Bitcoin is one of the best and oldest cryptocurrency. Six years ago, Bitcoin overpowered the crypto market with 81% share, which has fallen to 41%. At $803 billion, Bitcoin has not lost its value, and it is still the most valued token, followed by the fast-emerging Ether — the currency of the Ethereum platform — at $389 billion.
Functioning as an independent virtual currency, Bitcoin may be synonymous with crypto, which could also be a hedge against inflation. To enable Bitcoin transactions, blockchain — distributed ledger technology — was developed by its anonymous creators in 2008.
A teen familiarised with crypto by his father in 2011 discovered that restricting blockchain to financial transactions was Bitcoin’s shortcoming and conceptualised a new platform called Ethereum in 2014.
Computer programmer Vitalik Buterin designed Ethereum, which utilises blockchain for building applications that could facilitate secure property transactions or convenient royalty payments to artists.
Utilising Blockchain
Both Bitcoin and Ethereum are decentralised, implying that they are not allocated or regulated by a central bank or other authorities. Nevertheless, Ethereum, unlike Bitcoin, is supporting the crypto move beyond currency.
For instance, utilising some code on Ethereum, one can potentially pay crop insurance to a farmer based on drought data or even proffer artists royalties every time a copy of their work is sold.
Ethereum has its built-in currency, Ether, which can also enable execution commands for programmable actions and smart contracts on the Ethereum blockchain. A self-executing agreement written into lines of code and existing across a blockchain is known as a smart contract.
Vijay Pravin Maharajan, Founder & CEO of BitsCrunch, a Chennai- and Munich-based blockchain analytics startup, stated, “While Bitcoin was envisioned as the currency for a truly decentralised online financial market, Ethereum was launched as a way to extend its applications on the blockchain.”
Ethereum focuses on extending the singular use of blockchain technology against Bitcoin, which developed as an alternative asset and virtual currency with no backing or intrinsic value and no centralised issuer or controller.
Ethereum’s design also promoted non-fungible tokens (NFTs) and decentralised finance (DeFi). NFTs are typically used to give an ownership title to digital art, while DeFi signifies peer-to-peer financial services as against products from banks or other regulated entities.
It is also Ethereum that has enabled ‘trust-less’ blockchain transactions for government-backed (fiat) money. People need to trust the system more than others in a decentralised structure.
“Ethereum commoditises trust; it is a platform for zero-trust computing,” stated Gavin Wood, one of the co-founders of Ethereum. The platform doesn’t trust anyone, and everything is subject to verification.
What are the blowbacks?
Industry experts believe a blockchain system should have three essential attributes: decentralisation, security, and scalability. Ethereum is decentralised and secure. Nevertheless, scalability is a crucial pitfall.
There are some other critical differences between Bitcoin and Ethereum. Some parts of the world use Bitcoin to exchange goods and services. Bitcoin has been embraced as legal tender in El Salvador, for instance. This has been scrutinised because Bitcoin’s volatility can challenge the local population that utilises it for transactions.
Ethereum’s transactions are not monetary; instead, a collection of codes or smart contracts is implemented on the network. The smart contracts are the building blocks of Ethereum applications.
Crypto investors generally hold both Bitcoin and Ethereum, given their more robust fundamentals and longer track records compared with other cryptocurrencies. Although they have diverse roles, most analysts confirm that both will have a leading position in the crypto market for the predictable future.
Buterin cited this issue in the white paper itself. “Like Bitcoin, Ethereum suffers from the flaw that every transaction needs to be processed by every node in the network,” the white paper stated.
Maharajan declared this is a highly inefficient system and can challenge businesses or projects that depend on the blockchain. Yet, he further said that blockchain is an evolving technology, and developers are working on advancements.
What should investors drive at?
Industry players believe that Ether was never intended to compete with Bitcoin. Regardless, it grew in popularity because of its use in diverse, decentralised applications. “Ether should overtake Bitcoin soon based on its flexibility and versatility alone,” Maharajan stated.
The crypto market is patiently awaiting the launch of Ethereum 2.0, a more energy-efficient and cost-effective model that operates the proof-of-stake, or PoS, protocol rather than PoW. The transition to PoS will permit the network to support more transactions per second to make the network more scalable.
Eloisa Marchesoni, a crypto entrepreneur and public speaker, states that “The blockchain behind the second-largest cryptocurrency, Ether, will soon undergo a highly anticipated upgrade that may lead to more institutional investors putting money in the network and help lift Ether’s price.”
While Bitcoin today is the largest crypto by market value, Marchesoni further said, Ether could evolve into the leader after its infrastructure upgrade, also known as the “Merge,” marking the end of the proof-of-work for Ethereum.
