Home > Finance > What is Ethereum and How does it Compares to Bitcoin?

What is Ethereum and How does it Compares to Bitcoin?

42 Views

Advertising Disclosure This article/post contains references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services

If you’re interested in the cryptocurrency landscape, you’re likely familiar with Ethereum. Ethereum offers the second most popular cryptocurrency and plays an important role in the global cryptocurrency landscape. The Ethereum blockchain supports its own coin, ether. And the blockchain supports many more cryptocurrencies and smart contracts. Here’s a deeper look at what is Ethereum and what any cryptocurrency buyer should know about the world’s second-largest digital currency.

Ethereum Basics

Most people think of Ethereum as a cryptocurrency. While the currency is technically called “ether,” many people refer to the coin by the name of its underlying software, Ethereum.

Ethereum offers the second biggest cryptocurrency in the world by market cap, trailing only bitcoin. As of this writing, Ethereum is worth over $2,000 per coin with a total market cap of over $250 billion (compared to bitcoin’s $640 billion).

How to Buy Ethereum?

In order to buy, sell, trade, or hold Ethereum, you need an account with a cryptocurrency exchange. Or use your own cryptocurrency wallet that works with a decentralized exchange. For users in the U.S., several exchanges support ether, including Coinbase, eToro, Gemini, Kraken, Crypto.com, and Binance. In addition, you can hold ether in a secure hardware wallet, like those from Trezor and Ledger. These are hot wallets that are always connected to the internet.

When transacting on the Ethereum blockchain, users must pay “gas” fees to the computers that keep the network going. Gas prices fluctuate with network congestion and are used when trading or sending ether, any ERC-20 coin (a technical term for Ethereum-compatible currencies), NFTs (non-fungible tokens) or any smart contract.

How Ethereum Started

The idea of Ethereum started in 2013 with a white paper released by creator Vitalik Buterin, who was just 19 years old at the time. The initial Ethereum coin sale took place in 2014. The software and currency became fully operational to the public in 2015.

Ethereum uses similar blockchain technology to the older software, Bitcoin. But it supports additional features, notably other cryptocurrencies and smart contracts.

The Ethereum developer community is very active and has released several major upgrades over the years. The network is currently undergoing a large upgrade called “Ethereum 2.0” to enable faster, more sustainable, and lower-cost transactions.

What Is Ethereum Classic?

Ethereum Classic is an ongoing version of the original Ethereum blockchain. The continuous blockchain ledger tracks every Ethereum transaction from the start of the network through hard forks that create new versions of Ethereum. The original version is still alive and well under the name “Ethereum Classic.”

Due to the slower processing speed and higher transaction costs of using the older Ethereum network, most modern traders and investors choose the latest available version of Ethereum. However, as Ethereum 2.0 grows in popularity and replaces the older version for active use, Ethereum Classic will still be maintained as a source of record and a usable blockchain for the foreseeable future.

What Are Ethereum Smart Contracts?

A smart contract is a program that runs on a blockchain. Ethereum smart contracts work like a digital vending machine where a certain set of conditions triggers a transaction. Smart contracts facilitate, verify and enforce the negotiation of a contract. They are useful in two-party negotiations and the resulting payments. With smart contracts, you can negotiate nearly anything — money, property, shares, etc. — without the need of a middleman.

According to blockchain development and education site, Blockgeeks, lawyers, and bankers should be worried about the future of their professions as smart contracts become more prevalent.

Smart contracts are public blockchain resources. They interact with each other and require higher gas fees than standard Ethereum sending and receiving of transactions.

Bitcoin vs. Ethereum

Bitcoin vs EthereumBitcoin and Ethereum both run on blockchain technology. But they operate independently with their own cryptocurrencies. Here’s a look at the major similarities and differences of Bitcoin vs. Ethereum.

How Are Bitcoin and Ethereum the Same?

Bitcoin and Ethereum are both blockchains that support their own cryptocurrencies, ranking as the top two by market capitalization. As of now, the total market cap of bitcoin is over $640 billion compared to the market cap of ether, which is over $250 billion.

  • Both bitcoin and ether are extremely popular among cryptocurrency traders and investors. Also, both support smart contracts useful for various commercial purposes.
  • Ethereum borrowed the blockchain concept from its big brother Bitcoin. It uses a similar open-source approach to build trust in the network and invite more participation. Both rely on computers called “miners” to track and verify new transactions.
  • And most important to the many investors who got in early and held on, the currency prices skyrocketed over the last few years, minting many new crypto millionaires. These people proclaim cryptocurrency and blockchains as the future of global commerce.

How Are Bitcoin and Ethereum Different?

While ether and bitcoin are both blockchain-based cryptocurrencies, there are a few important differences. Of course, the actual currencies, bitcoin and ether, are not much different. The software behind the systems has a few noteworthy differences that may lead you to favor one over the other.

The original intent of bitcoin was to act as a currency and store of value. Programmers added smart contracts later. But Ethereum was built to handle its own bitcoin-like currency as well as smart contracts and other cryptocurrencies.

Is Bitcoin or Ethereum Better?

It’s impossible to say at this stage whether bitcoin or ether is better. That would be somewhat like asking if U.S. dollars or euros are better. Each fiat currency is extremely important to world commerce and wouldn’t work well without the other in the current global economy. The same is true of bitcoin and ether, but there are no national borders or governments involved.

If you’re a program developer, Ethereum may be a better choice for your smart contract app. Some people believe Ethereum will last longer than Bitcoin, because Ethereum has more use cases. But at this point, it’s too early to say which is better. The best option for you depends on your goals and cryptocurrency market outlook.

Where Can You Buy Ethereum?

Buyers in the U.S. can buy ether, Ethereum’s cryptocurrency, through most major cryptocurrency exchanges and wallet providers. Because it’s the second-biggest currency, it’s well supported and available even through many nontraditional cryptocurrency platforms, such as PayPal.

If you’re looking to get started with crypto today, consider one of these popular options to buy and hold your currency:

  • Coinbase: Coinbase is the largest U.S. cryptocurrency exchange. It makes it simple to buy and sell cryptocurrencies like ether. Consider the upgraded Coinbase Pro for lower exchange fees and more features.
  • eToro: With eToro you can invest in crypto and also copy more successful crypto traders’ investment strategies through its CopyTrader technology.
  • Gemini: Gemini is a popular cryptocurrency exchange from the Winklevoss Twins (of Facebook fame). It gives crypto holders and traders additional finance features.
  • Binance: Binance is a major international crypto exchange. It offers very competitive fees and a huge list of supported currencies.
  • BlockFi: BlockFi aims to work like a bank for your cryptocurrency, with competitive interest rates and other bank-like features.
  • Trezor: Trezor’s hardware wallet integrates with an online exchange to buy, sell and trade crypto. Hardware wallets are arguably the safest way to store your digital currency offline. Just make sure you don’t lose your password and keys, or you could lose your cryptocurrency for good.
  • Exodus: Exodus is a software wallet provider. It features a decentralized cryptocurrency exchange. This adds more privacy than centralized exchanges like Coinbase offer.

Bottom Line: Should you Buy Ethereum?

Cryptocurrencies are highly volatile trading tools, and they don’t have a government or company backing them like a fiat currency or share of stock have. However, many users and traders make ether and similar currencies an exciting way to invest and trade.

In general, most people shouldn’t invest more money in cryptocurrency than they can afford to lose. You could see your currency double or triple or even rise ten times in value over a short period, but a government action or bad news story could just as quickly send prices down to near zero.

While there are many risks involved, many people are gung ho on ether as the currency of the future. Only time will tell if they’re right. But as long as you understand and accept those risks, it’s a great time to jump on the Ethereum bandwagon. Hopefully, you’ll make a little money in the process.

Source link

TAGS
Hi guys, this is Kimmy, I started LicensetoBlog to help you with the latest updated news about the world with daily updates from all leading news sources. Beside, I love to write about several niches like health, business, finance, travel, automation, parenting and about other useful topics to keep you find the the original information on any particular topic. Hope you will find LicensetoBlog helpful in various ways. Keep blogging and help us grow as a community for internet lovers.