Bitcoin emerged in 2009, pioneering the world of decentralized digital currency during a time of rapid technological growth. Fast forward six years to 2015, and Ethereum burst onto the scene, revolutionizing the crypto landscape with its smart contract capabilities.
Today, Ethereum has skyrocketed to become the second-largest cryptocurrency by market cap. With its explosive growth and increasing adoption, an interesting question arises: Will Ethereum ever surpass Bitcoin to become the world’s most widely used cryptocurrency?
What Are the Key Differences In Technical Fundamentals Between Bitcoin and Ethereum?
While Bitcoin and Ethereum are both cryptocurrencies, the truth is that they are pretty different in a few ways. Bitcoin was originally made as a way for people to be able to complete transactions with each other without the need for a third party to monitor the transaction to make sure it’s correct.
One of the main features that sets Bitcoin apart is its Proof of Work (PoW) Consensus, also known as mining.
Very simply put, Proof of Work consists of a computer running super-complex math equations to validate transactions other people make and once the computer finds the solution, it gets rewarded with a little Bitcoin as a prize.
This is what allows Bitcoin to have few to no transaction fees and no need for anything like a bank.
Another thing that sets Bitcoin apart is its capped supply. What this means is that there will only ever be a maximum of 21,000,000 Bitcoin in circulation. This helps prevent inflation and it leads us to the final and primary use of Bitcoin as a store of value.
Bitcoin as a store of value means that Bitcoin is used, at its core, as a currency used to exchange for goods and services the same way you would buy a pizza for $10 but without having to deal with banks and physical cash.
What sets Ethereum apart is that it was created as a way to improve what Bitcoin was known for.
This is why it uses new, different technology, instead of PoW, Ethereum uses what’s known as Proof of Stake in which instead of Bitcoin miners providing validation for the transactions, participants in a transaction offer Ether in collateral as a type of validation.
Unlike Bitcoin, Ethereum does not have a supply cap on how much Ethereum is in circulation.
The main difference between the two is Ethereum’s smart contract capabilities, which allow Ethereum buyers to automatically share, save or control documents or transactions based on a previously established contract. This allows Ethereum to serve a functional purpose rather than just being a medium of exchange.
How Do Bitcoin and Ethereum Use Cases and Adoption Compare?
Because of Bitcoin’s main purpose serving as a currency or “Digital Gold”, many retailers around the world have started accepting Bitcoin as a form of payment as well as the country of El Salvador establishing it as a national currency.
Even though Bitcoin continues to effectively serve its purpose as a currency, it seems like that is where its capabilities come to an end.
Ethereum, on the other hand, has diverse uses such as their capability to build Decentralized Applications with ease.
These are user-made and user-controlled applications that allow multiple people to consume, feed, or seed content on them. What sets them apart is that they are not owned by any one company or any one person, but rather by a very large group of people who have equal control over the application.
Decentralized finance is another feature that Ethereum brings to the table. Decentralized finance just refers to the ability to complete transactions or trades or withdrawals of some type of money without the need for people or anyone to manage it.
This means that there should not be any failures in the system because there is no one to make mistakes.
The final main difference between Ethereum vs. Bitcoin is the crucial role that Ethereum plays in the creation and distribution of NFTs or Non-Fungible Tokens. NFTs are a type of unique indivisible asset that is created using Ethereum’s smart contract capabilities.
These NFTs allow for one person to create a token that cannot be replicated by anything, even something of equal value. These NFTs are stored in the Ethereum network which makes it very easy for anyone to be able to verify ownership.
These use cases for both cryptocurrencies affect their valuation in the long run depending on the demand of these uses.
Bitcoin grows as the world evolves since people want an easier way to pay for things meanwhile, Ethereum grows more popular by the second since many are interested in its many practical uses on top of its use as a medium of exchange.
What Innovations and Developments Are Shaping The Future of Bitcoin and Ethereum?
The main thing that sets both of these cryptocurrencies apart from the rest of them is that they are constantly being developed and are constantly being upgraded. Bitcoin is currently trying to develop a “Lightning Network” as a scalability solution. This is a payment protocol that will include some of the Smart Contract capabilities that Ethereum already has in place, as well as enable faster transactions among participants.
What makes Ethereum so special is that it is a relatively new cryptocurrency that was made to be better than Bitcoin. This means that it is constantly being upgraded with one of the most recent ones called “Sharding”. Sharding consists of separating transactions into a bunch of mini networks instead of trying to run transactions across one huge network. This improves the speed and overall performance of the cryptocurrency. Ethereum’s biggest upgrade though, was the release of Ethereum 2.0. This upgrade served as a way to get rid of many tiny inconveniences as well as make sure that the big problems bothering the users would be solved.
What does this mean in the Bitcoin vs. Ethereum race? Well, if these innovations and developments keep up at the pace that they have been going, Ethereum seems to be at an advantage since its upgrades tend to be a little more significant and broad than Bitcoin’s.
How Do The Community Support and Development Team of Bitcoin and Ethereum Differ?
Bitcoin is the largest cryptocurrency in the world right now, this means that it has the largest community and development teams. Bitcoin has something called Bitcoin Core which is a security system set in place to protect all of the important assets. Bitcoin Core is managed by a team of well-known developers.
Since Ethereum was released in 2015, it is still building a community to be able to compete with the other cryptocurrencies. Ethereum is backed up by the Ethereum Foundation which is a non-profit organization to be able to fund the development and growth of the Ethereum platform. This is a huge deal since it means that people are constantly trying to invest/donate money into something they believe is the future.
In this case, it is hard to say which one has the advantage since both cryptocurrencies have their pros and cons.
Can Ethereum Overcome Bitcoin’s Market Dominance?
The million-dollar question is, can Ethereum ever flip Bitcoin and overcome its market dominance? Well, probably. Even though Bitcoin has the largest market capitalization in the world, it lacks a few things that Ethereum has plenty of.
Ethereum has better and more recent technological advancements such as smart contract capabilities and the Sharding of networks. Ethereum also has better solutions to the same scalability problems that both cryptocurrencies face but, the smoking gun in this competition is the overwhelming adoption Ethereum has faced since its release growing over 60% this year alone.
Ethereum has every possibility to flip Bitcoin and overcome its market dominance; it just has to overlook a few hurdles. For now, all that there is to do is wait and see how long it takes for Ethereum to flip Bitcoin and finally win the cryptocurrency comparison competition.
Frequently Asked Questions
What are the key technical differences between Bitcoin and Ethereum?
Bitcoin uses Proof of Work (PoW) consensus for validating transactions and has a capped supply of 21 million. Ethereum uses Proof of Stake (PoS) and has no supply cap, offering smart contract capabilities for building decentralized applications.
How do the use cases of Bitcoin and Ethereum compare?
Bitcoin is primarily used as a digital currency and store of value, while Ethereum supports decentralized applications, decentralized finance, and NFTs due to its smart contract functionality.
What innovations are shaping the future of Bitcoin and Ethereum?
Bitcoin is developing the Lightning Network for scalability and faster transactions. Ethereum is advancing with upgrades like Sharding and Ethereum 2.0, which improve performance and scalability.
How do the community support and development teams differ for Bitcoin and Ethereum?
Bitcoin has a large community and is supported by Bitcoin Core, managed by well-known developers. Ethereum is supported by the Ethereum Foundation, a non-profit organization funding its development and growth.
Can Ethereum surpass Bitcoin in market dominance?
Ethereum has the potential to surpass Bitcoin due to its advanced technology, smart contract capabilities, scalability solutions, and rapid adoption. However, it needs to overcome certain challenges to achieve this.
