Ethereum vs. Bitcoin

Without becoming too technical, we must first comprehend what Bitcoin is. Bitcoin can be thought of as a digital form of gold. Gold bars are used to keep track of money. Basically, you acquire gold and keep it in a safe place for a long time. In times of economic turmoil, gold might be more stable than FIAT currencies because it represents a percentage of your wealth. As a result, when the markets go bananas, as they did in 2008, gold simply sits there and maintains its value, as it has for thousands of years. It is regarded as a safe sanctuary.


Gold has two major properties that make it an excellent store of value.


  • It's simple to store. Because gold is inert, it will never deteriorate, corrode, or rust. You can rest assured that your gold will be found hundreds of years from now.

  • It's in short supply. On the surface of the world, there is only a finite amount of gold. Traditional money, on the other hand, is superior because governments may print as much as they like, expanding supply and weakening currencies. Inflation is the term for this.


These characteristics are shared by Bitcoin. Bitcoin's supply is set and restricted to 21 million units. Currently, there are 17 million BTCs in circulation, with additional Bitcoins being mined. A digital variant of this method is used to create Bitcoin. Computers, rather than people, solve tough arithmetic problems and generate Bitcoin as a result. It's crucial to understand that this isn't free money, just like gold mining isn't free. Gold mining is costly and time-consuming, but Bitcoin mining is computationally intensive and expensive due to the technology and electricity needs.

Because Bitcoin is a digital asset, it is also incredibly easy to store. It won't spoil or degrade with time, either. That's Bitcoin: a decentralised digital currency unfettered by governments, banks, or monetary policy.


What is Ethereum if Bitcoin is like gold and acts as a digital commodity whose value is determined by supply and demand? Let us call it "digital oil." To understand what Ethereum is, you must first grasp what it is. It's basically programmed cash. This is a difficult notion to grasp because nothing like it has ever existed before.


Here's an illustration. Insurance is one of Ethereum's potential uses. In our existing system, everyone pays money to insurance companies, and in the event of an accident, the firm pays out to the victims while keeping a substantial profit margin. This is an unavoidable evil, as we require an entity to oversee the process. However, you could use Ethereum to code your money and fully bypass the middleman.



When it comes to flight insurance, you can programme code straight into the money, such as “if a flight is cancelled due to the airline's fault, pay x amount to the impacted parties.” This would be a decentralised, automated, and censorship-resistant procedure. Rather than needing to trust an insurance company that has a vested interest in cheating and lying for profit, you may rely on cold, hard code that is absolutely unbiased and is only programmed by behaviour.


It's also a lot less expensive, because instead of a cut in your flight insurance going to some CEO's Christmas bonus, you'd only have to pay a tiny fee to have these few lines of code run on a machine. So, what exactly is this contraption? Is it a computer at the ethereal headquarters that you're looking for? No, this is what makes blockchain so revolutionary. It's all about decentralisation.


Rather of a central computer, Ethereum is constructing a global supercomputer in which anybody can contribute and become a part of. So when you "pay a tiny sum to run the code," you're actually paying everyone in the Ethereum network to run your code on that supercomputer, not just the Ethereum corporation. The revenues are split among the users who run the supercomputer, rather than going to Ethereum.


Ethereum can be used for more than simply money. The Ethereum network can run anything that can be written. This has ramifications in both established professions like politics and emerging industries like automation and artificial intelligence.

The oil analogy is derived from this. Ethereum will be the fuel that powers this global supercomputer, a technology that has the potential to be as transformative as the Internet, much as oil is used to power everything in our daily lives.


Let's get down to business. What Are the Differences Between Bitcoin and Ethereum?

When you think about Bitcoin, what comes to mind? Most likely, "digital money?" Is Ethereum a “smart contract” platform? That's exactly; that's the most important distinction to remember.

Bitcoin employs smart contracts as well, but they aren't as versatile as Ethereum's. Bitcoin is a digital currency that may be used to send money and complete transactions. Ethereum can also be used to send money, but only under specified circumstances. Ethereum is a platform for the creation of decentralised apps (dApps) and smart contracts. DApps and smart contracts ensure the security of transactions, allowing a platform to send tokens with a specific value.

On the Ethereum blockchain, there are 50,000 masternodes and 10,000 on the Bitcoin blockchain. However, because Bitcoin mining is more difficult, the value of a single masternode is higher in Bitcoin. Because its masternode is the most valuable, Bitcoin's price is the most stable.


What Blockchains are Ethereum and Bitcoin based on?

The rise of Bitcoin and Ethereum, which have really propelled the notion forward, has made blockchains very well-known.


Bitcoin is built on a public ledger called the blockchain.

What exactly does this imply? This means that everyone in the globe can download and read the blockchain's data. You can see the quantity of Bitcoins transmitted to and from certain addresses in Bitcoin. That isn't to say it isn't safe. The power of cryptography protects the public blockchain. This is due to the fact that blockchain technology is completely decentralised.


The Consortium Blockchain is the foundation of Ethereum.

This type of blockchain isn't completely open to the public. Pre-selected server nodes control the consortium blockchain (i.e, computers). Here's an illustration of how the consortium blockchain may look: Consider a scenario in which ten banks each run their own blockchain (all of them have been pre-approved). A minimum of six banks must sign a transaction for any block processed by that chain in order for it to be put to the blockchain (of course, it can be added to the chain if all six sign).


What exactly is an ERC?

ERCs (Ethereum Request for Comments) are a type of proposal with the purpose of defining token standards and procedures. This differs from an Ethereum Improvement Proposal in that an EIP modifies the Ethereum code, but an ERC is more like instructions on how to use Ethereum features. The number ERC20 is assigned to a specific ERC proposal that aims to standardise how Ethereum contracts should be utilised and how they interact with one another.


If a token adheres to the ERC20 token standard, it will be considered safe to invest in by others. This does not, however, imply that the contract is risk-free. The ideal practise, like with any programming and software, is to assume that everything is terribly buggy. ERC20 is a means to standardise how token contracts interact with one another on the Ethereum blockchain in order to avoid daytime chaos and enhance interoperability.


Token owners have complete control over their assets. A token contract that follows the ERC20 standard may keep track of how many tokens are in circulation and who owns them at any one time. This is simple to accomplish because each coin is a sub-network of the Ethereum network. A smart contract is used to handle all token distributions.


Finally, this standard is extremely beneficial to the Ethereum ecosystem as a whole. The flexibility to use these assets across multiple platforms and projects will increase their utility.


The ERC20 standard is not a limit. In order to strengthen and maximise the blockchain's interoperability, security, and performance, Ethereum has gone above and beyond by introducing additional token specifications. There's more to come. Ethereum is dubbed "blockchain 2.0" for this reason.


Key Differences Between Bitcoin and Ethereum

Bitcoin and Ethereum are not powerful enough in terms of transactions per second. A common problem of Bitcoin and Ethereum is the scalability, which is why they can’t process more transactions. For comparison, let’s have a look at the quantity of transactions per second of famous payment systems:

  • Paypal – ~ 400 tps

  • Visa – ~ 24000 tps

  • IoT – ~ 300000 tps

The Crypto Market Giants: Ethereum and Bitcoin

Despite the fact that there are presently 1,630 cryptocurrencies in circulation, Bitcoin has a market share of roughly 45 percent. This means that any change in Bitcoin's price has an impact on the entire market. If the price of Bitcoin falls, the price of the majority of other altcoins will fall as well. For the time being, BTC sets the market's pace. The crypto market is still quite volatile because of the 45 percent dominance.

Experts believe Ethereum has the potential to challenge Bitcoin's dominance. Ethereum's market share is now about 18%.



Defining the Advantages and Disadvantages of Ethereum and Bitcoin

Ethereum and Bitcoin have demonstrated their independence and decentralisation. The crypto business, on the other hand, is relatively new and unregulated. Let's look at the main benefits and drawbacks of the top two cryptos by market capitalization.


Pros of Ethereum

  • Immutability - A middleman or third party cannot change the data on the Ethereum platform (blockchain).

  • Smart contracts and dApps can be used in an infinite number of ways.

  • Collaboration - The Ethereum Enterprise Alliance collaborates with a variety of businesses from diverse industries (from banking and healthcare to artificial intelligence and automation). Applicature is a member of the Ethereum Enterprise Alliance, by the way.

  • Ethereum is purposeful because it has a defined vision and knows what it wants to accomplish.

  • User-friendly – gives users plenty of options for creating and developing their own dApps.


Pros of Bitcoin

  • Payment independence

  • Counterfeit-proof

  • Control and security

  • Transparency\sLiquidity

  • Transaction fees are kept to a minimum.

  • Transactions are completed quickly.

Cons of Ethereum

  • Not completely scalable

  • Transactions per second are few.

  • The cost of masternodes is very high.

These aren't huge drawbacks. They are well-known among Ethereum developers. To address its flaws, Ethereum will launch a slew of new initiatives and updates. Continue reading to learn more about these initiatives.


Cons of Bitcoin

  • Speculative

  • Payments are volatile.

  • Usability is currently limited (less than FIAT, for now)

  • Major Ethereum Updates in the Future


As previously stated, the Ethereum team is aware of the platform's issues and is working to resolve them as quickly as feasible. Let's have a look at some of the most promising initiatives that could help Ethereum become even more popular and profitable.


Casper Ethereum

Ethereum, like Bitcoin, is based on a proof-of-work consensus algorithm. This approach demands a significant amount of processing power. Ethereum intends to move away from PoW and toward PoS. Casper was introduced by Ethereum a few months ago. This upgrade aims to move away from proof-of-work mining and toward minting, a hybrid approach that combines proof of stake and proof of work. The present Ethereum protocol relies on a group of engineers to record transactions and build new blocks by pooling their resources, such as hardware and electricity. It makes use of the block validator idea. The Ethereum protocol is widely regarded as the most reliable consensus algorithm.

Casper update proof of stake



What Is Casper's Process?

A validator wagers on blocks by assigning a probability to each of them; the sum of the probabilities for blocks of the same height must equal 100%. Validators may need to perform numerous betting rounds to select one block at each height, until at least 2/3 of validators wager on a block with a high probability. Casper sanctions violations from the protocol by withholding generation rewards and locking cash from misbehaving validators to prevent majority attacks. Casper was created to solve another critical issue, the "nothing at stake" problem, as well as to improve Ethereum's performance and reliability.


Casper's Influence

Casper was supposed to go live at the end of February 2018, but there were some severe network challenges to deal with. As a result, the developers decided to postpone the game's release.


However, Vitalik Buterin is confident that, as a result of the delay, the price of an Ethereum masternode will drop. From 1500 ETH to 32 ETH, the price will be reduced. A cheap masternode pricing, according to Buterin, will attract new investors, aid Casper in avoiding centralization, and make PoS more visible.


The Ethereum Improvement Proposal (EIP) proposes lowering the reward for mining a block, in addition to lowering the masternode price. Mining will be worth less: instead of 3 ETH, it will be worth 0.6 ETH. Because there will be less ETHs in circulation, this could boost Ethereum's price. Miners may wish to switch to Ethereum Classic (ETC) or ZCash (ZEC) under this situation, as Ethereum mining will be less profitable.


Buterin claims that the PoS/PoW hybrid (Casper) will “expand” the platform to its “theoretical maximum.”


In reality, Applicature collaborated with Ethereum to create the Applicature Ethereum Proof of Stake protocol (AEPoS).


Sharding

This is the method by which a platform can grow in size. Ethereum intends to shard in order to enhance the number of transactions it can process per second and the amount of processing power it can provide. This is accomplished through sharding, which divides the network into teams. At this time, the Ethereum network has a large number of machines that all hold the same public ledger and perform the same functions. The Ethereum Virtual Machine (EVM) runs on every computer, although adding more computers does not improve the system's efficiency. This is due to the fact that each computer maintains the same ledger. That's a waste of time and money, and it's not even necessary. This is where sharding can help. It's a method of dividing the network into groups. The network will be divided into teams, each of which will compete. As a result, each team has the ability to handle transactions and make calculations. The network's output is dramatically increased by splitting them down into parts.



One issue with sharding is that it works well for centralised servers. The next step is to integrate it into a decentralised network. What evidence do you have that your team is working together? The most dangerous aspect of sharding is that if the shards don't communicate with one another, someone might take advantage of the communication gap and create more Ethereum.


on the internet This is why Ethereum has taken so long to implement sharding. It's simple to design, but meeting the network's requirements is quite difficult.

Vitalik Buterin has hinted at the prospect of a Casper 2 release at the same time.


and the launch of sharding, which is crucial. Ethereum's Protocol would be ten times more effective as a result of this.

In the event of a successful launch, Ethereum will be worth a lot of money.


Other payment methods, such as Visa, will be surpassed.in terms of transaction volume per second (it could hit even a million transactions per second.)


Plasma

Plasma is a proposed framework for motivating and enforcing smart contract execution. It is scalable to a large number of state updates per second (possibly billions), allowing the blockchain to represent a large number of decentralised financial applications around the world.



It will build a blockchain within a blockchain in order to protect the network in the event of a fraudulent or invalid transaction. Others on the network will be rewarded for creating fraud proofs, which will allow them to penalise people who act fraudulently and reverse the transaction. Plasma may be able to address Ethereum's scalability problem, allowing it to process a million transactions per second.


Hard Forks on the Horizon

The miners, who are the backbone of Bitcoin's stability, benefit the most from keeping the old arrangement in place. They profit from the high transaction fees that prevent Bitcoin from being a widely accepted payment method. If the Ethereum blockchain does not continue to improve, it may be affected by such a situation.

Hard forks are therefore critical for Ethereum's ecosystem and users. They improve the usability and sophistication of a network. There have already been significant updates, and there will be more in the future.



  • The second phase of the Metropolis hard fork is Constantinople (the first phase was Byzantium, which was launched on October 17, 2017). Because the ecosystem's inflation is reduced, it will make Ethereum considerably more valuable. Casper and possibly sharding will be introduced in Constantinople.

Ethereum would like to move away from proof-of-work (mining) and toward proof-of-stake. One issue underlying this issue is that miners wield far too much authority over the present blockchain, and their hegemony can complicate matters. Miners aren't interested in improving the network; they're only concerned in increasing their own profits. This will not be the case in the Ethereum environment. The release date has yet to be determined, however it is expected to occur in 2018.

  • Serenity will be the final stage in the process of becoming a completely proof-of-stake platform. Serenity will provide all of the tools needed for anyone to get the most out of its network.


Ethereum Futures: A Threat or Not?

Futures have only been accessible for Bitcoin until now, but Crypto Facilities will shortly begin selling Ethereum futures. Timo Shleifer, the Head Manager of the Financial Conduct Authority (FCA), is certain that regulated contracts will increase the liquidity of digital assets.

Institutional investors will find futures to be a beneficial instrument. They will make it risk-free to short Ethereum or take long-term holdings. Futures represent a significant advancement in the growth of cryptocurrencies.

Some independent investors, on the other hand, believe that futures would “kill” cryptocurrencies since futures are a threat to the blockchain's decentralised notion. As can be seen, futures did not "kill" Bitcoin, but it is still struggling to restore its previous value. Obviously, futures aren't the sole factor impacting the price of cryptocurrencies. We'll see what Ethereum futures have in store for us.


Will Bitcoin benefit from the Lightning Network?

Bitcoin developers introduced Segregated Witness (SegWit) in August 2017 and published a beta version of the Lightning Network in September. This technological advancement helps Bitcoin to become more efficient, allowing for increased transaction bandwidth and lower commission fees. Other changes that will improve the Bitcoin network's performance will be introduced in the near future. These are the following:


MAST Technology –

  • increasing scalability and privacy

Bulletproof technology –

  • improving confidentiality

Sidechain projects –

  • making the Use of tokens as safe as possible. Sidenchain projects include three major technologies:

The Liquid Network RSK Drivechain



The Lightning Network was created to “relieve” the Bitcoin blockchain by extending transactional data beyond the blockchain's core structure. Because of its current architecture, the Lightning Network requires a lot of data storage, making it difficult to download and use. Laolu Osantokan, a co-founder of Lightning Labs, has submitted a new proposal (eltoo) that will drastically reduce the amount of data stored on the blockchain while also addressing a critical flaw in the penalty transaction process.


The Lightning Network's nodes now store all intermediate channel states (the data of all operations performed between the opening and closing of the payment channel). According to eltoo's reasoning, the new confirmed operation automatically cancels the channel's prior state: "Only the most recently completed transaction will be confirmed on the block."


The first attempt to improve Bitcoin's blockchain using off-chain transactions was "consecutive numbers," which allowed tracking of which off-chain transactions were the most recent and how much money was left in the balance after the last transaction. For example, if Alice had 10 BTC and sent 1 BTC to Bob, her balance would be reduced to 9 BTC. This transaction was assigned the number 1 as a serial number. Her balance would be 5 BTCs if she sent Bob 4 additional BTCs. This transaction would be the second in the sequence and would be the most recent.


Lightning has well-known strengths, including characteristics like decentralisation and secrecy.


First, the Lightning network does not pose a danger to the bottleneck-debilitating price problem: creating a Lightning channel costs a few cents, thus the channel will cost less than $20 for more than 100,000 transactions.

Second, any Lightning network participant can start a payment channel without the assistance of a third-party company or the purchase of pricey specialist equipment, lowering the risk of corporate centralization.

The Lightning network's security is also expected to be good, thanks to the notion of watch towers, which will inform users if a thief tries to take their funds.


Will Ethereum Become the First Cryptocurrency to Surpass Bitcoin?

Because it is being more widely used in various businesses and spheres, Ethereum may have a chance to overtake Bitcoin.


Analysts estimate that the Ethereum network employs over 300,000 developers. Every month since May, 50,000 more programmers have joined. According to Aragon's CEO, the high profitability of dApp is the cause for such activities. He previously asserted that he knew of no Ethereum application developer who “would not have been a millionaire.”


Decentralized applications, according to Allair, will play a critical part in the crypto-currency market's growth.


Ethereum attracted a large number of developers eager to work with dApps, which was one of the key causes in the crypto market's growth last year. Using smart contract technology, you may now issue new tokens on the bitcoin blockchain or establish entirely new types of financial services.


Bryan Armstrong, the CEO of Coinbase, previously revealed that he owns more Ethers in his portfolio than Bitcoins. The dominance of Ethereum's blockchain over Bitcoin's blockchain is expanding, according to the publication. Approximately 90% of services and coins are built on the distributed Ethereum registry, and this number is growing.


Because of the ecosystem it is creating, Ethereum is the preferred platform for almost all ICOs. It encourages and develops real-world solutions and use cases. Ethereum might upgrade and pump itself to the theoretical maximum with the launch of Casper, Plasma, sharding, and many more projects, including forthcoming hard forks (Constantinople and Serenity), while Bitcoin could become the new digital gold. Ethereum will not replace Bitcoin in 2018-2019, according to experts, but it has a lot of potential to do so later. Cryptocurrencies are unpredictably volatile; all we can do now is wait.


Scenarios for the Future of Cryptocurrency

Crypto is, without a doubt, an unavoidable phenomenon. More and more payment systems are beginning to accept cryptocurrency as a form of payment, and this is only the beginning. This is why the future of FIAT currency is uncertain, whereas the future of crypto is bright.

The market capitalization of the world is only approximately $300 billion, and it is still extremely volatile. The following factors contribute to the market's volatility and instability:


Inexperienced investors' trade moves are influenced by the government.

bullish (positive) and bearish (negative) trends the security of exchanges and their pliability the conduct of "whales" bullish (positive) and bearish (negative) trends the security of exchanges and their pliability (resistance to hacker attacks). When an exchange is hacked, the entire market is thrown into disarray.

The cryptocurrency market is grossly overvalued. 90% of all crypto initiatives will fail in the near future, despite the fact that cryptocurrencies like Bitcoin and Ethereum have far greater potential than DotComs. A “bubble” is not defined by rapid price growth. Consider Tesla, Facebook, and Google, all of which saw their stock prices surge in their early years. Right now, I can make a comparison between crypto and Apple in 2001. By the way, don't make Ronald Wayne's mistake of selling ten percent of Apple stock for only $800. Keep HODLing – it's a sure-fire way to make money in the long run.”


Bitcoin and Ethereum Price Predictions

Short-term predictions will not be mentioned because no one knows what to expect at this point. Long-term forecasts, on the other hand, are promising:


  • Bitcoin is expected to hit $20,000-$25,000 by the end of 2018, while Ethereum is expected to hit $3,000-$5,000.

  • By the end of the year, BTC might be worth $60,000-$100,000, while ETH could be around $15,000-$20,000.

  • By the end of 2022, computer programmer and entrepreneur John Mcafee estimates that 1 BTC will be worth $500,000. It may appear absurd, but it is not without logic.

Conclusion

Bitcoin has permanently transformed the way we think about money, but Ethereum is so much more. “If Bitcoin is an app, Ethereum is an app store,” according to Joseph Lubin. Who knows what developers will create in the next ten or twenty years on this platform? It's going to be a wild ride.

People were critical of the Internet when it initially appeared. They claimed that its applications were too narrow, that it was inaccessible, and that it would never take off. How far were they off the mark? It's been decades since they stated that, and it's time to look ahead once more. Satoshi Nakamoto, the creator of Bitcoin, the first blockchain technology, exposed it to the world in 2009. By doing so, he set off a chain reaction that would forever alter the globe.


0 views0 comments