[macroexchange]

Bitcoin has smart contracts. That's what people usually don't understand about ETH - its much more of an extension of Bitcoin and ColoredCoins than most people can ever realize. In fact this article shows exactly in what way this extension came up. Ethereum's history in two steps: 1) try to generalise Mastercoin 2) the same on its own blockchain. Grasping the internals of Bitcoin and its smart contracts capabilities is almost an requirement to understand ETH. Actually its very similar to going from assembly to a higher level language.

I worked on a Bitcoin project which in a strange turn of events led to Nick Szabo becoming an advisor there. But the limitations of Bitcoin are so large that all the attempts failed - Counterparty and Mastercoin were clearly never as succesfull as ETH for very good reasons.

[CryptoPunk]

Just to add: Mastercoin isn't the Bitcoin protocol. It uses Bitcoin as a data layer, but has an independent contracting system that doesn't interface with Bitcoin script.