In January 2009, Satoshi Nakamoto, a nom de plume for a team of people or a single person, published a white paper in 2008. Like any other academic report, it had a solution for the problem of double-spending. But, little did someone knew that this solution could rise to the potential of making him reach the list of top 40 richest men on earth.
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The solution was a cryptocurrency named bitcoin, which was a process of verifying monetary transactions without the interference of any central third party. Bitcoins do no operate as usual fiat money. They do not have any shape. It is a code attached to a publically distributed ledger accessible to all. Bitcoin can be used to keep the money in digitised form in a place providing services like alternative banking. It appears to be a viable alternative to the world currencies recognised by the governments.
Elon Musk, CEO of Tesla, would accept payment in bitcoins. Musk declared the purchase through a tweet where he commented with hands and diamond emojis. It implies that he has acquired bitcoin as an investment. Walmart and Square Inc, owned by Twitter’s CEO, have invested in bitcoin, and they treat it as a hedge. Recently, El Salvador has adopted bitcoin to be a legal tender.
There are other advantages to it. Sending and receiving money through bitcoin keeps the identity of the participants anonymous. It is also independent of any external control and recognised globally. The number of bitcoins available is finite. Additionally, it is designed to take 10 minutes for the blockchain to add a new block every ten minutes. These limitations were not liked by the developer of Ethereum, another rising cryptocurrency.
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Immutability is an exclusive feature of blockchain technology that makes bitcoin or other cryptocurrencies promising something which is dear to all, i.e., privacy and security. Bitcoin could not satisfy Vitalik Buterin and Joe Lubin. They created their blockchain and cryptocurrency platform by the name Ether or Ethereum in 2013.
Bitcoin as a method of securing transactions is a form of digital currency. Ethereum uses blockchain technology to create and share decentralised applications, known as dapps, about different genres. It is much more than just a digital currency.
It is written in Solidity, which is exclusive to the platform. Users can publish smart contracts, use dapps from the platform, create their own, sell or purchase them through Ether. Dapps can be accessed by paying ‘gas’ which is kind of a charge. Smart contracts are a set of predefined codes, and when their terms are executed, a favourable outcome occurs.
Ether is the second-largest cryptocurrency after bitcoin. Trusted brands like Shopify and CheapAir have been accepting payments in Ether.
Ethereum vs. Bitcoin
Bitcoin operates through its bitcoin network, where transactions are recorded and verified, known as proof of work. It is a digital currency. Ethereum operates on the Ethereum platform, where users can use, create, sell, and buy dapps and record transactions. Ethereum is not a currency but a token.
Bitcoin is based on a distributed ledger. In addition to this, Ethereum develops dapps and smart contracts. It takes ten minutes to add a block and earn bitcoins. Transactions through Ether takes seconds. Bitcoin’s primary goal was to provide an alternative to fiat money backed by economies and governments. Ethereum serves a greater goal.
As of now, the total value of bitcoin mined is $143 billion. Ether stands at $88 billion. An article published by Bloomberg found while bitcoin’s value jumped 500% over 2020, for Ethereum, the rate was 1500%. Coin Gecko also reported surprising statistics showing how bitcoin is getting hit by Ether. Bitcoin has 46% of the cryptocurrency market share, which was 70% in early 2021. Market share for Ethereum stands at 15% now.
While both currencies appear promising for investors, economists believe that currencies are volatile as their authority is on consensus. It means that anyone carrying a large amount of Ether and bitcoin can change their value on a whim. As Ethereum provides more prospects, it is now emerging as an alternative to bitcoin. More sophisticated and smart algorithms are likely to replace contemporary cryptocurrencies. Investors who feel that their prices are free from any external factor are wrong. Both the currencies have been floating in uncharted territories, and because of the anonymous nature of transactions, a threat of regularisation and legalisation is always looming.