In a previous article, we mentioned the two cryptocurrencies standing at the forefront of the digital currency race.
Satoshi Nakamoto’s Bitcoin is considered the base rock of all cryptocurrencies – the first decentralised virtual currency to actually impact the monetary world we live in. Ethereum, on the other hand, emerged 5 years later with a different mentality… Adding more flexibility and customisability where Bitcoin lacked.
Bitcoin vs Etherum – what’s the difference? What makes Ethereum such a huge potential investment and how does Ethereum’s functionality differ from the functionality Bitcoin offers? Is there a battle between these two?
Many Bitcoin-based cryptocurrencies surfaced after its undeniable success and in the swarms of bright ideas and when a majority failed.
Why Was Bitcoin Invented
The centralised government model has been pushed, morphed and turned upside down by those who knew how to manipulate the financial market ever since it existed.
Years before the 2008 Wall Street crash, central banks constantly devalued currencies with the result of significant inflation. Therefore, the attitude towards the financial moderators has started to turn sour.
With the final trigger of the subprime home mortgage swindle in America, Satoshi Nakamoto released the White Paper to eliminate unessential banks and other middlemen.
“While the system works well enough for most transactions, it still suffers from the inherent weakness of the trust based model… A certain percentage of fraud is accepted as unavoidable.”
Simply put, any centralised system will fall into a fraudulent activity as there is no line of defence for whoever stands guard of the system itself. Bitcoin thrived to remove the single point of failure that tends to cause the calamities such as discussed before.
Therefore, the visible target for Bitcoin is to transfer money from one party to another, just like the Western Union, without the fees, with privacy and full user control over his funds.
From the beginning, Bitcoin was built to be simple and secure. Programmed in C++, only 70 commands exist, limiting the tools which can be used to hack the blockchain technology. This adds security, however, it limits Bitcoin to operate exclusively as a peer-to-peer digital currency.
Realistically, there were two options. Either customise a system that’s been built to be simple into something more complex – a time-consuming and costly task – or build a new blockchain application to directly target this inelastic model. And this where the idea of Ethereum was born.
Is Ethereum Bitcoin’s Successor?
Vitalik Buterin, the founder of Ethereum, understood this gap in virtual currencies’ development and created a cryptocurrency built on certain ideas from Bitcoin.
The intent of Ethereum was to build on Bitcoin’s path and open up the floodgates for decentralised software development and financial transactions.
The Ethereum Virtual Machine (EVM) handles this by taking the cryptographic payment structure of Bitcoin, whilst adding logic into the mix. It also exponentially increases the inherent complexity of transfers – newly referred to as smart contracts.
Having its own native programming language, Solidity, allows Ethereum to achieve Turing-completeness.
The idea is to execute an algorithm that the Turing computer could. A calculator (yes, even a scientific calculator) with software that can only evaluate specific functions, cannot achieve a Turing-completeness.
Anyway, unlike Satoshi Nakamoto, Vitalik Buterin wanted Ethereum to be twofold in nature:
- A cryptographic currency to replace the unfeasible, centralised currency
- A platform for applications from the centralised world to enter the newly formed decentralised one with ease
Ethereum vs Bitcoin: What Is The Potential
Airbnb? Uber? Spotify?
Ethereum brings the idea of smart transfers. These so-called smart contracts aren’t just a buzzword, there is some serious real-world application when taking them into consideration.
The above commercial mega-stars have something else in common besides their huge individual market shares and potential. Each one of them may one day benefit from standing on the Ethereum’s platform or more likely in the near future – using Bitcoin transfers.
On the 26th December 2016, Brian Chesky (Airbnb CEO) tweeted some post-Christmas sprinkles of inspiration for 2017. Among the top suggestions was to accept payments via Bitcoin. Some even requested a complete shift to Ethereum.
Similarly, a video released later this year by Oaken Innovations, discusses an intrinsically identical to Uber model, but with all the decentralised benefits of Ethereum. With the rise of autonomous driving, this could allow owners “to monetize unused vehicle time”, an interesting concept which may ultimately become a significant importance to everyday transportation.
Lastly, an article by Jim Manning, details the acquisition of Mediachain Labs. It’s an Ethereum technology that focuses on ownership and safeguarding media copyrights straight from the source – the creator. Recognised by Spotify, its acquisition by Mediachain speaks volumes to the blockchain’s potential.
The fact that interest in Bitcoin, and more recently in Ethereum, is rising in big companies must mean that some potential is evident in both. Bitcoin’s innovative early rise and constant growth built a reputation which allowed for more widespread acceptance. AirBaltic, CheapAir, Microsoft and even PayPal are all now accepting Bitcoin as a payment method.
Is It Better to Invest in Bitcoin or Ethereum
Throughout its 9 years of existence, Bitcoin has continually appreciated in value despite many fluctuations.
From basically no value at the start –$0.09 – 1 Bitcoin rose up to a peak of $3000 in June 2017 and has maintained a value above $2000 since then.
Ethereum is riding the same train, with an initial value of $1.27 in September 2015. One Ether (price unit of Ethereum) as of now is priced at $207.49.
A case study of both Ethereum and Bitcoin from the inception to 18 months later, demonstrates Ethereum’s meteoric growth of 826.77%, which pales in comparison to the 6,822.22% inflation by Bitcoin.
However, consider this:
|Date||Bitcoin Value||Date||Ethereum Value|
|18 Months Later||16/01/12||$6.22||01/02/17||$10.50|
In the past 6 months, Ethereum has skyrocketed by another 1925.80% from $10.50 since last February. It took Bitcoin another year to match this percentage increase in growth.
Multiple studies predict different futures for Ethereum. Will Ethereum suffer a devasting crash? Possibly. It’s possible that a bug, a hack, change in economic policy or an Initial Coin Offering (ICO) failure can cause a spiralling descent into oblivion.
Yet we are hopeful.
An article by AtoZForex discusses this possibility in detail and lists four reasons why Ethereum’s value will continue to rise:
#1 Worldwide recognition and desire to support the smart contract applications through digital currency.
#2 The Enterprise Ethereum Alliance (EEA) has recently been connecting technology vendors with large-scale companies to utilise blockchain in more practical means.
#3 ICO capabilities. Start-up “Brave” managed to raise $35 million in just about 30 seconds
#4 Bitcoin itself contributes to Ethereum’s steep rise. The more Bitcoin rises, the more people look out for cheaper cryptocurrency alternatives to invest in. Ethereum being second in the race and still rising, is cheap enough for the general population to properly invest in.
Bitcoin vs Ethereum: Which One Is Better?
Bitcoin is primed for secure P2P transfer and aimed to give rise to an alternative from the centralised financial system that had generated so much bitterness.
Ethereum is built on Bitcoin’s revolutionary technology and expanded it to add a programmable versatility to the currency. To be a World Computer and a platform for others to build upon.
Bitcoin vs Ethereum – what’s the difference then? Realistically, neither is better or worse, they simply operate on different playing fields with different goals driving them.
The credit card stood virtually still for over 25 years until it took off. What may now seem untenable may become ubiquitous in the near future.With the potential Bitcoin and Ethereum have, such cryptocurrencies could share a similar fate.
Charting such a plot would require much investment, preparation and organising from the market top dogs and states alike. Initial ventures will likely be costly and turbulent. Though as more people are educated and systems made more user-friendly, cryptocurrencies will slowly settle as the norm.