on top for almost any purpose imaginable.
2. Turing-complete, universal scripting language vs Scripting systems of Bitcoin, and even proto-cryptocurrency-2.0 alternatives such as the Bitcoin-based colored coins protocol and so-called “metacoins”, are far too limited to allow the kind of arbitrarily complex computation that DAOs require.
3. Fees – Ethereum contracts will regulate its Turing-complete functionality and prevent abusive transactions such as memory hogs and infinite loop scripts by instituting a transaction fee for each computational step of script execution.
4. Mining algorithms – there has been a lot of interest into making cryptocurrencies whose mining is resistant against specialized hardware, allowing ordinary users with commodity hardware to participate without any capital investment and helping to avoid centralization. Scrypt and Primecoin mining, exist, but both are imperfect; neither require nearly as much memory as an ideal memory-hard function could require, and both suffer from time-memory tradeoff attacks, where the function can be computed with significantly less memory than intended at the cost of sacrificing some computational efficiency. Ethereum instead uses an algorithm called Dagger, a memory-hard proof of work based on moderately connected directed acyclic graphs (DAGs, hence the name), which, while far from optimal, has much stronger memory-hardness properties than anything else in use today. In a near future, Ethereum will migrate its mining procedure to “Proof of Stake” (asks users to prove ownership of a certain amount of currency (their “stake” in the currency) to achieve distributed consensus).
5. Over colored coins master coins specifically: The specific failure of Bitcoin is particularly concentrated in one place: scalability. Bitcoin itself is as scalable as a cryptocurrency can be; even if the blockchain balloons to over a terabyte, there is a protocol called “simplified payment verification”, described in the Bitcoin whitepaper that allows “light clients” with only a few megabytes of bandwidth and storage to securely determine whether or not they have received transactions. With colored coins and Mastercoin, however, this possibility disappears. The reason is this. In order to determine what color a colored coin is, you need to not just use Bitcoin simplified payment verification to prove that it exists; you also need to trace it all the way back to its genesis, and do an SPV check each step of the way. Sometimes, the backward scan is exponential; and with metacoin protocols there is no way to know anything at all without verifying every single transaction.
Most information here was written by Vitalik Buterin.
SOURCE 1: https://bitcoinmagazine.com/articles/ethereum-next-generation-cryptocurrency-decentralized-application-platform-1390528211
SOURCE 2: http://vbuterin.com/ethereum.html