Ethereum was launched on July 30, 2015, and since then, a lot has happened. Ethereum gained the reputation of being a cryptocurrency with intrinsic value and therefore is the most actively used coin in the blockchain network. According to the daily volume and market capitalization, Ethereum’s native token is the second-largest digital coin. Experts predict that 2022 will be the year of Ethereum, forecasting that it could grow by even 400% in value until the end of the year. Cryptocurrency analysts often describe Ethereum as a highway for decentralised finance because it’s a platform that runs on a blockchain and not an asset that creates value like Bitcoin. Investors use Ether – the crypto coin associated with Ethereum – to interact with the platform. Most Ethereum users are developers, but investors also tap into its potential.
What is Ethereum?
Before discussing why Ethereum is one of the most popular cryptocurrencies, let’s explain what it is. The programmer Vitalik Buterin invented Ethereum in 2015 to respond to Bitcoin’s emergence because he understood that Bitcoin works similarly to a pocket calculator that can complete a single task. And even if it does it flawlessly, the user can do nothing else with it. Therefore, he created a blockchain network with an associated cryptocurrency (Ether) that can do more and augment Bitcoin’s functionality. Cryptocurrency experts agree that Buterin achieved his purpose and created a digital coin with more capabilities than Bitcoin. It’s crucial to mention that Ethereum enables smart contracts to feature prominently. Smart contracts are programs that run autonomously on the blockchain and perform several functions that third parties would complete usually.
The blockchain for Ethereum was developed using a Turing-complete scripting language that can run smart contracts synchronously across all nodes. As investors can buy and trade it as an investment like other digital coins, it’s also a software platform developers use to design new applications. People can use it for securing, trading, codifying or decentralising almost anything. The Ethereum Virtual Machine can run smart contracts for monetary agreements and allow users to execute wagers, act as escrow, or fulfil employment contracts.
Uses of Ethereum
Similarly to other public-beloved cryptocurrencies, Ethereum was created on the principles of decentralised finance because all Internet users can access the services and products associated with Ethereum. With the help of smart contracts, people can build decentralised applications that meet several purposes. They often include financial tools like data services, decentralised lending platforms, and cryptocurrency exchanges. But Ethereum can also be used to buy or sell developer technology, digital artwork, or gaming technology. Its open-source concept enables developers to create new currencies on top of it. Besides digital currencies, developers can also create other digital assets like NFTs used to represent ownership of one-of-a-kind elements.
Above are only a couple of examples of how Ethereum can be used.
Why is Ethereum a popular cryptocurrency?
Now that it’s clear how Ethereum can be used and its purpose, let’s look at the main reasons why it gained popularity.
Smart contract capability
When talking about Ethereum’s benefits, it’s best to start with our previously touched subject: its smart contract capability. Buterin created it as a platform that facilitates programmatic smart contracts and applications using Ether. Its use cases in the real world are growing and acquiring value because the Ethereum blockchain is able to execute smart contracts that lead to DApps, NFTs, and DeFi development.
Investors also prefer trading Ethereum because it offers a disinflationary supply. Bitcoin is often tagged as an investment against inflation because it has a finite supply. In this area, Ethereum is different because it has an unlimited number of Ether (however, the amount released annually through the mining process is capped). The supply of Ethereum evolves in direct conformity with the disinflationary mechanism. The value of Ether increases as there will be fewer coins in circulation. Investors always track Ethereum price over an extended period before buying and selling to ensure their transactions are profitable. Over the last few months, ETH price has appreciated faster than other cryptocurrencies. Historically speaking, Ethereum price has always been more volatile than Bitcoin’s.
Speed and scalability
Ethereum and Bitcoin differ according to two primary metrics. Ethereum block times are 10-15 seconds, while Bitcoin’s 10 minutes. Also, a Bitcoin transaction is completed in 40 minutes, while an Ether one needs around 5 minutes. Investors prefer Ethereum due to its guaranteed speed, which can only improve after the following upgrades.
Even if Ethereum used a proof-of-work model initially (as Bitcoin does), it switched to a proof-of-stake model, drawing the market’s attention to it. The new model has gained the public’s interest because it changes the rewards system. The old proof-of-work model didn’t encourage collaboration or trigger consequences for malicious behaviour. But the proof-of-state model replaces miners with transaction validators and removes all cryptographic challenges. Someone can become a validator only if they own Ether and put their full stack of coins on the line to certify the block’s validity.
Ethereum promotes a new type of connectivity
Ethereum can also be defined as an infrastructure that can revolutionise the financial and technological sectors. DeFi could recreate the financial system, and Ethereum-based applications will affect the real world.
What makes Ethereum more advanced than Bitcoin?
Some cryptocurrency experts promote the idea that Ethereum is better than Bitcoin because it’s more than a digital currency; it’s a blockchain-based platform with several features. Because there’s a code behind it, it can run any program and solve complex computational equations.
Ethereum uses blockchain stored applications to facilitate and negotiate contracts as the blockchain offers a decentralised method to enforce and verify contracts. Due to the advanced blockchain, Ethereum transactions are faster and provide greater security. Ethereum’s GHOST protocol makes a block time in 12 seconds, while a Bitcoin block’s time is 10 minutes.
Another difference between the two cryptocurrencies is that Bitcoin has already mined two-thirds of its available supply while Ethereum’s supply is unlimited. And let’s not forget that the transaction costs of the two are different.