Ergo Vs Other Blockchain Platforms: What’s The Difference?

Ergo offers a series of unique features that set it apart from other blockchain platforms. In this article, we’ll compare Ergo to a number of popular networks, taking one feature from each – a specific design choice – and highlight how Ergo does things differently.

Trade-Offs

It’s worth stating that there are always trade-offs in selecting any given technology. For example, carbon fiber is light and tough, and therefore used extensively in high-performance sports cars. However, it’s expensive and harder to maintain than conventional steel bodywork, which is used in the majority of regular cars. Whether carbon fiber is the “right” decision for a car therefore depends on a number of factors.

In the context of blockchain, trade-offs are frequently made between security, scalability, and decentralization – often referred to as the “trilemma” within the industry. There are also trade-offs made between driving adoption through mining incentives (block rewards) and maintaining economic viability for validators, on the one hand, and limiting supply and inflation for the longer-term on the other.

Once again, choosing one or other approach is rarely a simple matter of right or wrong. These are design choices that are generally made in the interests of facilitating specific properties and functionality. Ergo has been carefully designed to be a particular type of blockchain platform. This infrastructure enables certain features and use cases, while avoiding other issues.

By comparing Ergo to five other blockchain platforms, we’ll look at several of these key design choices, and why Ergo and its growing community of users, miners, developers, and traders believe they are important.

Bitcoin: UTXOs Vs eUTXOs

Ergo is largely modeled on Bitcoin, inheriting many of the technologies and security assumptions that underpin the world’s first and most successful cryptocurrency. This choice ensures that Ergo benefits from Bitcoin’s track record of more than 15 years of near-flawless operation, with an almost perfect record of uptime. While Ergo aims to introduce innovation to the blockchain space, change for the sake of change brings unnecessary risk.

Bitcoin uses the unspent transaction output (UTXO) model to record coin balances on the blockchain. This approach tracks batches of coins (unspent outputs), registering them to a user’s address, and updating the status every time part or all of a UTXO is used in a transfer. While this might sound cumbersome, it is generally considered to be more straightforward and secure than the Account model (used by Ethereum and many other blockchains), in which a user’s balance is updated like the value in a bank account.

However, Bitcoin (intentionally) cannot be used for complex smart contracts. It is designed to do one thing well: secure value storage and transfer. Ergo extends Bitcoin’s model, enabling new functionality to be attached to UXTOs. This “eUTXO” model allows conditions and arbitrary data to be attached to UTXOs, meaning that scripts, smart contracts, and whole dApps can be run on Ergo – while still retaining Bitcoin’s unique and tried-and-tested security model.

BNB: PoS Vs PoW

Many different blockchains could have been chosen for this comparison – not least Solana and Ethereum (see below).

In the years since Bitcoin was launched, thousands of new cryptocurrencies and blockchain platforms have been developed. Almost all have either followed Bitcoin in its use of proof-of-work (PoW) – the means by which Satoshi Nakamoto solved the so-called Double Spend or Byzantine Generals Problem – or have used the more recent proof-of-stake (PoS) model.

Like many other platforms, Binance Chain opted for PoS. There are good reasons for this: PoS has a lower energy footprint, giving it (at least superficially) better environmental credentials, and can be run using consumer-grade hardware or a regular VPS. It also makes sense to use PoS when most or all network coins/tokens have been sold in an ICO or similar event, and few or no new ones will be distributed in the form of block rewards.

Similarly, several reasons underpin Ergo’s use of PoW. Firstly, it is the consensus method with the longest track record. Bitcoin has never been hacked at the protocol level, and PoW offers a well-understood and well-tested security model. Secondly (unlike Binance Chain and many other well-known blockchains), Ergo had no ICO, no VC backers, and no premine. 100% of all ERG is distributed to miners in return for their work of securing the network. This “fair launch” mirrors Bitcoin’s own origins, and is vital for building an open and accessible blockchain platform. Additionally, although it’s a secondary benefit, PoW is carving out an important role in maintaining energy grids, buffering power generation at times of peak demand.

One of the changes that Ergo has made to Bitcoin is its use of Autolykos instead of SHA256. It is a memory-hard algorithm where regular GPUs can be used to secure the network, rather than expensive ASICs that constantly need to be updated.

Solana: Centralization Vs Decentralization

As with PoW vs PoS, a number of different blockchain platforms could have been chosen to illustrate this point.

As noted above, the well-known blockchain trilemma highlights the need to balance three factors: security, scalability, and decentralization. It is extremely difficult to build a platform that prioritizes all three of these. The more decentralized a platform becomes, for example, the harder it is to scale to support large transaction volumes without also compromising on security.

The result of this reality is that blockchain founders typically optimize their platforms for one or two of the three variables, and downgrade the importance of at least one. Solana, for example, was designed to support large transaction throughput – differentiating the platform from Ethereum, which has struggled in recent years with limited capacity.

While Solana initially achieved this throughput via a relatively high degree of centralization, the platform has made some strides forward in terms of decentralizing its infrastructure. However, of concern is the centralization of its tokenomics. As a proof-of-stake platform, Solana holders stake their SOL to maintain the security of the blockchain. The percentage of these tokens held by individuals and centralized entities (such as VC organizations) following the token sale has always raised questions. Although the distribution has somewhat improved over time, these large holders pose an economic threat to investors, since any forced selling can crash the market.

This problem is seen far more clearly in the raft of memecoins that have recently been launched on Solana – thanks in part to its thriving community and trading ecosystem. Unscrupulous founders often retain a large percentage of token supply, pump the market through strategic buys and social media engagement, and then sell their holdings at the top of the market.

This issue of uneven token distribution is not confined to Solana, but it is particularly prominent in instances where VCs and insiders have been able to buy large token allocations at an early stage. Ergo made the decision not to compromise in this regard, even though this could limit project funding.

In terms of infrastructure decentralization, Ergo has always prioritized security and decentralization. As new users and services come to Ergo and blocks fill up with transactions, layer-2 solutions are being deployed to handle the additional load on the network – with each being designed according to its needs.

Ethereum: Flexibility Vs Safety

Ethereum was the first smart contract platform, and is still the largest by developer count and market cap. However, Ethereum suffers from a number of problems that more recent networks have sought to address. One of these issues is the security of its smart contracts.

Ethereum’s smart contracts are generally written in Solidity, and can be very overly complex. This complexity often introduces attack vectors, which hackers ruthlessly exploit. There can often be tens or even hundreds of millions of dollars at stake, held in the protocols that are routinely probed for weaknesses. Solidity has a number of inherent vulnerabilities, and developers must be aware of these – and how to mitigate them – to prevent common attacks. Even when the best developers create dApps, which are then thoroughly tested and audited by reputable security firms, exploits can occur.

Ergo’s use of eUTXOs and its smart contract language, ErgoScript, are designed to avoid the most common security vulnerabilities that have plagued Ethereum dApps. ErgoScript is based on Scala, and is intended specifically for building smart contracts with Ergo’s eUTXO model, extending Bitcoin’s functionality while maintaining security and privacy. ErgoScript allows for Turing-Complete applications, but tends to avoid the kind of ambiguities seen in Solidity that can introduce risks and attack vectors.

One of the things that ErgoScript does particularly well is its native support for Sigma Protocols: highly composable cryptographic statements that can be used to build secure and powerful dApps that emphasize privacy through ring and threshold signatures. Such use cases are simply not possible with Ethereum, since the complexity entailed in creating them would introduce unacceptable risk and make them prohibitively costly in gas terms.

Dogecoin: Incentives Vs Sustainability

Every blockchain network has to balance two competing sets of economic demands. Initially, there is the need to incentivize the security of the blockchain, paying validators for processing transactions and ensuring double spends do not occur. In a PoW ecosystem, this is typically achieved through block rewards, as well as fees charged on every transaction.

However, there is also the need to limit the total overall supply of coins. Cryptocurrency culture is opposed to the fiat-world system of infinite money printing. Inflation erodes purchasing power, and the more currency there is in existence, the less each unit is worth. Thus there is a tension between the need to bootstrap a network and secure it, on the one hand, and to ensure sustainable monetary policy, on the other.

Different PoW networks approach this in different ways. Bitcoin’s block rewards are cut in half every four years (the “Halving”), before ultimately being phased out. There will only ever be 21 million BTC, and within the near future, the majority of mining rewards will come from transaction fees.

Dogecoin takes a different approach. Every block sees an additional 10,000 DOGE mined into existence. There is no Halving or other reduction in block rewards. This means that Dogecoin will have an ever-increasing supply (though as the number of DOGE in existence grows, the percentage that total supply grows every year drops).

Ergo has a different approach again. Block rewards are periodically reduced, and there will be a maximum supply of 97.74 million ERG. This is similar to Bitcoin, however, Ergo miners will not solely rely on transaction fees for revenues. Storage rent (demurrage), or “on-chain garbage collection”, is charged on addresses that have been dormant for more than four years. These small fees are added to the pool of mining rewards, giving miners another revenue stream – and therefore allowing them to spend more as a whole on securing the network. Users who do not want to be charged storage rent can simply move their coins every four years.

This approach means that coins that would otherwise be removed from supply forever due to lost or corrupted keys can slowly be recycled, benefiting miners. Miners will also have the opportunity to earn by helping secure sidechains, allowing for greater total transaction throughput. This careful balance between economic sustainability and security incentives sets Ergo apart from other PoW platforms.

To find out more about the Ergo ecosystem and the unique design choices taken to create a smart, sustainable blockchain ecosystem, check out the Ergo blog and read our documentation.