Bitcoin and Ethereum are the biggest cryptocurrencies on the market, of the over 20,000 available. However, according to Yahoo Finance, Ethereum may overtake Bitcoin because of its bespoke contracts, making it a more adaptable alternative to Bitcoin. But how does Ethereum compare to Bitcoin regarding functionality, applications, and so on?
Bitcoin and Ethereum are fundamentally different because the former was created to enable decentralized finance. In contrast, the latter was made to enable apps and contracts. While Ethereum allows payments using its internal ETH money, its reach is – by design – far more significant than Bitcoin’s. Both systems use blockchain technology to confirm and record transactions. Still, due to a planned shift in how Ethereum trade functions, it will do so differently, with implications for speed, sustainability, and accessibility. The difference lies in what’s known as a consensus mechanism.
A consensus mechanism is a technology used by cryptocurrencies such as bitcoin and Ethereum to check transaction validity and preserve the security of the underlying network. Every cryptocurrency blockchain uses a consensus method. It is a system that blockchain network users use to agree on transaction legality. This approach ensures that all legitimate transactions are recorded on the blockchain and that all valid transactions are present in each copy of the blockchain.
Bitcoin employs a consensus system known as proof of work (PoW), which allows network nodes to agree on the status of all information collected and prevents some forms of network attacks. In September 2022, Ethereum switched to proof of stake (PoS), a series of interrelated advancements that would make Ethereum more secure and long-lasting. Sharding will be handled as part of the shift to proof of stake to address scalability difficulties, which will continue to be discussed throughout 2023. One major complaint of proof of work is that it consumes much energy due to the computational power required. Proof of stake replaces mining with staking, which saves energy and replaces miners with validators, who stake their bitcoin holdings to activate the capacity to create new blocks.
With the recent Ethereum enhancements, the native ether token has witnessed a significant increase in popularity. As a result, many financial and cryptocurrency professionals believe that ether will eventually eclipse bitcoin. Here are some reasons why people believe Ethereum will eventually eclipse bitcoin.
Data Ownership – Ethereum’s most prominent supporters believe blockchain technology will be the foundation for a completely new internet, dubbed Web 3.0, by experts. In principle, the new web would be decentralized, allowing people to reclaim ownership of their data and build an organic online identity. This user-centric strategy would encourage the formation of networks in which individuals and businesses produce products and services that benefit everyone. It would also end some of today’s more problematic big-tech practices, such as data mining, suppressing specific political viewpoints, and manipulating user experience to create more addictive platforms. To put it another way, web 2.0 treats users as consumers or units, whereas web 3.0 allows users to be individuals.
Security – Ethereum’s smart contracts leverage blockchain-stored applications for contract negotiation and facilitation. The blockchain provides a decentralized method for contract verification and enforcement. This decentralized nature makes fraud and censorship extremely difficult. In addition, things are recorded significantly faster than in Bitcoin due to the sophisticated blockchain, usually in seconds rather than minutes. These smart contracts aim to increase security while lowering associated costs.
Ecosystem – Ethereum is far more helpful in the actual world than Bitcoin. Because it is an open technology platform, developers can create products with real-world utility. Its smart contracts, for example, are widely utilized in decentralized exchanges and peer-to-peer crypto swaps. Because of all the apps and other protocols that run on the Ethereum blockchain, it has an ecosystem that Bitcoin does not have. While one can wait for Bitcoin’s price to continue to rise, the utility of the Ethereum ecosystem is more likely to drive its value and price in the future years.
There are advantages to utilizing both Bitcoin and Ethereum. However, because Ethereum has more use cases than Bitcoin and serves a larger purpose, we may claim that it is an overall better Bitcoin alternative. However, it is evident from Ethereum’s premise that it is not intended to be a Bitcoin substitute. Instead, it sprints beside it while pursuing a different goal. However, if there were only room for one, Ethereum would almost certainly dominate the market because it provides both smart contracts and a store of wealth.