here in Guangzhou, China. And today we're going  to be dealing with the topic of Bitcoin versus  

Ethereum. And what's the differences between the  two. And what really sparked this idea for me was  

I remember covering the crypto space two or three  years back, and one of the things you saw was  

in terms of prices, if bitcoin went up,  everything else went up, if bitcoin went down,  

everything else went down. But nowadays, you're  starting to see a divergence between some of these  

different coins, especially with Ethereum at this  point, as investors begin to look at this space  

more closely and study the differences between  these different cryptocurrencies. And to help me  

out with the conversation today, we'll be hearing  from two brilliant guests the first, the head of  

research blockchain.com, also a visiting fellow  at the London School of Economics, the second  

a top executive at Consensys, which is an entity  that is building a theory and base apps. Now,  

on the basic level, a theorem is a blockchain  on which developers can build different apps.  

Ether is the token or cryptocurrency that powers  that. And I just want to spend a quick second  

on blockchain. It's a topic we've dealt with  on other episodes of Beyond the Valley. So I  

urge you, listeners and viewers to go back  and listen to that. But just very quickly,  

it's effectively a distributed ledger of activity,  in bitcoins case is a public ledger designed to  

verify and record different transactions, and  it's immutable, it can't be tampered with,  

and depending if it is public, or private, depends  on who has access to it. But that's the basic idea  

of shared distributed ledger of activity. Now  back to Ethereum. You can think of it almost as  

an operating system of sorts. If you think about  Apple's iOS for iPhones, or even Google's Android.  

Those platforms, developers can come in  and build apps on top of it's very similar  

to the concept in any way of Ethereum. And this  is very different from Bitcoin, because Bitcoin  

is very much designed to be a means of  transaction, a currency, some call it  

digital gold, depending on your point of view. But  that's very different to Ethereum. And it's worth  

just spending a second talking about the original  white paper for Ethereum, which was published  

in 2013, by the founder, Vitalik Buterin, and  eventually the project launched in 2015, six years  

after Bitcoin and Vitalik did praise a Bitcoin,  but said he wanted to Ethereum to be something  

different. And in that white paper, he describes  Ethereum as a next generation, smart contract,  

and decentralized application platform. Two very  key terms here, smart contract, decentralized  

applications, and I'll add one more decentralized,  finance or DeFi, and we're about to delve into all  

these topics, so stick with us. And to help us  out with the conversation. I want to introduce  

my first guest Garrick Hileman, the head of  research at blockchain.com, also a visiting fellow  

at the London School of Economics. Now Garrick  was on one of the very first episodes of Beyond  

the Valley in which we spoke about Bitcoin.  Garrett is great to have you back on the podcast.

Garrick. So good to have you back  on beyond the valley podcast.

Thank you Arjun, it's a  pleasure to be back on again.

So I just want to kick off really  with it with a broad overview,  

what are some of the big differences  between Bitcoin and Ethereum?

Right. So it's always tricky to try to simplify  this in just a few words. But Ethereum was  

developed to allow for smart contracts in a way  that are not as fully available on the Bitcoin  

network. So oftentimes, you'll hear Ethereum  described as having more room for expressive  

and more capable, decentralized applications. And  we'll get into maybe more what that means. But a  

more advanced programming, more automation  would be a way to maybe characterize it,  

and also more capacity. So scalability is another  big feature that Aetherium is very focused on. And  

a lot of what people are excited  about in terms of what's in the  

pipeline for Aetherium have to do with  that scalability, additional capacity.

So Ethereum, as you mentioned, there sort of  talks about itself as as a blockchain platform  

for smart contracts and decentralized  applications. And I want to dig into  

these terms, specifically for our  listeners and our viewers as well. So  

let's just start off with this term  smart contract, what does it mean?

Right. So I always like to try to explain smart  contracts with an example. You know, something  

that is automated, that can verify this is took  took place, and then say automate a payment. And  

so imagine you were traveling, and you have flight  insurance, your flights delayed or canceled.  

If that that insurance policy was on a smart  contract, the smart contract could in essence,  

check automatically to see whether the flight was  delayed or canceled and make a payment to you,  

without you having to file a claim. And also, you  wouldn't even have to trust that the insurance  

company had the money, the money is held in  escrow in the smart contract on the blockchain  

network. So that's kind of the value proposition  of a kind of a smart travel insurance contract.

So if you sort of extend that beyond sort of  that application, which of course very useful,  

and what are some of the sort of big things  you see, in the world of smart contracts,  

let's take it to say, sort of large financial  institutions, for example, even governments?

Right. Yeah, this is where it gets really  exciting. So, you know, things like,  

you know, imagine the New  York Stock Exchange or NASDAQ  

can be, in essence, a smart contract. Meaning  that basically an entire exchange can operate  

in an automated way without people on top of a  blockchain like, the Ethereum network. And we've  

already seen some some very significant traction  for these what are called decentralized exchanges,  

which are basically just kind of a version  of a smart contract, a money market protocol,  

where borrowing and lending is fully automated,  again, no people matchmaking or intermediating.  

That's another advanced smart contract  that's gained a lot of traction today.

And the reason we couldn't get  a smart contract is effectively  

we have a contract, but the rules of that  contract are, are in code. Right? That's,  

that's how this kind of works. And effectively,  if one thing happens, you know, that code  

is executed, right, and carries out the  terms of the contract in a simple way.

I think that's correct. And I think the word smart  can be a little misleading and might imply like an  

artificial intelligence. But I think the the truth  is closer to what you described, where the rules  

are embedded in software code, and,  and are executed automatically.  

Now, some people may question whether that term  smart is appropriate, given that sometimes people  

intend one thing to happen with smart contracts,  and something else happens. These are bugs. And  

unfortunately, we've seen a lot of exploits of  smart contracts. This year, hundreds of millions,  

in fact, have been siphoned off due to various  programming issues of these smart contracts.

Yeah, and that we'll certainly get into  some of the challenges in a moment.  

Just want to get into another term, and that is  sort of decentralized applications. And we hear  

the word decentralized a lot when it comes to  Bitcoin, for example, decentralized currency,  

you know, the idea that there's no sort  of intermediaries, no middle people at  

this point. But when we talk about decentralized  applications, how, how would you describe that?

Yes, I think the most important thing to  remember when you hear the word decentralization  

is this is not an either or this is not binary,  where you're either decentralized or you're  

not you centralized, this is a spectrum.  And you can exist at various points along  

that decentralization spectrum. And so that's  really important to keep in mind. So there's no  

such thing as something that's completely  decentralized. There's different degrees  

of decentralization. And what we mean by that  really, is, we are not having to trust a person  

or an institution to keep their word. I often  will, when I'm teaching this in classes put  

up a picture of a handshake, you know, a very  traditional way of achieving cooperation and  

trust. But also some of that can be very easily  broken. Rules that are automated in software,  

are more trust minimized, arguably, then that  handshake, and therefore harder to break.

So when we talk about that idea  of, of permissionless, as well,  

that's where this comes in. So I  mean, it just described that term,  

because again, it's something that  we're going to come up against a lot.

Yeah, permissionlessness is a way of saying that  this is open access to anyone with a computer  

and an internet connection, you don't need to  go apply to use the Ethereum blockchain or the  

Bitcoin Blockchain, you just have to have a  computing device and an internet connection.  

And you can start using these blockchain  networks. You know, that's not how traditional  

finance is often worked, where you have to  go into a bank, provide some identification,  

and get approved. And there's a billion  plus people who don't have bank accounts,  

some of which, you know, hundreds of millions  don't have ID, and, and blockchains, kind of  

do away with all that and saying, hey, just get  on the internet. And you can start transacting,  

coding, building an application launching  the next Alibaba on a decentralized network.

And yeah, you take that idea of decentralized now  you take it to decentralized finance - DeFi - huge  

buzzword again, you know, again, just  just lay out what that means for us.

Yeah, so defy is is a is a buzzword that is  typically associated with these daps decentralized  

applications that are built on top of Ethereum.  But really, we're talking about financial  

blockchain, you know, networks. And even Bitcoin,  for example, could arguably be classified as DeFi,  

but most people wouldn't refer to Bitcoin as DeFi,  they're talking about things like money market  

protocols, that facilitate borrowing and lending  in an automated fashion or decentralized exchanges  

or, or things like even, you know, emerging  forms of blockchain based insurance, you know,  

kind of proto-deposit insurance, if you will, all  this kind of falls under the heading of DeFi. And  

many people are looking at this and saying, This  is the new financial system that's being built,  

and can replace our existing traditional financial  plumbing with decentralized financial plumbing.

Now, I think one of the interesting parts  of because this, you know, we're talking a  

lot about Ethereum in here is the relationship  between ether, the token, the digital currency,  

and Ethereum, the blockchain network, you know,  how do those two work together? And then I guess  

the other question is, is ether necessary for the  Ethereum blockchain to sort of work long term?

You ask all the easy questions  Arjun. So yeah, this so  

so it's important to think about these two things  is kind of distinct, but also very integrated.  

And, and you can think of Ethereum as  kind of like the database or the ledger,  

or the network. You know, sometimes you'll use  the analogy of like, a train car, you know,  

it's kind of like the currency or the asset that's  traveling on top of the train tracks, those rails  

you can think of as a theory of the network.  And in in the case of ether, the train car  

and Ethereum, the train tracks, these things are  locked together, they can't be kind of separated.  

Ether lives on those rails and cannot be taken  off those rails. In the same way you can think  

of like, well, I can take my US dollars and  move them across Visa's rails and then I can  

move them across PayPal's rails and kind of lift  that train part up and off of different rails.  

Ether is locked in fully integrated to Ethereum,  the network, and that, that integration is partly  

what allows for, the ease of programming smart  contracts and decentralized applications and DeFi.

And, and then I just want to get on to get  some of the challenges as well with Ethereum  

and you mentioned one earlier, some of the bugs  perhaps with the smart contracts and some of  

the issues, in terms of people losing money that  result from that as well. I mean, how are those  

things solved? You know, and how big a problem  is that as we look to the future of Ethereum?

Yeah, it's a great question. I mean, I think the  latest assessments are over a half a billion US  

dollars has been lost through various exploits  or bugs, flash loans, attacks, vampire texts,  

there's all sorts of different names. It is a  real issue. And it's important for people playing  

in the DeFi space to understand this is still semi  experimental, and even some of the oldest and most  

battle-tested money market protocols. Compound,  for example, recently had a bug that allowed for,  

you know, kind of the treasury to be to be  drained in the tens of millions of dollars. So,  

you do need to be aware that this is  new. But you know, at the same time,  

the teams are iterating and learning. And, you  know, we haven't seen anything, what I you know,  

what I characterize is catastrophic happen. And  the most important thing is that the underlying  

blockchain networks, Ethereum, Bitcoin,  others, those have continued to be secure.

And the other issue as well is, is one  of this idea of scalability. And when we,  

when we mentioned that word,  we're really talking about  

the network's ability to maintain sort of all  these applications, but also do it in an efficient  

and a low-cost manner as well. So, at the moment,  Ethereum does have some scalability issues,  

and there are concerns, you know, whether  these are going to get resolved or not.

That's right. And, and there's already  some serious competition. You know,  

Selena, for example, is attracted  a lot of interest this summer,  

can process tens of thousands of transactions  on their layer one, their base blockchain,  

compared to the, you know, dozen or so you  know, roughly that that Ethereum can do  

on its base layer. So, what's interesting about  the blockchain space is different blockchains are  

experimenting in different ways with different  approaches to scalability. Ethereum is kind of  

throwing the kitchen sink out the problem  with the hope that one of these things will  

kind of stick in and I think there's a there's  a, there's a general confidence that that it's  

going to get sorted out positively. But the  competition is breathing down Ethereum's neck.

Yeah, and certainly I want to dig into those  things in a moment in terms of sort of upgrades  

to the network and things that are happening in  that space. But just one of the other issues,  

because you mentioned sort of Solana there, and  all these other challenges. You know, if we look