Ethereum has hosted numerous protocols due to its flexibility and broad smart contract capabilities. Some notable protocols built on Ethereum include:
- Uniswap: This protocol allows for decentralized trading of ERC-20 tokens directly from a web3 wallet, like MetaMask.
- Compound: A protocol that allows users to earn interest on their cryptocurrencies or take out loans against them.
- Chainlink: A decentralized oracle network that enables smart contracts on Ethereum to securely connect to external data sources and APIs.
- MakerDAO: A decentralized credit platform on Ethereum that supports DAI, a stablecoin pegged to the U.S. dollar.
- Aave: An open-source and non-custodial protocol for earning interest on deposits and borrowing assets.
Legal issues related to these protocols and more broadly, the Ethereum ecosystem, can include securities law implications, smart contract legality, data privacy concerns, and regulatory issues related to decentralized finance (DeFi), among others.
As for Ethereum’s differences from Bitcoin:
- Purpose: Bitcoin was created as a digital currency to be an alternative to traditional money, whereas Ethereum was created as a platform to facilitate immutable, programmatic contracts, and applications via its own currency, Ether.
- Capabilities: Bitcoin essentially operates as a decentralized, peer-to-peer digital currency. Ethereum, on the other hand, is a decentralized platform that hosts smart contracts. These are self-executing contracts with the terms of the agreement directly written into lines of code.
- Speed: Transaction confirmation times also tend to be faster in the Ethereum network.
- Supply: Bitcoin has a finite supply of 21 million coins, which creates scarcity and contributes to its value. Ethereum, however, has no hard cap on the total amount of Ether that can be produced.
- Consensus Mechanisms: Bitcoin uses Proof-of-Work (PoW) as its consensus mechanism, which requires a significant amount of computational power. Ethereum started by using PoW, but transitioned to Proof-of-Stake (PoS). Ethereum officially switched to a Proof of Stake (PoS) consensus mechanism in 2022 as a secure and energy-efficient way to validate transactions and add new blocks to the blockchain
These differences bring along different legal considerations for each platform and the protocols built on top of them.
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