Bitcoin is just not the only one in the family of cryptocurrencies; though it has long been dominant. But Ethereum, another cryptocurrency-related project, has additional features and applications because of which it has attracted a lot of hype.
Let’s see what makes Ethereum different and how it is better.
The main point of Ethereum is that it is not just a digital currency but a blockchain-based platform with many aspects.
There is a code behind Ethereum and they call it Turing-complete, which means it can run any program (or contract) that can solve most reasonably complex computational equations.
The Ethereum Virtual Machine (EVM) is a smart contract featured by Ethereum which uses its currency called ether for peer-to-peer contracts. Ether along with other crypto-assets is held in the Ethereum Wallet; this wallet allows the creation and use of smart contracts.
The New York Times described the system as a single shared computer that is run by the network of users and on which resources are parcelled out and paid for by ether.
The blockchain stored applications are being used by Ethereum’s smart contracts for contract negotiation and facilitation. A decentralized way to verify and enforce the contracts is provided by the blockchain.
This decentralized aspect makes it incredibly difficult for fraud or censorship. Because of the advanced blockchain, things are recorded much faster than Bitcoin, mostly in seconds rather than minutes. The aim of these smart contracts is to provide greater security and bring down the associated costs.
Virtual shares, assets, proof of membership, and more can be represented by using digital tokens; Ethereum allows the creation of digital tokens. The digital tokens can be used for many purposes, including the representation of shares, forms of voting, and also fundraising.
One can either have a fluctuating amount in circulation or have a fixed amount of tokens based on predetermined rules.
Companies and organisations, which are looking for a robust and efficient network and blockchain, are attracted by the speed and flexibility of Ethereum’s blockchain.
Elimination of the need for a third party such as a lawyer, a court, or any legal intermediary is an important feature of Ethereum. The third-party is generally required to complete a transaction, trade anything or establish a legal document.
Major Fortune 500 companies, start-ups, academics, and technology vendors regrouped and made the Enterprise Ethereum Alliance the largest open-source blockchain alliance in the world.
The main objective is to create Enterprise-grade software using the blockchain and capable of handling the most complex and demanding business applications.
There are 180 members in this alliance and the number keeps on growing. Microsoft, JP Morgan, Mastercard, and ING are a few among those 180 companies.
Ethereum helps to provide the organizational structure to get the idea off the ground apart from the help they prove for source funding. One can collect proposals from the people who backed their project and then hold votes on how one should proceed.
The traditional expenses such as hiring managers and doing paperwork are eliminated. While its decentralized network means that one won’t face downtime, Ethereum also protects one’s project from outside influences.
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Ethereum’s live blockchain was initially launched on July 30th, 2015 while Bitcoin was first released way back on January 3rd, 2009. There are small but major aspects that differ between the two blockchain-based projects.
Ethereum’s GHOST protocol is really quick which makes the average block time to be just 12 seconds, while Bitcoin’s average block time is 10 minutes.
The average block time of Ethereum is only 1/50th time of that of Bitcoin. A super-fast block time means that confirmations are quicker. However, there are also more orphaned blocks.
Another major difference between them is their monetary supply. Bitcoins have already mined more than two-thirds of all available bitcoin, and the majority of them were early miners.
The total supply of Bitcoin mined is 21 million. While Ethereum, with a presale, raised its launch capital, only about half of its coin is expected to be mined by its fifth year of existence.
The reward for mining Bitcoin will be half about every four years and its current value is 12.5 bitcoins. Ethereum rewards miners based on Ethash, which is its proof-of-work algorithm.
In this 5 ether has been given for each block. Proof-of-work has a disadvantage and that is it does not encourage collaboration nor does it provide any consequence for the vicious behaviour.
Decentralized mining by individuals is encouraged by Ethash, which is a memory-hard hashing algorithm, while Bitcoin uses more centralized ASICs.
The transaction costs of Bitcoin and Ethereum are different. In Ethereum, the main factors on which the costing of transaction depend are complexity, storage needs, and bandwidth usage. Whereas in Bitcoin, the block size limits the transaction and the block sizes compete equally with each other.
Ethereum has its own feature known as Turing complete internal code, which means that anything can be calculated with enough time and enough computing power.
This capability is not there in Bitcoin. Even if there are advantages of Turing-complete, there are complexities also which bring in security complications.
However, if we see it from a general point of view, Bitcoin and Ethereum have different purposes. While the main aim of the creation of Bitcoin is as an alternative to regular money and therefore it is a store of value and medium of a payment transaction, Ethereum is developed with an aim to be a platform facilitating peer-to-peer contracts and applications through its own currency vehicle.
Thus to conclude, Bitcoin and Ethereum are different versions using the blockchain technology (with Ethereum being a more advanced technology), and both the cryptocurrencies, driven by different intentions, are set to establish themselves.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.