The biggest difference between Bitcoin and Ethereum seems to be "the former uses a proof-of-work (PoW) consensus mechanism and an unspent transaction output (UTXO) model, while the latter uses a proof-of-stake (PoS) mechanism and an account/balance model". However, what drives them apart is not only these differences in their "physical construction" but also in their "non-physical philosophy".

This article investigates their differences in "non-physical philosophy".

Development with constraints vs. development without constraints

The development of Bitcoin is hampered by two factors: the small blocks and the need to maintain privacy. When a Bitcoin developer offers a proposal, he needs to consider whether the proposal will lead to a waste of block space or privacy harm. In other words, he needs to write proposals under these two constraints to achieve his goal.

This is not the case with goal-orientated Ethereum. Reaching the goals is its top priority, even if it's at the cost of other matters.

Development with or without constraints varies greatly. Let's compare Bitcoin and Ethereum to two rare rough diamonds: Bitcoin's approach to development is to carve a rough stone while preserving its characteristics, but Ethereum's approach is to carve it in a way that meets the needs of the marketplace.

This distinction will result in two vastly different products. Which one is better? It's a matter of opinion. But for an ecosystem, this distinction may be a blessing, which allows us to enjoy immediate prosperity and look forward to a bright future.

（Note: Why does Bitcoin have small blocks? This is a simple yet very important question. Thinking it through will make it clear what Bitcoin is holding on to.)

Public vs. private infrastructure

The year 2020 saw two exciting cryptographic applications of Ethereum: zero-knowledge proof (ZKP) and statelessness, which contribute to the development of layer 2 vertical scaling and layer 1 horizontal scaling, respectively. I believe they constitute the core technical building blocks that enable the scaling of Ethereum.

Applications of zero-knowledge proof and statelessness require expertise and substantial time and money. However, zero-knowledge proof can be applied to private infrastructure to generate projects that can be financed. The application of statelessness is confined to public infrastructure and cannot bring direct financial benefits.

This year, the development of the two applications is hugely different on Ethereum. Zero-knowledge proof projects abound, and everyone is talking about them. In contrast, progress has been plodding on statelessness. Although the former started earlier than the latter, the vast difference between their status quo is astonishing. Private infrastructure is booming, especially in the hot segment; although construction of public infrastructure is continuing, the decisions are political and utilitarian. (Note: Here, “utilitarian” does not mean people are pursuing financial gains. It means doing simple things that deliver results quickly but whose negative impacts are not well-documented.)

Bitcoin presents a different picture. First, zero-knowledge proof and statelessness are treated equally, and statelessness is even more widely used than zero-knowledge proof; second, zero-knowledge proofs are used in a wider range of applications, except for those that can be financed. The construction of public infrastructure is being steadily pushed forward, and cryptography is being used as a tool rather than an end in itself.

Blockchain is sometimes likened to roads. If we follow this analogy, Ethereum is contracting out the construction of roads to private developers, who develop their own roads or facilities to expand the road system and generate revenues through tolls. The primary purpose of the construction of Ethereum’s public infrastructure is to assist and coordinate the projects of the private developers so that they can efficiently connect to and operate the central system.

But for Bitcoin, the design and construction of the main system itself account for a large part, and even private developers are mostly engaged in projects that can be used as public infrastructure.

There are two main reasons for this difference. From a technical perspective, Ethereum and Bitcoin have chosen different technical routes in terms of scaling solutions. Ethereum adopted a chain structure, which needs to increase capacity by developing sidechains. Bitcoin adopted a net structure which is easy to expand nodes in the future, what matters most is what the UTXO model and net structure can do.

There are also cultural reasons. For Bitcoin, the most important thing is “Bitcoin”, which can somewhat hamper private infrastructure involvement. But for Ethereum, the top priority is “making profits”, which will disturb the construction of public infrastructure. Different community cultures lead to different developer options, as well as different attitudes of users and investors. These options and attitudes, in turn, influence community cultures, further reinforcing certain trends.

For my part, when investigating a Bitcoin project, whether it’s related to its infrastructure or application, the first question coming to my mind is: Will it “hurt” or “boost” Bitcoin? If the answer is the former, I won’t waste my time on it. But for an Ethereum project, I’ll consider if it’s worthwhile to invest time and money in it. In other words, can I make money from these projects?

Private infrastructure is the driving force behind the industry’s growth, and public infrastructure lays the foundation for the industry’s existence. But I can’t pretend to be naive and conclude this section by saying I wish both could be taken into account—some ideas that are hard to hold on to, others that are seductive and addictive.

Trustlessness vs. decentralization

In the opening section of the Bitcoin white paper, Satoshi Nakamoto wrote: “While the system works well enough for most transactions, it still suffers from the inherent weaknesses of the trust based model”. In the concluding part, Satoshi wrote: “We have proposed a system for electronic transactions without relying on trust.”

From the beginning to the end, the author has argued against the trust based model and proposed a system without relying on trust. The white paper didn’t mention decentralization. It did cite the central authority as an example, simply because it is the most common object of trust in the trust based model.

Look at another white paper: Ethereum: A Next-Generation Smart Contract and Decentralized Application Platform. “Decentralized” is a frequently used word in this white paper. Its goal is to achieve “decentralization” in various situations, and even Bitcoin is treated as a decentralized rather than a trustless system.

Although they are similar at first glance, trustlessness and decentralization are different. Trustlessness can be achieved by multiple methods, including the decentralized consensus, but not any decentralized consensus can guarantee trustlessness because various factors are involved, including consensus mechanism and participants. It could even be argued that centralization can’t be trustless, and rarely can decentralization be trustless.

Different philosophy of Bitcoin and Ethereum has led to diverging development paths. Bitcoin turns to cryptography because cryptographic proof, which only relies on security assumptions, is the best way to achieve trustlessness. However, Ethereum turns to consensus, which can achieve decentralization easily.

Therefore, when we look at Bitcoin, we see a general signature, behind which all the effort and mystery are hidden; but when we look at Ethereum, we see a giant made up of multiple layers of consensus, each of which is a wealth code.

Remarks

I’d like to conclude this article with a quote from The Garden of Forking Paths. As a practitioner in  the cryptocurrency industry, I don’t want to tell which is better, and I wish them both success. If I must convey my personal opinion in this article, it would be: Please don’t try to turn Bitcoin into another Ethereum, because trustlessness is valuable, and privacy is valuable.

“With slow precision, he read two versions of the same epic chapter. In the first, an army marches into battle over a desolate mountain pass. The bleak and somber aspect of the rocky landscape made the soldiers feel that life itself was of little value, and so they won the battle easily. In the second, the same army passes through a palace where a banquet is in progress. The splendor of the feast remained a memory throughout the glorious battle, and so victory followed.”

btc: bc1p80u5advn72k2nzt8u6n5c3annrx87tuyq7t5ulae366qem3fxj5sze3pcu

eth: 0x8142B9A50a603eA0eD05C5D71E91E0FC41a6EF0b