If Bitcoin is the Coca-Cola of the digital currency world, the most likely candidate to be the Pepsi is Ethereum (ETH). Except, that’s not quite right. Colas are interchangeable in a way that digital currencies are not.
More specifically, Ethereum offers several improvements on the underlying digital currency implementation worked out by Satoshi Nakamura that make it more flexible and more useful. Introduced by a dev team headed by Vitalik Buterin in 2015, they had the benefit of years of seeing the Bitcoin protocol at work, and working out how they could improve on it.
The most notable of these improvements is the implementation of what are called “smart contracts”. In simple terms, this means that conditions can be placed on an Ethereum transaction. This enables creative programmers to use code to replace third party participants in a transaction, such as escrow services, expanding the decentralized nature of the currency. Decentralization, and the enabling of “trustless” transactions between anonymous parties, was one of killer apps of digital currency to begin with.
And more features and improvements are on the way. Over the next two months, the Ethereum dev team will be rolling a pre-planned upgrade, or “hard fork”, the the Ethereum digital ecology. The code name for this upgrade is “Metropolis”.
One of the most important Metropolis improvements is the somewhat whimsically named “zksnark”. This stands for “Zero Knowledge Proof”, and it is a way of bringing a whole new level of anonymity to digital transactions. This protocol, already implemented in the the cryptocurrency Zcash, uses some subtle mathematical trickery to obfuscate details about transactions on the blockchain, including the sender, recipient, and value. With Bitcoin, all this information is transparently available to anyone who wants to look.
The sender and recipient are typically anonymous of course, represented in the blockchain with just a long alphanumeric string, but there are ways of analyzing successive blockchain transactions that can reveal a lot of information about the participants, especially if they are not careful about reusing payment addresses. With an implementation of zksnark, even this limited knowledge will only be available to people the participants want to know it.
Another improvement due with Metropolis involves the streamlining of the coding process used to create the smart contracts. You could call this a “behind the scenes” thing, the people who will benefit most directly will be the ones writing all that code. But remember, better systems of coding make for better software…you can’t write Call of Duty in BASIC after all.
Further, the new update will provide greater protection against hacking attempts, even by attackers armed with (as yet theoretical) quantum computer systems, by a system of masking that will enable users to know any address for which they have a private key.
Metropolis will also include some changes to the protocol that will make the mining process more difficult. Some cryptocurrency observers see this as putting a downward pressure on the price of the currency, but the improvements to the system overall sure to be a countervailing upward pressure.
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