Ethereum vs Bitcoin- Full Analysis

/Ethereum vs Bitcoin- Full Analysis

Ethereum vs Bitcoin- Full Analysis 2018-02-21T17:20:59+00:00

Ethereum versus Bitcoin

As an investor, an initial aim is to create success in all potential investments that you would like to undertake. For many years, financial investment companies have always managed to control the progress of financial success of investors especially by managing their portfolios and charging high fees. The revolutionary invention of cryptocurrency managed to break these barriers and surrender investment control to the investors directly.

Bitcoin and Ethereum (ETH) are currently recognized to be the two largest cryptocurrencies in the world as Bitcoin (BTC) takes the lead. Ethereum’s performance in the past few years has opinionated the possibility of taking on the lead in the near future. However, bitcoin is observed to maintain a steady and higher performance in spite of the volatile market trends in 2017.

Bitcoin being the “mother” of founding cryptocurrencies has led to the innovative gesture of new digital coinage globally such as Ethereum its current major competitor. No matter how similar they may seem, you would be concerned with analyzing the major differences between Ethereum and Bitcoin. Recognizing these difference would help you in the process of decision making while choosing the best cryptocurrency to invest in.

ETH vs BTC has stirred an instrumental structure of allowing the larger audience to learn more about the differences between both digital assets. Along these guidelines, investors possessing either one of the assets or even both at the same time will be able to enlist the benefits and the limitations of each asset.  The comparison of these benefits and limitation forms the foundation of stirring up the debate of Bitcoin versus Ethereum.

Ethereum vs. Bitcoin Explained

As a new investor, you will need to be aware of the market tendencies that ensure solid investment ventures that are often demonstrated by the unpredictable volatile trends of the market prices. Investing in the cryptocurrency industry will require your constant need to enroll an analytical strategy that will be able to enhance your ability to make a safe and pleasant decision.

Bitcoin may seem more attractive than Ethereum due to its leading performance in the cryptocurrency marketplace. However, this does not affirm that it will always have a definitive high performance. The debate of ETH vs. BTC has been ongoing for the past few months. Major differences identified between Ethereum Bitcoin digital assets are addressed below.

Bitcoin

  • It was initially developed and launched on January 3, 2009. This asset was designed to operate as a secure P2P (peer-to-peer) decentralized payment system.
  • Bitcoin uses the C++ programming language which has less than seventy specified commands to be utilized to provide high-security levels. It also utilizes the proof of work model which increases security and validity of transactions.
  • It is circulated through a process known as mining which also rewards completion of the transaction at a rate of 12.5 Bitcoin per block. This reward is usually halved upon completing 210,000 blocks. Bitcoins limit the volume created each year thus halving the reward. The time consumed to create Bitcoin blocks is ten minutes which is very long and more energy consuming. At the moment there are only 21 million Bitcoins that can be mined.

Ethereum

  • Was initially developed and launched on July 30, 2015. It is a decentralized online platform that enables smart contracts to be operated. It has a much wider spectrum by allowing the development and running of an application on its platform by different.
  • Ethereum can program a variety of smart contracts within the system as it is written in Turing complete programming languages.  The Turing language in this system contains seven different programming languages that enhance the flexibility and operational functions to developing different smart contracts.
  • Complete transactions/ blocks are rewarded at a rate of 5 ether per block. This reward does not change throughout since this asset does not apply a maximum number limitation. It simply caps the volume of ethers released each new year.  The time taken to create Ethereum block is fourteen seconds which saves time and is less tiresome.

The main differences of ETH vs. BTC are:

  • Bitcoin was designed to serve as a decentralized peer- to- peer payment system whereas Ethereum was designed to serve as a decentralized platform that operates smart contracts.
  • Bitcoin system utilizes the C++ programming language while Ethereum system uses the Turing complete language system which contains seven different programming languages. Bitcoin programming language is not diversified nor as flexible as the one used in Ethereum systems.
  • Both cryptocurrencies are circulated through a process known as mining. However, Ethereum Bitcoin systems have applied different limitations and rewarding procedures as explained below:
  • Bitcoin will usually reward a client with 12.5 bitcoins for completing each Bitcoin mining block. This is very different from Ethereum rewarding system which rewards 5 ethers to their clients for every Ethereum mining block completed.
  • Bitcoins rewards are eventually halved once you create 210,000 blocks and above while Ethereum maintains the reward of 5 ether per block throughout. Ethereum does not alter the 5 ether reward no matter how many Ethereum mining blocks you create. Bitcoin limits the volume of Bitcoins blocks created each year to 21,000,000 while Ethereum does not have a maximum volume of Ether blocks created each year. Instead, Ethereum caps the volume released each year.
  • Bitcoin system takes a much longer time to complete each block than Ethereum. If you work with Bitcoin system you will use up to ten minutes to create one block. Whereas, when you use Ethereum system you will use only fourteen seconds to create each block in the blockchain. This means that when you use ten minutes to create one Bitcoin mining block your reward will be 12.5 Bitcoins. Whereas, when you use the same ten minutes to create Ethereum mining block you will produce 42 ETH mining blocks. The will, therefore, be 210 Ethers.
  • Bitcoin system takes more time as it involves solving complex mathematical problems which provide high security and waste both time and energy. Whereas, Ethereum system is flexible as it enables the usage of seven different programming languages which are much easier to use to create each ether block at a shorter period of time.
  • The models of charging transaction fees are very different when considering BTC vs. ETH.
  • Bitcoin transaction fees are usually charged according to blocks and timespan. If you would like for your transaction to take the shortest amount time possible such as 5 minutes to 15 minutes you will need to pay the highest possible fee. When you pay lower fees your transaction will take from 10-30 minutes to be confirmed. Bitcoin system also charges a higher transaction fee for 3 blocks than for 6 blocks.
  • In Ethereum technology, the transaction fee is calculated differently using a two-step process. First of all, you will need to measure ETH gas price which is usually very minute. It can be measured in Szabo’s whereby 0.000001 ether is equal to 1 Szabo. The second step is to take the gas price and then multiply it by the total amount of ETH gas units being purchased in each block in ETH blockchain system. The answer will give you the total transaction fees to be charged in an ETH transaction.
  • You should note that Bitcoin transaction fees are actually higher than Ethereum transaction fees. BTC transaction fees have been reported to charge up to 40% of the transaction block value. Ethereum transaction fee, on the other hand, is much lower such that it may not even reach 10% of your ETH block value.

Bitcoin vs. Ethereum in market terms

  • In the crypto market, BTC price level has been observed to attain 1,500% rise in the price level in 2017. The rise is presented by the price rise that reached well above $15,000 in 2017. However, even with this great rise in price levels, the market share of bitcoin in the cryptocurrency market has gradually depreciated. In the last year alone, Bitcoin market share fell from 90% to 42% in 2017 and is predicted to fall further in 2018 due to higher competition from other altcoins being preferred by clients globally. Even with a decreasing market share, Bitcoin is still expected to increase in market price value to $100,000 per bitcoin in 2018.
  • The proof of work model has mitigated the security of operations of Bitcoin but also considered to produce several hindrances of time and energy wastage. You may feel a greater sense of assurance to invest in Bitcoin cryptocurrency due to its high level of security. However, the time wasted in using ten minutes to get just one block completed greatly discourages and limits the potential profit growth of clientele accounts.
  • Since it takes ten minutes to earn 12.5 Bitcoins in the mining process, then the average energy cost of one bitcoin will be equivalent to 20 barrels of oil. However, the current value of Bitcoin to oil is 1bitcoin= 100 barrels of oil. This makes Bitcoin cryptocurrency become one of the most valuable commodities to have globally. As the value of Bitcoin towards oil increases, mining of Bitcoins has become extremely valuable especially if the energy costs of mining are kept low.
  • On the other hand, Ethereum is looking up to a rising opportunity of increasing both its crypto market share and its crypto market price. The switch from using the proof of work model to proof of stake model using Casper protocol is greatly influencing the structural behavior of clients globally. Ethereum is bound to increase due to the fact that you can manage to create each block at a much lesser amount of time than Bitcoin. The reward remains the same throughout and the programming language is much more flexible to utilize than the one in Bitcoin system.
  • At this rate of progress and innovative changes to proof of stake, Ethereum is bound to become the leading coin in the crypto market due to its ability to offer higher efficiency to clients. You will be able to earn many ethers since it takes only 14 seconds to create an ether block in the blockchain system. Since it takes a lesser amount of time to create an ether block and earn 5 ethers per block the energy consumption rate is also lower thus reducing the cost of mining. ETH mining in comparison to bitcoin mining is much cheaper since energy consumption is far much lesser than the energy used to mine bitcoins.
  • Ethereum uses oil and energy costs that are equivalent to the energy consumption in a small country whereas, Bitcoin oil and energy consumption and costs are equivalent to energy consumption in 159 countries. Ethereum saves energy cost by more 99.4% in comparison to Bitcoin energy consumption levels. Eventually, Bitcoin will run out of energy resources to utilize in its mining process especially with utilizing its proof of work model.
  • On the other hand, Ethereum will save more energy costs even as it shifts to utilizing the new proof of stake model. This is because the new model will eliminate the usage of mining process to create the blocks. It will rather use validators which eases the process of validating and securing legitimate smart contracts operations digitally.

What is each one backed up by?

  • Bitcoin- one of the most important criticisms of bitcoins is that it is not backed by anything, nor is it intrinsically valuable. Bitcoin is considered too volatile in the crypto market and it does have a characteristic of being natively deflationary. This means that Bitcoin has been noted to erratically deplete its market value in the shortest amount of time possible. Its high charges in transaction fees also discourage clients from acquiring more Bitcoins and they rather alter to less expensive cryptocurrencies that are more affordable. You cannot lend your Bitcoins as a means of creating a source of income as an interest charge has zero value on this asset.
  • Several Bitcoin clients have also complained about the slow transaction, fees, and process while sending Bitcoins to another client. You will experience this mainly because once you send your bitcoins to another person, the transaction will go through different computers in order for Bitcoin protocol to be run globally. This ensures the validity of the transaction and once it is verified, the transaction then waits in the Mempool. Your Bitcoin transaction is basically waiting to be collected by a Bitcoin miner. Bitcoin miner will collect it and place it in the block transaction section of the blockchain system. This delay is one reason for the delay in the transaction process. The other reason is that due to the current price increase of Bitcoins the number of transactions has also increased. Each block in the blockchain can only hold a finite number of a block placed in the blockchain system. As a result, you will need to wait for quite some time for your transaction to be picked by a Bitcoin miner all while realizing that there are many transaction waiting in the mempool.
  • In spite of all of these delays and discrepancies in Bitcoin system, we should all be thankful to BTC for having provided us with the freedom to make more wealth. As Nelson Mandela once quoted, ‘money won’t create success, the freedom to make it will.’ We should also be thankful to BTC for introducing us to the new and highly developed technology of blockchain system and digital currency. However, innovative improvements on this amazing technology are required in order to enhance the models in which digital currency can be created with an intrinsic value, lending capabilities, and low transactions fees.
  • Ethereum- Vitalik Buterin the inventor of Ethereum is progressively innovating the blockchain structure to fit the larger needs of investors. In his advanced technological systems, you will be able to create more wealth at much lower costs under Ethereum system than under Bitcoin system. You will be able to use Ethereum in any of the following ways explained below:
  • Healthcare systems globally will be able to store, share and access their patient’s records. This will be a key component towards preventing or controlling viral outbreaks as new vaccines are developed due to having sufficient information. As a patient, you will be able to access health care while visiting a foreign country as your health information can be accessed online by all hospitals globally.
  • You can use Ethereum for security purposes since Ethereum security system is not centralized therefore hackers will have a very hard time in being able to access your personal information. Your personal information is also safe from third parties as Ethereum blockchain technology makes it impossible for third parties to collect personal data even through search engines as done before.
  • Ethereum through smart contracts enables you to make an exchange with anything of value. This type of exchange is also completely risk-free since the transaction is computer coded and securely stored.
  • You will be able to place your political vote on a safe platform no matter which country you live in. Ethereum system will be able to apply high-security measures that report every change in votes and it will be directly and publicly displayed. Transparency, therefore, will be more applicable using this system and democracy in politics will reach its greatest heights.
  • If you are a great fan of taking on high risks especially in the gambling sector, you will now be able to relax as Ethereum technology will offer a fast, safe and no scamming platform. You will be able to gamble at no extra loss or risk as well receive a big push in exploiting your high-risk investment ambitions.
  • You will also be able to store data with Ethereum technology as it is encrypted and it enables users to transfer data quickly between millions of servers.
  • Ethereum will also engage in the Google project of mass producing self- driving cars in mid- 2020. It will make the self- driving cars much safer to use and communicate with at a pace that is a thousand times faster than is humanly possible.

Buterin’s persistent improvements made on ICO by combining it with DAO to form DAICO. As a result, you will be able to experience the following benefits:

  • Minimized risk and complexity of using Ethereum technology. Ethereum technology will ensure that you will never experience a 51% risk attack
  • Include your own ideas and wisdom that is also leveraged with the wisdom of the larger populace. You will be able to utilize the ERC20 which in full is known as Ethereum Request for Comments. It is a platform in which you and the larger populace can propose any improvements needed to be conducted on Ethereum technology.
  • Spreading the funding systems over time thus ensuring availability and accessibility of funds in the long-term period thus making the asset a store of value for you and the larger populace.
  • Ethereum technology does not fully trust the centralized system in order to operate. Instead, it applies the decentralized system in order to ensure that hackers will not gain access to your profile and personal data.

From the information provided above, you realize that Ethereum is backed up by amazing products and platforms that will ensure its continued usage and growth in the long run.

Ethereum technology has created a platform that facilitates the creation of the products being used by clients. For example, ETH token which is a product is created on the ETH platform by developers. Since the ETH platform uses the Turing language that contains seven different languages making it flexible for many users to be able to develop smart contracts within the shortest amount of time. The flexibility of using seven different languages will influence clientele to develop more smart contracts in each New Year as it is easier apply and understand.

The ETH platform is equipped with other tools such as compilers and IDEs that support the development of ETH products. The platforms and the products developed the platform is developed to abide by the procedures and the conventions as defined in the protocols system.

Examples of the amazing Ethereum products that you can utilize either as an individual client or organizational client include:

  • Smart contracts which are considered to be a large product that contains standalone assets such as Ethereum tokens and ETH cryptocurrency. You will be encouraged to use the smart contract as they do contain an intrinsic value, can be lent and are completely risk-free. They take a much shorter amount of time to create and can be easily used in various aspects of real life as discussed above.
  • Decentralized applications (DApp) are also another product of Ethereum technology. They provide high-security measures and minimize risk attacks by more than 51%. This assures clients of their privacy and security, as fraud and online theft of their wealth is prevented from the get-go.

From an investor’s point of view, you would be well advised to invest in Ethereum than in Bitcoin system as it carries a larger weight of benefits. The proof of stake will offer a more efficient structure of validation than the proof of work model and you can also address any challenges with Ethereum system through the ERC20. The DAICO innovation by Buterin will enhance the overall performance of this asset in the long run while stabilizing its volatility in the marketplace.

to sum up…

Ethereum versus Bitcoin has offered an in-depth analysis of the operational approaches being used by each digital asset well enough to have a clearer picture of Ethereum being the better investment.

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