Recently, a new type of cryptocurrency known as Ethereum has started to garner a great deal of attention on the economic world stage. In a certain light, it is part of a natural evolution in competition to the most popular form of cryptocurrency, Bitcoin.
To understand the value of each and whether or not these cryptocurrencies have a place in your investment strategy, we will need to take a closer look at both.
Bitcoin is essentially the very first form of virtual currency. It was created in 2008 by a mysterious individual going by the moniker Satoshi Nakamoto. It promised lower transaction fees than other traditional electronic payment mechanisms. At the same time, it is also operated by a decentralized authority, away from the control of any single government. This also means there aren’t any physical bitcoins, there are only balances associated with private and public keys.
As time has gone on an increasing number of government entities and regulators have started to embrace the concept of virtual currency. Yet it still isn’t recognized as an approved medium of payment or secured insurable value. Yet it has managed to remain strong as well as grow, while also coexisting with the financial systems that continue to debate and scrutinize it.
The Influence Of Blockchain
As more government bodies, financial institutions, and regulators attempt to understand Bitcoin, they also managed to stumble onto the Blockchain technology that essentially powers it. This sophisticated technology is highly sought after in many industries and sectors.
A Blockchain is essentially a special type of public ledger that keeps track of every transaction that a given system has ever been executed. The Blockchain is constantly increasing as more and more completed blocks are added to it.
These linear blocks are added to the blockchain in chronological order using a special type of cryptography. This ensures that it will always remain beyond the power and influence of would-be manipulators.
It ultimately represents a tamper-proof record of all transactions that have occurred throughout the network, while also being accessible to all participants. The blockchain provides the opportunity to work at lower costs, yet with greater regulatory compliance, as well as reducing the overall risk, and enhancing the system’s overall efficiency.
Since its inception in 2015 Ethereum has steadily grown to be the largest and most well-established, open-ended decentralized software platform. It works with Smart Contracts as well as Distributed Applications, which allows it to be run without any downtime. It also prevents fraud, outside control or interference from any third party.
This essentially means that Ethereum is more than just a software platform it is also a programming language that runs on its own Blockchain. This allows software developers to build and publish distributed applications with increased efficiency as well as a broad reach.
The cryptographic token, known as Ether, that Ethereum uses can support a wide range of potential applications that are designed to run on its specific platform. Ether is essentially a virtual vehicle that allows the users to move around on the Ethereum platform.
The Purpose and Benefits of Ether
This cryptographic token serves two purposes on the Ethereum platform. For starters it is essentially traded as a digital currency just like any other cryptocurrency, only it is used on the Ethereum platform to run applications while also serving to monetize work performed. Ethereum indicates that it can be used in several ways including to codify, decentralize, secure, and trade.
A major project using Ethereum is Microsoft’s partnership with ConsenSys which has been designed to employ Ethereum Blockchain as a Service, which is available on Microsoft Azure. It allows enterprise clients and developers to essentially have a single click cloud-based blockchain environment.
Understanding the Comparative Value Between Bitcoin And Ethereum
At first glance, it’s worth noting that both Bitcoin and Ethereum are powered by the complex principle of cryptographically distributed ledgers. Yet there are also many technical differences between the two!
In contrast to this Bitcoin is essentially a stack-based language. This means that basically relies on a stack machine model for its passing parameters. There are several other programming languages that also do this including Forth, RPL, and PostScript, as well as BibTeX.
Block time is also a significant difference between Ethereum and Bitcoin. An Ethereum transaction is usually confirmed in a matter of seconds, whereas Bitcoin typically takes minutes.
The two types of cryptocurrency also differ in their underlying purpose. On the surface of it, Bitcoin was created as an alternative form of currency, with the ability to expand beyond the potential volatility of fiat currency.
Yet Ethereum was created to be a platform which facilitates peer-to-peer contracts as well as platform-based applications through its own proprietary currency vehicle. While they are both a form of digital currency, Ether does not directly intend to establish itself as an alternative form of payment beyond its own platform.
When considering your own stance on these two types of cryptocurrency, you need to keep in mind that Ethereum is essentially an advancement or evolution of the Blockchain principle that supports Bitcoin. However, it does not directly attempt to compete with Bitcoin. Yet at the same time, the popularity and rising market capitalization of Ether brings Ethereum into competition with all forms of cryptocurrency.
If you are looking at Ethereum or Bitcoin from the perspective of an investor, looking to make the most out of a new and rising opportunity, it can be hard to choose between the two. If on the other hand, you are a software developer or your company is interested in sourcing software developers through peer-to-peer contracts, then chances are pretty good that Ethereum is on your radar now and possibly into the future!