Will Ethereum Eventually Become Superior Over Bitcoin?
The cryptocurrency market is unfolding continuously, and this development is expected to continue as new blockchain protocols are regularly introduced. Statistics gathered from the crypto price website, CoinGecko, show that bitcoin’s current price stands at approximately USD 50,000 per bitcoin.
Anonymous and secure transactions, peer-to-peer architecture, and decentralization have led to higher cryptocurrency adoption. As a result, there have been arguments about whether Ethereum might overhaul Bitcoin as a more suitable value store. ETH is intended to complement instead of competing amidst bitcoin; it has developed as a strong competitor in the cryptocurrency marketplace.
Bitcoin: The Basics
Bitcoin was first launched in 2009 and became the first cryptocurrency to use blockchain technology. Satoshi Nakamoto’s goal was to develop a peer-to-peer electronic cash system that was decentralized and censorship-resistant.
The digital currency was created as an alternative to regular currencies and aimed to fix the problems in global finance as it doesn’t need a third party like a bank or another money transfer facility. Some regulators recognize it as an asset, although cryptocurrencies aren’t accepted as a form of payment.
The cryptocurrency is highly liquid and is used for online transactions like buying goods or receiving money. Completing Bitcoin transactions takes mere minutes.
Bitcoin transactions are recorded in an online public ledger, made from records of new transactions that occur. No one can write over or delete the blocks from the chain, but developers can add blocks. That makes it more than challenging for hackers to electronically ‘interfere’ with the ledger. Bitcoin code is open-source and uses the blockchain process to prevent hacking.
BTC operates on mathematical equations that act as checks on the numbers in the digital ledger to validate the accuracy of new blocks. Being a decentralized currency means there are no third-party servers to run the equations.
Miners run the equations, and only those with expensive and robust mining hardware to solve the equation are likely to get Bitcoin.
Bitcoin has lower transaction fees, but this changes depending on network congestion and mining volume. The digital currency also has a strong mining pool with a cryptographic difficulty that needs ASICS rather than GPUs.
Bitcoin has brand name recognition as a first-generation cryptocurrency. However, Ethereum closely follows behind and has much catching up to do before it can overtake Bitcoin.
Ethereum: The Basics
Ethereum isn’t a cryptocurrency, but it’s the platform within which Ether( the cryptocurrency) works. Ether works as the cryptocurrency that Ethereum uses to encourage miners to validate the blockchain.
The primary intent behind Ethereum was to allow software developers to use blockchain technology for decentralized applications or D’apps,
Ethereum launched in 2015. It works as a decentralized network to support Dapp development. Dapps are applications meant to operate on decentralized networks for Dapp developers. The second-generation cryptocurrency represents a shift in the function of cryptocurrencies.
Some of the issues faced by the Ethereum network are sustainability and scalability. Therefore, the platform decided to come up with a detailed upgrade to address these issues.
Ethereum 2.0 or Eth2 is one of the upgrades proposed by this platform. It was released in December 2020 and aimed at making the blockchain sustainable, scalable, and secure. Initially, the network had a limit of 15–45 transactions per second, which wasn’t enough for the D’apps on the blockchain.
With Ethereum 2.0, the platform hopes to spread the network load across new chains. That will improve the transaction speed and reduce congestion. However, Ethereum being a proof-of-work blockchain makes it energy-intensive due to the mining. Eth2 seeks to move Ethereum from proof-of-work to proof-of-stake, which means the platform will no longer use computing power, but ETH will secure it through staking. That will increase its energy efficiency and make Ethereum more sustainable.
What are the Similarities Between Bitcoin and Ethereum?
Bitcoin and Ethereum share some similarities like:
Both Bitcoin and Ethereum are decentralized. They have no central regulator or central computer server and use tamper-proof blockchain technology.
- Depends solely on Miners
Ethereum and Bitcoin incentivize miners to verify the transactions on the blockchain.
What are the Differences Between Bitcoin and Ethereum?
Some of the significant differences between the two include:
- Use Cases and Goals
Bitcoin was initially meant to be used as a real currency, while Ethereum was designed to develop blockchain software. Ether, which is the cryptocurrency, was meant to incentivize blockchain validation.
Bitcoin is more of digital money, while Ethereum characterizes smart contracts.
- Their Roles
Bitcoin acts as a store of value, which means people can use it to value regular transactions like money.
Ethereum functions as a building platform for D’Apps or smart contracts. You can think of Ether as the fuel or gas in the Ethereum network. The blockchain platform can send tokens that depict a specific value. Although these values can be anything, they do not represent cryptocurrencies.
- Hash Rate
Ethereum has a network hash rate of over 700 Ether per hour, while Bitcoin has over 40 BTC per hour.
- Speed of Transactions
Bitcoin’s transactions are manual, and Ethereum’s transactions are programmable or automatic. A Bitcoin miner takes minutes to solve an equation. It only takes seconds for a miner to solve an Ethereum equation. That makes Ethereum faster than Bitcoin.
Bitcoin’s code is used to make records of transactions. Ethereum code is versatile and can execute commands provided by a software program.
Ethereum production is continuous, which makes its supply unlimited. The founder of Ethereum stated that the total number of coins would not exceed 100,000,000 in the future.
Bitcoin is capped at 21,000,000 coins, making it a store of value as the scarcity creates supply and demand.
Is Ethereum Better Than Bitcoin?
There are benefits to use both Ethereum and Bitcoin. BTC is liquid compared to ETH, and it has a low coin supply.
However, suppose I was to choose between Ethereum and Bitcoin. In that case, Ethereum is a better alternative based on its unlimited use cases and immense potential to grow based on its technology.
Ethereum released its blockchain in 2015, which is an advanced version compared to Bitcoin’s blockchain. ETH introduces features like smart contracts, a decentralized tool that allows you to set conditions that prompt a transaction. Smart contracts are powered by blockchain technology. As a result, developers can create applications that can’t go offline or be edited by third parties.
Moreover, there are planned upgrades in the Ethereum blockchain, making it a usable asset, unlike Bitcoin. The proposed Ethereum burning or EIP-1559 is a proposal to change ETH’s fee structure. Burning Ethereum is expected to increase the asset’s scarcity and bring a lot more benefits.
The resurgence of Decentralized finance, a concept that seeks to use cryptocurrency technology to create an alternative to traditional financial instruments like loans, tradings, savings, and more. Experts believe that the growth of the DeFi ecosystem on which Ethereum's blockchain operates will attract more people, thus pushing the price of ETH higher.
Digital currencies have revolutionized the way we view money. Bitcoin was the first cryptocurrency to gain mainstream success and has a market cap of over USD 350 billion. However, BTC enthusiasts are waiting for the day it will be traded as a cash-based currency.
Bitcoin has a better position in the market as it’s used for financial transactions. Digital currency removes the need to use third parties in payment technology. However, BTC only focuses on payments and banking issues. Ethereum may not be a cryptocurrency, but it has considerable growth potential. That’s due to its different uses and better technology.
An investor looking for something more stable should opt into the Bitcoin market, but for investors who are not afraid of taking risks with a high potential for rewards, Ethereum may be a good fit.
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