Ethereum and how it’s different from Bitcoin

Ethereum- the rising star in the cryptocurrency domain

There’s a lot buzz surrounding Bitcoin, Ethereum, cryptocurrency and blockchain technologies these days. And, why not? Loads of money is being pumped into this sector. And it doesn’t seem to be slowing down at all.

But the fact remains: all these technologies are popular only through word-of-mouth. People are still trying to figure what the buzz is all about. And, if by any chance you utter a term like Ethereum, be assured, you’d get nothing but only blank stares, in return.

The Real World Scenario

Ethereum is being labeled as the next bitcoin, by several intelligent entrepreneurs. In fact, a group of 30 companies, all big and powerful in their own right, have come together under a new non-profit organization called the Enterprise Ethereum Alliance to further advance this blockchain technology.

Before we dive deep into how this cryptocurrency works, let’s start with the basics.

So, what’s Ethereum basically?

Launched in 2015, Ethereum is again a cryptocurrency.  Though it’s younger to bitcoin, it’s a rising star in the cryptocurrency domain.  Its capabilities and objectives, however, differ widely from Bitcoin.

While the bitcoin blockchain focuses on peer-to-peer electronic transaction of online payments, the Ethereum blockchain is a peer-to-peer network of virtual machines that a developer uses to create and run decentralized applications *DApps* and *smart contracts.*

“Smart Contracts* are basically computer codes built within the blockchain network that not only stores rules for negotiating the terms of a contract but even self-executes the contract on agreed terms.  Once the contract is executed it’s updated to the shared ledger which is there for everybody to see.  

Today, Ethereum blockchain is also referred to as “smart contract” technology.

Say, for instance, if you want to buy a Ford car. 

Traditional Way of Buying A Car

On the other hand, on the Ethereum blockchain you can buy a Ford car via a smart contract in no time.  Given that all the ownership documents are available on the smart contract along with the pricing details and more, you just need to enter the required ether (cryptocurrency) into the smart contract and it will execute the process on its own on the blockchain. In no time, a brand new car will be shipped to you. That’s it.  You don’t have to deal with banks for money or wait for days to get the car. Things happen instantly on the Ethereum platform.

Buy-with-Smart-Contract-Ethereum Blockchain

Ethereum Blockchain combined with smart contract technology removes the need for centralized systems so the parties can directly deal with each other.

Given that the applications run on the blockchain, there’s zero scope for downtime, fraud, censorship, and third-party interference.

While other blockchains are good enough to process codes, their capabilities are limited.  Ethereum blockchain is unlike other blockchains.  Ethereum, which is not just a platform, but a programming language as well, enables developers to create whatever operations they want in the form of DApps. Meaning, developers can come up with as many applications they want, in tens and thousands that is, something which has never happened before.

Ethereum Virtual Machine

Before the creation of Ethereum, blockchains were able to perform limited set of operations.  Bitcoins and other cryptocurrencies were created to operate on a peer-to-peer digital currencies basis.

This was sort of limiting for developers. And even if they thought of expanding the functions offered by bitcoin and other applications, it could turn out to be really complicated and time-consuming.  So, might as well develop a new blockchain application on an entirely new platform.

Realizing the limiting capacities of the existing blockchain, Ethereum’s creator, Vitalik Buterin came up with a new approach. Ethereum’s core innovation, the Ethereum Virtual Machine (EVM) enables you to run any program on the Ethereum network, no matter the programming language, given enough time and memory.

The machine makes the process of generating blockchain applications really easier and efficient than ever before.  The biggest plus is that you don’t have to set up an entirely new blockchain for a new application; instead, it enables you to develop potentially thousands of applications on one platform.

 

Benefits of Ethereum  

Developers can build and deploy decentralized applications (Dapp). A Dapp is supposed to serve particular purpose of the users.  For instance, Bitcoin is also a DApp that enables peer-to-peer online payment of bitcoins.

And given that decentralized applications are made up of code that runs on blockchain network, individuals and central entities have no roles to play in particular.

The potential applications of Ethereum are huge and are run on a platform-specific cryptographic token, Ether. In 2014, Ethereum had launched a pre-sale of ether that received an outstanding response.

Ether is broadly used for two purposes: as a digital currency like other cryptocurrencies and is also used inside Ethereum to run applications and even monetize work.

One of the biggest projects that currently surround Ethereum is Microsoft’s partnership with ConsenSys. The partnership attempts to offer “Ethereum Blockchain as a Service (EBaaS) on Microsoft Azure. This will enable enterprise clients and developers to have cloud-based blockchain developer environment via a single click.

Bitcoin Vs Ethereum

bitcoin-vs-ethereum

In simplest terms: Bitcoin is a digital dollar.  Bank regulations don’t apply it.  It’s not associated with any company. And anyone can create Bitcoin wallets to buy and sell coins through websites such as coinbase.  And there’s no such thing as fixed prices when it comes to bitcoins. It valuation depends on the supply and demand in the digital marketplace.

However, these days it’s common to convert bitcoins in the form of tokens that are issued by companies during ICOs or Initial Coin Offering.  Simply put, people invest their bitcoins in return of tokens. The prices of these token go up and done just like the share prices go up and down in an IPO.  The token operates separately in a secondary market and is not related to the rise and fall of Bitcoin’s currency.

Why are people interested in Bitcoins?

  • They want to store the money somewhere else other than the bank
  • It’s an investment and people expect its prices to climb up substantially in the future
  • To invest in companies that raise capital through ICO and not through traditional currency
  • Token can be purchased via Bitcoin or Ether (Ethereum’s cryptocurrency)

Ethereum

Ethereum is yet another cryptocurrency which is touted to be overtaking bitcoin as the dominant digital currency in the market.

What makes Ethereum stand out from other altcoins and gives bitcoin a tough competition is its technology. Ethereum’s coin value is called “ether” and is bought and sold by investors to buy ICOs.

Bitcoin Vs Ether

Image source: https://learn.onemonth.com

The main difference between ethereum and bitcoin is that bitcoin is just a currency, while ethereum is a blockchain technology that could be leveraged by companies to build decentralized applications.

No doubt, bitcoin, and ethereum operate on the blockchain technology; however, ethereum’s technology is by far the most robust. If Bitcoin is 1.0, Ethereum is 2.0.

What’s more? Several Fortune 500 companies, under the name of “Enterprise Ethereum Alliance” have agreed to come together to build upon this technology. These companies include Intel, Microsoft, J.P. Morgan, and Accenture.

People are excited about ethereum’s technology because it has the potential to impact machine learning, IoT projects and processes.

Sure, it’s in the development phase, but then it has opened doors for all sorts of unique investment.

 

Final thoughts

Ethereum is the new bitcoin with several entrepreneurs swearing up and down saying the same. So, if you have missed the ball on bitcoin, don’t give ether a miss.

 

Jini Maxin

Jini Maxin

Jini Maxin is a prolific tech writer who’s constantly juggling and struggling to keep pace with the Usain Bolt’s of the cryptocurrency world, who are leaving no stone undisturbed to make cryptocurrencies the commoners’ currency in this digital era.

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