3 Things Which Set Ethereum Apart from the Competition
You have undoubtedly heard of cryptocurrencies, and have probably also heard all about Bitcoin if you’ve been following its progress over the past few years. But its competitor Ethereum is making just as many strides, and, in fact, goes even further in its offering than Bitcoin in some respects.
Below, we go into three of the key ways that Ethereum is different from the competition. We’ll mostly be looking at it compared to its greatest competitor, Bitcoin. Don’t forget that you can easily stay up to date with the latest insights from the cryptocurrencies if this is something you’re interested in. It’s never been easier to get involved in the ever-growing world of cryptocurrencies.
What’s a cryptocurrency?
Both Ethereum and Blockchain are cryptocurrencies. These are a kind of digital currency that are powered by blockchain technology. It’s this blockchain technology which ensures the integrity of each transaction and thereby allows for relatively anonymous, encrypted transactions, as the blockchain technology records each and every transaction. As there’s no physical imprint, the transaction is less likely to be targeted by fraudsters.
All cryptocurrencies are also characterized by the lack of a middleman, as they’re decentralized. Usually, when you’re looking to invest, there’ll be a central authority managing the process – but with cryptocurrencies, there isn’t one. Critiques of cryptocurrency have focused on their extreme volatility and vulnerability to market fluctuations, and the risk of their use for illegal activities. Undoubtedly, however, cryptocurrencies are more transparent, resistant to inflation, and portable. But what sets Ethereum apart from its rivals?
The main difference between Ethereum and its competitors is what’s known as smart contracts. These don’t just track transactions but in fact work to program them – they work independently, so that you can get involved in greater investments and exchanges in more exciting assets like stock and property.
In essence then, whilst Bitcoin is essentially digital money, Ethereum is a ledger technology that’s programmable. It’s therefore more innovative and exciting. Ethereum allows developers to build other cryptocurrencies like Chainlink, and to introduce digital assets such as non-fungible tokens (NFTs) into the investment world.
Like Bitcoin, Ethereum also runs on a peer-to-peer basis – there’s no middleman. The idea is to ensure greater security and minimal fraud, scams or other hacks as a result. There are inevitably some risks to this; as reported by Creighton University, these agreements are contingent on consumers putting their trust in the code of the smart contract.
That said, these smart contracts make Ethereum much more appealing as a result of greater application to ‘real world’ industries like gambling and banking. Plus, the fact that Ethereum has the biggest community of developers of any cryptocurrency (its 250,000-strong community is around four times the size of the nearest competitor) mean that it offers unparalleled online support.
One of the biggest criticisms levelled at Bitcoin is the amount of energy that the infrastructure underpinning it consumes. Every transaction must be verified by “mining” bitcoins, which is a labour-intensive process that requires a significant amount of computer processing power. This “proof-of-work” concept means that Bitcoin actually consumes more energy than some entire countries.
While Ethereum also runs on a “proof-of-work” system, it’s currently in the process of undergoing a revamp. Ethereum 2.0 is set to transition to a “proof-of-stake” framework, whereby transactions will be verified by community members staking their own tokens against the transaction. This is far more energy efficient and, once the upgrade is live, will set Ethereum apart from Bitcoin and other “proof-of-work” cryptocurrencies.
Ethereum is the second biggest cryptocurrency behind Bitcoin – but it has a few USPs which set it apart from its more illustrious rival.