Bitcoin is the original; the king, the gold standard of cryptocurrencies. However, its popularity is a double edged sword: price has skyrocketed over the years, but it has consequently made it very expensive and slow to perform cryptographically verifiable, trustless value transfer on chain. Ethereum came on the scene many years after, applying some of the lessons learned in the development and network of Bitcoin. The Ethereum community has developed a protocol that confirms transactions faster and for less, up to 20x cheaper than Bitcoin.
This difference is partly due to the fact that Ethereum is a fundamentally less secure chain with a less strong network. Incidentally, despite these imperfections, Ethereum provides more flexibility to those trying to develop technology that further decentralizes key offerings.
Ethereum vs Bitcoin
At Coinpit, we made loginless trustless decentralized leveraged trading a reality on Bitcoin. The model worked great when it was conceived by founder Bharath Rao, but it relied on on-chain transactions that ensured that users always maintained control of funds that were not in active margin trades. The problem is that in the current state of the bitcoin network, this model became prohibitively expensive. It became too cumbersome to move funds in and out of margin account for position and into the custodian address. Additionally, providing on-chain settlement so users could always verify the integrity of the system became too expensive due to the multiple inputs building a large transaction size.
Another option we considered at Leverj was to just create our own blockchain. This would give us the full flexibility to implement whatever features were necessary to make decentralized leveraged trading as smooth as possible — without centralizing aspects of the architecture. Unfortunately, the risk of chain attack due to a weak network is too strong, and the stakes are too high given we are in the trading world.
Enter: the phenomenon of Ethereum.
Ethereum’s faster, cheaper transactions when compared to Bitcoin make it the natural next step for further developing decentralized trading platforms. It is the Goldilocks “just right” choice when considering security of bitcoin and the flexibility of our own chain. Furthermore, the robust community of Ethereum developers is an excellent opportunity to capitalize on synergies with other projects. It is the perfect candidate to fill the void while Bitcoin solves its scaling issues.
More Product Possibilities
Leverj will offer the same platform features and functionality of Coinpit, but on Ethereum. It will have a much more pleasant user experience as off-chain state sync and smart contracts allow for cheaper decentralized actions to occur on-chain.
The grand opening product offered on this platform will be one that the Ethereum community desperately needs: Ether-collateralized ETH/USD inverse futures contracts. This allows for perfect USD value hedging using only Ether! As the back-end for this is already live on Coinpit’s Bitcoin platform, it will take less than six months to have it running on Ethereum.
Ethereum is the Answer
Currently, the optimal blockchain technology to develop the next phase of Coinpit’s decentralized leverage trading vision is Ethereum. The ultimate goal is to allow total decentralization and open source from the back end to the front, but this is realistically many years out into the future. For now, Ethereum offers Leverj the opportunity to go to the next level; as such, we are excited to join the Ethereum community.
