Ethereum was first conceived, described, and proposed by Vitalik Buterin in November 2013; it is a young cryptocurrency that’s almost 5 years younger than Bitcoin which was invented in 2008 and launched in 2009 on the backdrop of the then prevailing economic recession.
Additional founders of Ethereum included Charles Hoskinson, Gavin Wood, Joseph Lubin, and Anthony Di Iorio. Ethereum development work and crowdfunding commenced in 2014, and on July 30, 2015, its network went live and has remained so since then.
According to the Ethereum website, www.ethereum.org or https://ethereum.org/en/, “Ethereum is a decentralized platform that runs smart contracts.” Smart contracts are a major feature in Ethereum and enable people to make agreements without the need for a middleman to do so on their behalf.
Ethereum creates its smart contracts by applying the same decentralized blockchain technology principles that Bitcoin utilizes. In the same vein that Bitcoin’s blockchain network validates Bitcoin ownership, so does Ethereum’s blockchain also validate its smart contracts which are executed by encoded rules.
Ethereum versus Bitcoin
In terms of market capitalization, Ethereum or Ether coin comes second only to Bitcoin: as of February 10, 2022, it hit a market cap value of $367.85 billion and exchanged at a rate of $3,077 per 1 Ether or Ethereum coin.
Bitcoin is regarded as “digital gold” because it was the first cryptocurrency to be invented and is the strongest to have reached a market cap of more than $1 trillion, while its limited supply which is capped at 21 million Bitcoins—the maximum number that would likely ever be mined—may guarantee that it continues to remain highly valuable.
Because people are also attracted to the features of Ethereum which is the second-largest cryptocurrency by market cap, it is regarded as “digital silver”: like the precious metal known as silver, Ethereum has great features and a wide variety of applications.
Although the principle of cryptography and distributed ledgers powers both the Ethereum and Bitcoin networks, the two respective networks have features that differ technically in a number of ways.
For instance, the feature of executable codes in smart contracts helps to process Ethereum network transactions, while the data appended to Bitcoin network transactions are usually for keeping records or digital notes.
Another difference between Ethereum and Bitcoin networks is the block time: each Ethereum transaction is confirmed in a matter of seconds, while each Bitcoin transaction takes minutes. Bitcoin network runs on the SHA-256, while the Ethereum network runs on the Ethash algorithm.
Ethereum blockchain provides a platform for users to employ smart contracts and perform or run their decentralized applications. This is the reason why many other cryptocurrencies can operate on the Ethereum platform.
Although Bitcoin and Ethereum networks are both currently using the proof of work (PoW) consensus protocol which allows the nodes of members in each network to validate or verify information and prevent anybody from manipulating the system, in 2022 Ethereum network plans to upgrade its features and move to another consensus protocol called proof of stake (PoS) which would make Ethereum more secure, scalable, and sustainable.
Generally, the Bitcoin and Ethereum networks differ in regard to their respective aims: While Bitcoin was invented to serve as an alternative to traditional or national currencies and a medium of exchange, Ethereum was invented to facilitate changeless step-by-step instructions in computer programs or contracts and applications through its own cryptocurrency.
The main features of Ethereum are as follows
- Its network is decentralized—but it is more decentralized than Bitcoin
- It uses and allows the development and deployment of smart contracts in its virtual machine
- It allows users to create DApps (Decentralized applications) also known as consolidated applications
- It allows users to create decentralized autonomous organizations (DAOs) for use in democratic decision-making
- Its token or trading symbol is “ETH” or “Ether”
- It is minable
- Ethereum mining wastes less energy than Bitcoin mining does
- For now, creation or mining of Ethereum occurs through proof-of-work (PoW)
- The transaction time can occur within seconds—as little as 14 seconds—although in some cases it can increase depending on confirmation requirements
- Transactions are not entirely or completely anonymous