Canadian crypto battle between Montreal with Sidechains & Toronto with Ethereum

What is it about Canada with its radical blockchain technology? Is it the need to think different to compete with its giant southern neighbor?

Within Canada, the two cities of Toronto and Montreal are in opposite sides of the big debate over whether blockchain technology can be separated from bitcoin the currency.

In Toronto, where Ethereum was conceived, the view is that yes you can have applications using blockchain without using bitcoin.

In Montreal, where Blockstream created the Sidechain technology, the view is that bitcoin is the currency to be used for all blockchain transactions.

Of course, that is over simplifying. There are people in Toronto who favor Sidechains and people in Montreal who are fans of Ethereum.

My 101 guide for those who don’t follow this debate closely;

Ethereum does not rely on bitcoin. In other words, there are no bitcoin miners verifying the transactions. This enables more complex applications to be created, not limited by things like bitcoin block size or the time taken for miners to verify transactions. Blockstream uses Sidechains as a two-way peg with bitcoin. Complex transactions go off to a different blockchain and then come back to the bitcoin network.

My take is simply that it is horses for courses. Some use cases will be more suited to Ethereum and others will be more suited to Blockstream.

I have one concern about Blockstream which is that they have raised $21m from VCs and yet they have not said how they plan to make money. There is debate in places like Reddit, but I cannot find any official company statement on this. I understand that in the social media phase, many ventures postponed even thinking about monetization until they reached scale. I understand that can work well if the monetization is some form of advertising. However in a tech platform that pitches to developers, entrepreneurs want to know before committing. In ye olden days it was simple – you just paid license fees. Blockstream has now released an open source version, but developers have learned to be wary of building apps on top of platforms such as Twitter that can unilaterally change the rules.

I am sure Blockstream will reveal their plans and will get traction with developers who believe that the best way to verify distributed transactions is to use the mining infrastructure that comes with bitcoin. The big picture is that developers are spoiled for choice and that is why we are starting to see more end user facing applications appear. We have covered two user centric blockchain ventures. One – Augur – uses Ethereum. The other – Lighthouse – uses bitcoin (although it is unclear whether they use Sidechains). This indicates that this is not a winner take all battle. Some use cases and some developers will favor Ethereum and other use cases/developers will favor Blockstream.

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