You might be familiar with the hype surrounding Bitcoin and Ethereum. They are one of the biggest crypto coins that have graced the crypto market with exceptional performance. Although Bitcoin was the first coin introduced in the market, Ethereum has a marked significant impact on the overall market.
Ethereum is the second most prominent name in the crypto space. It is ranked as the second highest cryptocurrency exchange in market cap and value. But what else makes it unique and special? If you have the same questions, you are at the right place. This article will walk you through every reason that makes Ethereum superior and different from others.
What is Ethereum?
Ethereum was officially launched in July 2015, and today it is known as a reputable and the second largest crypto coin in the digital financial world. It runs through an open-ended decentralized software known as blockchain technology. It is a peer-to-peer technology that does not only enable transactions for digital currencies but also serves unique benefits.
Besides being a coin, Ethereum is also widely known as an established platform that handles the deployment of smart contracts and decentralized applications (dApps). With its blockchain functionalities, this platform prevents these applications from fraud, downtime, control, or involvement of the central forces.
How Does It Work?
Ethereum uses a programming language supported by a blockchain and facilitates the formation of new applications. So if you are a developer, you can build and run applications on it. This makes it clear that Ethereum has numerous applications supported by its native token known as ETH. The platform uses ETH as a fuel to carry out commands and can also be used to run applications on the platform.
Utility of Ethereum
Ethereum has two famous utilities:
- Ethereum is a digital currency that users can trade through trading platforms.
- ETH can also be used to run applications on the Ethereum network.
Is Ethereum Similar To Bitcoin?
Being one of the biggest crypto coins to date, Ethereum and Bitcoin hold numerous similarities. However, if you are unaware of their similar roles, have a look below:
- Both coins have a decentralized nature that ensures the elimination of central control–for instance, banks or government.
- These cryptocurrencies can be traded through digital exchanges.
- You can also store them in either cold or hot wallets.
- They both are known for their market capitalization.
- Both coins are handled and protected by blockchain technologies.
Despite these similarities, Ethereum has some remarkable differences that distinguish it from other coins.
How is Ethereum Different From other Cryptocurrencies?
We have compared Ethereum with Bitcoin because both cryptos are competitors. Following are some crucial differences that make Ethereum unique:
Difference in Objectives
Bitcoin and Ethereum are a few coins that were created to serve some objectives. Bitcoin was solely introduced to replace traditional currencies with digital currencies that can serve more security, ownership, and transparency. People use it as a store of value and a medium of exchange.
However, Ethereum was shaped as a platform to promote unchangeable, programmatic applications and smart contracts through its native currency. The main objective of ETH is to facilitate and monetize the development and operation of dApp and smart contracts.
Nature of Transactions
- Be it Bitcoin or Ethereum, distributed ledgers and cryptography power both networks. However, they differ in terms of how they process. On the one hand, Bitcoin uses data only to keep notes. On the other hand, a transaction in the Ethereum network contains executable code.
- Moreover, transaction speed also counts. For example, Ethereum processes a transaction in seconds faster than Bitcoin, which consumes minutes.
- Their algorithm also differs. Ethereum uses Ethash, and Bitcoin uses SHA-256.
Consensus Mechanism
Although both cryptocurrencies employ the same consensus mechanism, some developments in the Ethereum network can define its uniqueness. Currently, both networks use proof of work (PoW). It is a protocol that allows its nodes to agree on each transaction recorded through the blockchain and keeps the network secure against fraud.
However, Ethereum intends to adopt proof of stake (PoS) during its Eth2 upgrade. Eth2 will observe several upgrades to ensure and offer more security, scalability, and sustainability.
Energy Consumption
The proof-of-work mechanism utilizes heavy computational power, and for this reason, it is highly criticized. Unlike a highly energy-intensive protocol, the proof-of-stake mechanism acts as a less energy-intensive protocol. It replaces computational power with staking and miners with validators responsible for staking their assets to enable the creation of new blocks.
Decentralized Applications
Decentralized applications (Dapps) are currently being developed to make it enabled for Ethereum today. They are standalone applications that facilitate smart contracts and utilize EVM for operations. So whether you want to access reputation functions, micro-payments platforms, schedulers, online gambling apps, or P2P marketplaces, you can enjoy unlimited functionalities with the Ethereum platform.
But what makes Dapps so unique? They utilize a decentralized network and do not require any central authority. If Ethereum finds any multi-party application that depends on a central server, it eliminates it right away–for instance, gaming, chat, banking, or shopping.
Smart Contracts
Ethereum aims to develop and run smart contracts for multiple reasons. The most common of them include:
- Issuing ICO tokens.
- Or creating entire decentralized autonomous organizations (DAOs).
Ethereum as Digital Silver
Because of its value as the second-largest cryptocurrency by market cap and has a wide variety of applications, Ethereum is popularly compared to digital silver.
Bottom Line
With its massive trading volumes and market capitalizations, Ethereum came out as a rival to Bitcoin. However, it stands high in front of many other coins as well. It is not just a coin you can trade or use for different reasons; it also serves as a leading ledger technology that is trusted by top-notch and many other small companies.
The crypto market is expanding at an incredible rate, and we can not overlook the already existing coins that are widely accepted and trusted for their brilliance. If you wish to explore unique features and benefits, trust Ethereum for numerous reasons.
