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Discussion on: Explain Ethereum like I'm five

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isaacdlyman profile image
Isaac Lyman

I don't understand Ethereum as well as I understand Bitcoin, and I certainly didn't intend for my original comment to delineate the differences between them. It was supposed to be a "five-year-old's guide to Bitcoin."

As I understand it, Ethereum is basically Bitcoin + a programming language. So instead of trading money back and forth and verifying transactions, you trade scripts ("smart contracts") back and forth, run them (on an Ethereum-specific virtual machine) and verify the end state of each script. "End state" here includes the actual lines of code in the script, where the script is stored, and the balance in each user's account after the script is run. This allows you to do some cool distributed computing tasks (albeit at a rather high price) and specify behaviors far more complex than "give X dollars to Bob".

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ben profile image
Ben Halpern Author

Okay that does answer a lot of my questions about purpose. So Ethereum's value is sort of more on the practical side of things. You could do a lot of this stuff on Bitcoin, but Ethereum is built for more practicality in achieving certain use cases?

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isaacdlyman profile image
Isaac Lyman

Yeah, and there are a few differences in implementation. For example, the number of freshly-minted Bitcoin is reduced by half each year with a hard maximum of 21 million Bitcoin (there can never be more Bitcoin than that, because math). There's no hard maximum to Ethereum, though I've heard that they won't increase the amount they issue per year, but may decrease it (possibly to 0).

Ethereum also has DAOs, which as I understand it are democratic robot investment funds that run on an Ethereum script and choose how to invest their members' Ethereum dollars.