Sugarcane Podcast

Brief History of Bitcoin and Ethereum | Founders, Purpose, Controversies | Ep. 04

August 01, 2023 Sugarcane Episode 4
Sugarcane Podcast
Brief History of Bitcoin and Ethereum | Founders, Purpose, Controversies | Ep. 04
Show Notes Transcript Chapter Markers

In this episode, we journey back in time to explore the captivating histories of Bitcoin and Ethereum - the two forerunners of the crypto realm.

  • The Legendary Origin of Bitcoin: Dive into the world of Bitcoin, born from a need for financial freedom and autonomy. Hear fascinating stories of our early encounters with Bitcoin, including free handouts at MIT and Bitcoin faucets. Understand how Bitcoin's inception during the 2008 financial crisis provided a safe haven for investors.
  • The Birth of Ethereum: Join us as we shift focus to Ethereum, an ambitious project by Vitalik Buterin. We'll chart his journey from the world of crypto blogging to the creation of a virtual machine that revolutionized blockchain technology. Understand Ethereum's unique functionalities, especially its groundbreaking smart contracts.
  • Bitcoin vs Ethereum: A side-by-side comparison of these crypto giants. We'll discuss their transaction speeds, fees, and the distinct scaling solutions each has adopted to tackle their limitations.
  • The PoW to PoS Transition: Dive deep into an in-depth discussion on Ethereum's pivotal shift from a proof-of-work consensus algorithm to proof-of-stake. This monumental move could potentially change the entire crypto landscape.
  • Overcoming Challenges: As we navigate through these narratives, we won't shy away from the controversies and challenges both Bitcoin and Ethereum have faced. Learn about their encounters with skepticism, regulatory hurdles, and technical challenges, offering invaluable lessons for all crypto enthusiasts.

Links: 🔗 Website - Podcast - YouTube - Twitter - Discord - TikTok

Disclaimer: 🚨 The information provided across all of Sugarcane's communication channels is for informational and entertainment purposes only. It should not be construed as financial or investment advice. Consult with a financial professional before making any investment decisions.

Speaker 1:

Welcome back everyone to the SureKane podcast. I am Rudy. Hey, i'm Sheldon, the founder and CEO of SureKane, and we're here to give you some more tasty tidbits. What are we talking about today, sheldon?

Speaker 2:

Yeah, i think we're talking about some history lessons actually, so definitely into history of Bitcoin, history of Ethereum, talking about kind of how they're different and why they matter. So I think that's the kind of general take, what we're up to.

Speaker 1:

History class What am I not favorites?

Speaker 2:

but I don't think I really appreciated it until I got older, I think one of the subjects that you don't really like, until you realize that when you're an adult, you have to actually know something about what happened in the past.

Speaker 1:

I'm like, what is what's going on? Like I live in Boston area, so Lexington, massachusetts, is nearby And that's like where the start of, like the war happened, like the first shot around the world. And I'm like, oh, it's like right here. This is what the books have been teaching me about And I didn't even like recognize that until someone told me while I was living here.

Speaker 2:

It's okay, you can see you're completely delinquent in school.

Speaker 1:

I wasn't a complete delinquent, but I was pretty much delinquent. Yeah, i was definitely spending more time on video games than I was on history lessons 100%.

Speaker 1:

A good thing we're here today, because we're going to give everyone else a good history lesson that I think is actually really important to understand Bitcoin and Ethereum, why they exist and keep up with the drama that goes on between them. So I think we all know Bitcoin's history pretty well. There's an anonymous figure or group of people we don't know, but they're labeled as Satoshi Nakamoto And this person during 2009, especially during that financial crisis, the housing crisis the timing couldn't have been better for something like this to be released And I definitely want to know, sheldon, when was your first time ever like hearing about Bitcoin?

Speaker 2:

That's funny. So I went to the school at MIT and in my junior year sophomore junior year, around 20, i want to say 2013, 2014, they were giving out free Bitcoin to every student, and it's kind of funny. even at that time the price is pretty low, but I kind of thought nothing of it, to be honest, and maybe try to buy into it. Then at that point, my life would have been different.

Speaker 1:

I would be on this podcast. Different conversation on the podcast.

Speaker 2:

That's when I first heard about it. But specifically, getting actually like involved and interested, i started building a lot of stuff in I want to say 20, 20, what? 17,? I want to say 2016, 2017,. I started building a lot of stuff specifically in Ethereum because I was like really cool about how you can actually program money and program value as I got into space. What you.

Speaker 1:

Yeah, it was with friends, I think we were just hanging out in my parents' basement, you know, playing video games, talking about New Tech, and someone's just bringing up oh there's this Bitcoin. It's a digital currency and you can buy stuff online with it And naturally, my nerdy self is intrigued, so I'm like free money.

Speaker 2:

I don't have a job.

Speaker 1:

So how do I make this work? Yeah, But yeah, I think I remember, like for anyone that knows or remembers a faucet, or you can just like go on a website that gives you free Bitcoin slowly, just because they were trying to incentivize people to use it.

Speaker 2:

And you actually talk about. What is that? What is the faucet?

Speaker 1:

So a faucet would be a page, web page where you would type in your Bitcoin address and you would receive a fraction of a Bitcoin or a set, and the intended purpose was, i think, two things. One, the person who owned the web page would just receive money for showing lots of advertisements, because lots of people were trying to get free Bitcoin And at that time when faucets existed, it was less a couple bucks of Bitcoin, maybe even less And it was just a way to get Bitcoin circulating in the ecosystem. Otherwise, if people were holding it all for themselves in that time, it wouldn't spread and any people to use it to make it valuable.

Speaker 2:

Yeah, pretty much. It's definitely great way to dispute, like it, what is the theorem? or Bitcoin and spread out cryptocurrency because, like current onramps are pretty hard, so it's great to have people getting it freely at least, so they can actually try out systems. Exactly, yeah.

Speaker 1:

Yeah, and I guess for history lessons, how do you view the first or the intended purpose of Bitcoin when it first came out?

Speaker 2:

Yeah, it was interesting because back in 2009, when it first came out early 2009, right after the kind of financial crisis, and at the time it was like peak like hatred of like existing financial system, and so people really thought about Bitcoin as a fight against that right, so really like completely anarchist in the way of like enabling people to have non-state of controlled money and be able to actually have access to something that, like, no central entity can like mess with or surround, and like change, like hey, i can take your money from you, and so that's really where it started. Nothing since then really got evolved into like this fully a concept of digital gold. I think that's really been a narrative that has been like expanded upon and really captured your people's imagination.

Speaker 1:

And to add on to that, like, people wanted a safe haven for their money, and this is what Bitcoin advertised. Like you said, decentralized, you own your money, no one can take that from you, and it's self sovereignty. That's the goal, yeah, and then, as Bitcoin developed, more projects were forking Bitcoin, meaning they were just using Bitcoin source code, editing it to what they see fit to make it seem better. Bitcoin had that first mover advantage. It was big push, but it doesn't stop new contenders from coming. Even the founder of Ethereum, vitalik. He was a big Bitcoin fan. He was a proponent. He loves, or loves, bitcoin. I think he still loves Bitcoin today. He's pretty agnostic in terms of crypto. He's definitely an idealist, and that's kind of where Ethereum came from was the idea of what a digital currency can do, and I love to learn your thoughts too, sheldon, about that transition of what Bitcoin was providing and what the vision was and what Ethereum can do.

Speaker 2:

Yeah, so also the kind of bit of a history lesson Back in 2009, in 2013, vitalik was like a big, created a lot of blogs. You see evendern that facebook. They stop moving in early on in SNES, at the sí site. And you know another thing they used Colored Coins because of theircrowd mientras that it needed visual. From me to you, I can also maybe create a separate piece of code against smart contract or some kind of entity that can do something, and then you can interact with it. I can interact with it. No central entity can control that piece of code.

Speaker 2:

And so colored coins came out of like that emergence of like kind of do more with this kind of decentralized network And kind of if you take it a couple of steps further, instead of having it be very specialized, that colored coins can only do one thing. That's how I thought about how can I actually create a full, like what's called a virtual machine, like almost like a computer in the cloud or in like a decentralized network so that it can do anything, anything imaginations that people can come up with? And so that was kind of the big start of where Ethereum that it's kind of breathed from, like Bitcoin can only do once, or Bitcoin can only do like value and colored coins into like it can do something but not anything. And then Ethereum. The idea is that it can do anything And that Ethereum came out I think it was like in mid-2015. So that's kind of where it started. I start.

Speaker 1:

I don't think I even knew about colored coin.

Speaker 2:

Yeah, i don't think I knew about that, i'm surprised. I didn't know you that much really.

Speaker 1:

I thought I knew them all back then because there was only a handful.

Speaker 2:

But yeah, og lessons They came out. I think it's like in when it must be, like 2012, 2013, when those kind of started coming out because they started to be able to do more with the premise of using Bitcoin as, like the basis. But then if you move past colored coins you can actually do fully like expressive code as essential as way and that's also a thing to remember too is the more you do, there's also more transactions happening system.

Speaker 1:

So Bitcoin transactions versus Ethereum transactions Can you give us a quick synopsis on the difference?

Speaker 2:

Yeah, so Bitcoin, even though it has this idea of being a wealth storage system you can actually store money, store value the actual Time it takes is pretty slow, right. It takes about like 20, 10 to 20 minutes to come to consensus or comes to agreement about the state of the world. Like if I sent you, let's say, five Bitcoin, again It'll take about 10 minutes for that transaction to actually be verified. And in the real world, you just can't wait that 10 20 minutes for something to be actually finalized. But in the Ethereum context, i think it's like 12 second blocks, like It's much faster in terms of like, also order magnitude and how fast transactions can be completed or through this, true, but again that's in the case of like visa transactions around like the millisecond level. So definitely a lot of ways to go and there's a lot of scaling solutions to get to that. But Bitcoin is 10 minutes, 10 20 minutes. Ethereum is around like 12 seconds. Visa, at the top end, is like middle seconds. So or can they give you context?

Speaker 1:

to work things out, and that's the thing, too, is like you are. The idea is supply the world with the transaction of this money. There's tens of thousands of transactions happening. Every second Visa can handle that. That's why they're a great system. Credit card It's great, yeah, and then this is where crypto Falls. It is not easy to handle mass transactions, especially for just money and crypto and Bitcoin's sake, but with the theory of its money and nowadays, nfts, smart contracts, interactions with dApps, those all involve transactions and also all cost time. It's not cheap and it's, yeah, it takes a lot of time to do. Yeah. Thankfully, though, both systems are working on a scale scalable solutions. Bitcoin's working under lightning, ethereum is working on layer twos, and yeah a lot more scaling solutions with that.

Speaker 1:

The future is like coming soon, and that's that's also a beautiful part about this system is how You're able to grow. You're able to build on top of this code, but people can work on new improvements and come to a consensus, an agreement to say, hey, this is sounds like a good update, let's all push for it and require all these Miners or nodes to approve the update worldwide, globally. And now there's a big shift to within the ecosystem of Bitcoin and Ethereum, the proof of work to proof of stake. Bitcoin still on proof of work. Ethereum was on proof of work for a long time in the beginning, until a year or two ago, when they moved to proof of stake. Yep, i want a quick overview on what kind of like, why that's such an important transition for Ethereum and why they kind of went through it, and why is Bitcoin still on it?

Speaker 2:

So I think defining POW birth POS, so POW is proof of work, pos is proof of stake, and so proof of work, which is kind of a way in which blockchain networks Incomes an agreement about and the state of the world. So, if you remember from the last episode, we're talking about, like, if you have a ledger, like a kind of state of transactions, and I transfer money to you, that ledger or that state of transactions gets updated to a new state of transactions. That agreement process of like what that new world is, is kind of what proof of work is this is meant for. And so the idea is that these computers can run these, essentially an algorithm, and It takes us around cycles for this algorithm to be completed and then, once they get to the end of the cycles, they come up with a hash or come up with like a number, and that number is then used to create the new state of the world. All right.

Speaker 2:

So again for the technical, probably complicated, but the idea is that in the proof of work context, computers are running computations to basically get to the new state of the world, but the difference is that improve a stake. Now you have, instead of having everyone running all these computations competing with each other. You now have people who are putting collateral, could bring money up, basically say, hey, i want to be the one to prove the next block, or be the person that says what's in that state of the world and And based on how much collateral you put up as your percentage of the pie of the number of blocks or number of trans, no, no number of new states the world you get to create, and so In question there by like why that matters.

Speaker 1:

But for anyone who's Wanting a deeper understanding, don't worry. Next episode is gonna be all about The miners and nodes and take a nice deep dive in what's actually happening. Yeah, yeah, we'll keep a high level for this.

Speaker 2:

Yeah, so the reason I bring that up is because Proof of work is very energy-intensive, right? Everyone around the world who are running Bitcoin nodes or Ethereum nodes This is last year They had to all be running computation, burning energy, right? So what happened in around like end of last year, around I think it's like October? I was actually at a watch party watching like the transition happen. Ethereum moves from proof of work to proof of stake and so, in proof of state context, it's now a lot more energy efficient. You don't actually have to have everyone running computation, because now, instead of everyone competing on the competition on the computation side, you now basically have to put up money to let collateral and be the one to actually have your share of the pie of the person creates the next block, and so You. I think I forgot what I was going with this. Is that the question?

Speaker 1:

Nice Well that's what you're saying is so accurate, and the idea behind that too is it's kind of scary to hear oh, i have to put money up to participate in Ethereum's proof of stake now, but you don't have to put a lot. The requirement for a full node, of solo node, is 32 ETH. But there are plenty of options and protocols that are providing like a pool where you put 0.1 ETH or 0.00 ETH, 1. Not 0, 0, 0, but 0, 0, 1. And that way you can still participate in this pool of staking and collect rewards for helping out this network. Yeah, anyone can participate, and it's also a little bit more friendly towards new people.

Speaker 1:

Because proof of work, you have to buy a piece of electronic device, a miner It's pretty much a computer that runs a certain algorithm over and over and over again, and so leave that running in your house, which is again expensive, and kind of keep an eye out for it. So if you're going to just participate in proof of stake, you can do that with many options like Rocket Pool or Stakewise There's more coming out And then if you want your solo staking, then you would have to again host a little computer at home, but thankfully it's not as energy intensive. You kind of just have to leave it connected to the network. There's so much to go into those two, though That's just high level people. We're going to go deep into it, and I feel like there's also a lot of controversy between these two.

Speaker 1:

If you've been keeping up at all, you're probably screaming at us right now Like there's so much more to it. You can't just leave it off like that. Don't worry for nuts. But I think this kind of wraps up today's episode. It was a good one because it was history, some brief technicalities and a good prep for next week. Yep, all right, guys, see ya.

Speaker 2:

Night dude.

History of Bitcoin and Ethereum
Cryptocurrency Transition to Proof of Stake
Work vs Stake