Ethereum is one of the most popular cryptocurrencies. In fact it is open-source public service that uses blockchain technology to facilitate smart contracts and cryptocurrency trading securely without a third party. There are two accounts available through Ethereum: externally owned accounts (controlled by private keys influenced by human users) and contract accounts.
Ethereum allows developers to deploy all kinds of decentralized apps. Even though Bitcoin remains the most popular cryptocurrency, it’s Ethereum’s aggressive growth that has many speculating it will soon overtake Bitcoin in usage.
The differences between the Ethereum and Bitcoin
While there are many similarities between Ethereum and Bitcoin, there are also significant differences. Here are a few:
- Bitcoin trades in cryptocurrency, while Ethereum offers several methods of exchange, including cryptocurrency (Ethereum’s is called Ether), smart contracts and the Ethereum Virtual Machine (EVM).
- They are based on different security protocols: Ethereum uses a “proof of stake” system as opposed the “proof of work” system used by Bitcoin.
- Bitcoin allows only public (permissionless or censor-proof) transactions to take place; Ethereum allows both permissioned and permissionless transactions.
- The average block time for Ethereum is significantly less than Bitcoin’s: 12 seconds versus 10 minutes. This translates into more block confirmations, which allows Ethereum’s miners to complete more blocks and receive more Ether.
- It is estimated that by 2021 only half of the Ether coins will be mined (a supply of more than 90 million tokens), but the majority of Bitcoins already have been mined (its supply is capped at 21 million).
- For Bitcoin, the computers (called miners) running the platform and verifying the transactions receive rewards. Basically, the first computer that solves each new block gets Bitcoins (or a fraction of one) as a reward. Ethereum does not offer block rewards and instead allows miners to take a transaction fee.
What are the advantages of Ethereum?
Proponents of Ethereum believe its main advantage over Bitcoin is that it allows individuals and companies to do much more than just transfer money between entities leading Bloomberg to write it’s “the hottest platform in the world of cryptocurrencies and blockchains” and that the applications that can be realized with the Ethereum technology open up innumerable perspectives in the very near future, thus giving it a certain value.