What is a public blockchain?
A public blockchain is a decentralized, distributed ledger that allows anyone to read or write transactions on the network without the need for permission. This means that anyone can view the transaction history on a public blockchain, and anyone can participate in the consensus process that helps to secure the network. Public blockchains are generally considered to be more transparent and secure than other types of distributed ledgers, because they are open and decentralized.
What are the most established public blockchains? Bitcoin and Ethereum.
Bitcoin in short?
Bitcoin (BTC) is a decentralized, digital currency that uses cryptography for security and can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. It was invented by an unknown person or group of people using the name Satoshi Nakamoto and released as open-source software in 2009. The value of a single bitcoin is determined by supply and demand on exchanges, and it can be traded for other currencies, products, and services. Transactions on the bitcoin network are recorded on a public, decentralized ledger called the blockchain.
Ethereum in short?
Ethereum is a decentralized, open-source blockchain platform that runs smart contracts and allows developers to build and deploy decentralized applications. It was created in 2015 by Vitalik Buterin. Ethereum enables the development of a wide range of applications, from simple financial contracts to complex decentralized applications that can be used for a variety of purposes. It is powered by a global network of nodes that validate transactions and maintain the blockchain, and it uses a native cryptocurrency called ether (ETH) to facilitate transactions on the network.
Comparison
While they share many similarities, there are also some key differences between the two.
Bitcoin is primarily a digital currency and a store of value, while Ethereum is a platform that runs smart contracts and allows developers to build and deploy decentralized applications. This means that Ethereum has a wider range of uses and applications than Bitcoin.
Another key difference is that the bitcoin network uses a proof-of-work consensus algorithm, while Ethereum is moving to a proof-of-stake consensus algorithm. This means that the process of reaching consensus and verifying transactions on the Ethereum network is different from that of the bitcoin network.
Additionally, the native cryptocurrencies of each platform have different properties. Bitcoin is limited in supply and is designed to be a store of value, while ether, the native cryptocurrency of Ethereum, is used to pay for transaction fees and to power the Ethereum network.
Bitcoin Layer 2
Bitcoin layer 2 networks are systems that operate on top of the Bitcoin blockchain and provide additional features and capabilities. These networks are often referred to as “off-chain” networks, because they are not directly built into the Bitcoin blockchain. Instead, they use the security and trust provided by the underlying Bitcoin blockchain to enable additional features and functions.
Examples of Bitcoin layer 2 networks include the Lightning Network and the Liquid Network. These networks allow for faster and cheaper transactions than are possible on the Bitcoin blockchain itself, and they are designed to help scale the Bitcoin network and make it more accessible and usable. Some layer 2 networks also provide additional features, such as improved privacy or support for new types of transactions.
Nevertheless, while promising in theory and growing in usage, Layer 2 networks have not yet picked up a large enough mass of users to be confident in their future relevance. They can add more complexity from a usability perspective and the game theory of funding and providing distributed liquidity needed to run those L2 networks as intended has yet to be established.