Will Ethereum eclipse Bitcoin?Marco Ng
Unless you have been living under a rock, you have most likely heard about Bitcoin, the world’s most popular cryptocurrency that is growing by leaps and bounds. In fact, recently, Bitcoin broke the threshold of $6000 and is now priced at an all-time high. Bitcoin is not alone in this race as another cryptocurrency named Ethereum is hot on its heels.
Despite being only three years old, Ethereum is quickly emerging as a popular choice especially among enterprise users. Ethereum’s YTD price growth has been more than a whopping 3000%. In terms of market cap as well Ethereum has shown a significant increase. Its overall share of the ‘total cryptocurrency market’ rose from 5% at the beginning of the year to 30% YTD. In absolute terms, today it stands at around $28 Billion. On the other hand, Bitcoin’s market cap as a percentage of the market has shrunk from 85% at the start of the year to 55% and is valued at around $90 Billion.
Bitcoin played a huge role in bringing Ethereum into existence. The co-creator and inventor of Ethereum, Vitalik Buterin, was only 19 when his father introduced him to bitcoin and by extension, to the fascinating world of cryptocurrency. In a span of 3 years, Vitalik had written several blogs on the topic and also co-founded the Bitcoin Magazine in 2011. Though Bitcoin served as an excellent tool for money transaction eliminating the need for banks, fees, or third party, its scripting language had limitations. This led to Vitalik, along with other developers, to found Ethereum – A platform that aimed to extend beyond Bitcoin’s scope and make internet decentralized.
How Ethereum differs from the reigning cryptocurrency – Bitcoin
Both Bitcoin and Ethereum are built on top of Blockchain technology allowing them to build a decentralized public network. However, Ethereum’s capability extends beyond being a cryptocurrency and differs from Bitcoin substantially in terms of scope and potential.
Exploiting the full spectrum blockchain platform
Bitcoin leverages Blockchain’s distributed ledger technology to perform secured peer-to-peer cash transactions. It thus disrupted traditional financial transaction instruments such as PayPal. Meanwhile, Ethereum aims to offer much more than digital currency by helping developers build and deploy any kind of decentralized applications on top of Blockchain. The following are some Ethereum based features and applications that make it superior to bitcoin.
A decentralized app or DApp refers to a program running on the internet through a network but is not under the control of any single entity. A white paper on DApp highlights the four conditions that need to be satisfied to call an application a DApp:
- It must be completely open-source
- Data and records of operation must be cryptographically stored
- It should utilize a cryptographic token
- It must generate tokens
The whitepaper also goes on to suggest that DApps are the future:
“decentralized applications will someday surpass the world’s largest software corporations in utility, user-base, and network valuation due to their superior incentivization structure, flexibility, transparency, resiliency, and distributed nature.”
Smart Contracts and EVM
Another feature that Ethereum boasts over Bitcoin is a smart contract. A smart contract works like a traditional contract. You can use it to perform a task or transfer money in return for any asset or task in an efficient manner without needing interference from a middleman. Though Bitcoin is fast, secure, and saves cost it has limitations in terms of the ability to run operations. Ethereum solves this problem by allowing operations to work as a contract by converting them to pieces of code and have them supervised by a network of computers.
A tool that helps Ethereum developers build and experiment with different contracts is Ethereum Virtual Machine. It acts as a testing environment to build blockchain operations and is isolated from the main network. Thus, it gives developers a perfect platform to build and test smart as well as robust contracts across different industries.
One can also create Decentralized Autonomous Organizations (DAO) using Ethereum. DAO eliminates the need for human managerial involvement. The organization runs through smart contracts that convert rules, core tasks and structure of the organization to codes monitored by a fault-tolerant network. An example of DAO is Slock.it, a DAO version of Airbnb.
An important factor for cryptocurrency transaction is the amount of time it takes to finalize the transaction. This is called as Block Time. In terms of performance, the Bitcoin network takes 10 minutes to make a transaction whereas Ethereum is much more efficient and boasts a block time of just 14-15 seconds.
Community and Vision
One can say Bitcoin works as a DAO with no involvement of individuals in managing the cryptocurrency and is completely decentralized and owned by the community. Satoshi Nakamoto, who prefers to stay behind the curtains, is the only name that one comes across when it comes to relating an individual with Bitcoin. The community, therefore, lacks a figurehead when it comes to seeking future directions.
Meanwhile, Vitalik Buterin is hugely popular amongst Ethereum enthusiasts and is very much involved in designing the future roadmap with other co-founders.
Similar to Bitcoin, Ethereum has Ether which works as a digital asset that fuels the network and transactions performed on the platform.
Bitcoin has a fixed supply cap of around 21 million coins. It’s going to take more than 100 years to mine the last Bitcoin after which Bitcoin would behave as a deflationary cryptocurrency.
Ethereum, on the other hand, has no fixed supply cap but has restricted its annual supply to 18 million Ethers. With no upper cap on the number of Ether that can be mined, Ethereum behaves as an inflationary currency and may lose value with time. However, the Ethereum community is now planning to move from proof-of-work to proof-of-stake model which should limit the number of ethers being mined and also offer benefits such as energy efficiency and security.
Some real-world applications using Ethereum
The Decentralized applications’ growth has been on the rise with people starting to recognize the value offered by Blockchain and decentralization such as security, immutability, tamper-proofing, and much more. While Bitcoin uses blockchain purely as a list of transactions, Ethereum manages to transfer value and information through its platform. Thus, it allows for immense possibilities when it comes to building different DApps across a wide range of industries.
The financial domain is obviously where Ethereum is finding a lot of traction. Projects such as Branche – a Decentralized Consumer Microcredit and Financial Services and Augur, a decentralized prediction market that has raised more than $ 5 million are some prominent examples. But financial applications are only the tip of the iceberg when it comes to possibilities that Ethereum offers and potential it holds when it comes disrupting industries across various sectors.
Some other sectors where Ethereum is making its presence felt are:
Firstblood is a decentralized eSports platform which has raised more than $5.5 million. It allows players to test their skills and bet using Ethereum while the tournaments are tracked on smart contracts and blockchain.
Alice.Si a charitable trust that lets donors invest in noble causes knowing the fact that they only pay for causes where the charity makes an impact.
Chainy is an Ethereum-based authentication and verification system that permanently stores records on blockchain using timestamping.
Flippening is happening!
If you haven’t heard of Flippening, it’s a term coined by cryptocurrency enthusiasts on Ethereum chances of beating Bitcoin to claim the number one spot to become the largest capitalized blockchain.
Comparing Ethereum to Bitcoin may not be right as both serve different purposes. Bitcoin will continue to dominate cryptocurrency but as more industries adopt Ethereum to build Smart Contracts, DApps, or DAOs of their choice, its popularity is only going to grow, subsequently making Ether more valuable. Thus, the possibility of Ether displacing Bitcoin is strong.
With the pace at which Ethereum is growing and the potential it holds in terms of unleashing Blockchain’s power to transform industries, it is definitely a question of when rather than if Flippening would happen!