Bitcoin and its underlying technology blockchain are game-changing technologies that are reshaping and revolutionizing the world economy. (1)

Often hidden behind the headlines of Bitcoin’s meteoric rise in market value and blockchain’s technological promise is a basic understanding of what these two technologies are and where they come from.

This brief article examines the digital currencies Bitcoin and Ethereum and introduces Blockchain, the technology that facilitates the digital transfer of value and much more.

Bitcoin: The Beginning?

“I think the internet is going to be one of the major forces for reducing the role of government. The one thing that’s missing, but that will soon be developed, is a reliable e-cash.” — Milton Friedman, ‘99’

In 2008, a person or group of people acting under the pseudonym Satoshi Nakamoto published a white paper titled Bitcoin: A Peer-to-Peer Electronic Cash System. The paper introduced a solution to two puzzling issues.

The first was our inability to transfer money digitally between willing participants without the need of a trusted third party. The second was that a function was needed to transfer money digitally with the ability to establish the order of transactions to avoid double spending.

Nakamoto proposed two solutions:

The ledger would operate much the same as any other, except that the recorded transactions would be distributed to computers around the world.

In 2009 the ability to transfer value digitally was born in what is widely known as Bitcoin. However, it is the second capacity, now known as blockchain that is proving to be of far greater significance.

Although blockchain has scarcely found its way into mainstream thinking and discourse, it is, as mentioned, revolutionizing the world economy.

Bitcoin and Ethereum

Since inception, Bitcoin has captured the attention of an ever-growing, and yet relatively small, number of investors, enthusiasts, companies, and others around the globe.

As it has grown, it has served the dual function of acting as proof of concept for a “peer-to-peer version of electronic cash” and simultaneously giving rise to thousands of other digital currencies.

The most well known of these currencies by market value are Bitcoin and Ethereum. Bitcoin’s current market value is $37 Billion USD, while Ethereum’s is $16 Billion USD.

Any attempt however to compare the two cannot be accurately described as an apples-to-apples comparison. More about this later. First, let’s look at what Bitcoin actually is.

Bitcoin

Bitcoin is a decentralized peer to peer electronic version of cash that maintains its value without backing or inherent value. It allows the transference of money digitally without going through a trusted third party such as a bank or credit card. (3)