Table of Contents
The direct contact between users and parties is a major factor in the increasing acceptance of cryptocurrency, and Ethereum is widely accepted. There are many reasons why Ethereum stands out from other cryptocurrencies. The leading name: Ethereum (ETH), the technology behind Metaverse, and innovations like NFTs (non-fungible tokens) is a prominent name. Its network is used to create financial products which reduce or even eliminate the need for third parties like brokers and banks.
Ethereum is currently second only to Bitcoin (BTC) in terms of market capitalization, with a market capitalization of over $400 billion as of May 25, according to data from coinmarketcap.com. Together, the two cryptocurrencies account for 60% of the cryptocurrency market.
How Ethereum Stands Out From Other Altcoins?
The token ‘Ether’ is the core of Ethereum’s network. Vitalik Buterin, its co-founder, first introduced it. Ethereum uses blockchain technology; this is a public ledger that records transactions and account balances for a specific cryptocurrency. Web3 development is also influenced by Ethereum.
[READ ALSO: 5 Ways to Make Money In Web3]
In its 2022 report, US-based investment management company, ARK Investment Management LLC, stated that Ethereum emerged as the dominant smart contracting platform for decentralized finance and NFTs in 2021 after a turbulent 2018/19.
According to ARK, ETH has been identified as the most preferred collateral for DeFi and the unit of account on NFT marketplaces. This suggests that Ethereum will likely capture a significant portion of the $123 trillion global money supply. The report stated that Ethereum could replace many traditional financial services, and Ether could be a global money system. A major utility and one of the reasons why Ethereum stands out.
Financial services are moving on-chain, and decentralised networks will likely grab shares from financial intermediaries. According to the report, Ethereum, the base protocol, and DeFi are the beneficiaries of this shift.
“Ethereum is a great technology with tremendous potential as it remains a core part of DeFi apps. Exploring Ethereum technology can be a profitable addition to your portfolio,” says Bhagaban Behera (CEO and co-founder at Defy, a cryptocurrency platform.
With over 600 active DeFi protocols, the Ethereum Mainnet is the most widely used blockchain. It also has a Total Value Locked (TVL) of more than $100 billion.
Ethereum Has Potential for High Growth
Experts believe Ethereum is a good long-term investment. Edul Patel (CEO and co-founder of Mudrex), a global crypto-investment platform based on algorithmic investing, stated that Ethereum is the largest altcoin by market capitalization.
What Sets Ethereum Apart From Bitcoin?
Blockchain 1.0 is the name given for Bitcoin. It allows transactions to be made and can only be automated transactions. You could program the transaction to make a Bitcoin purchase. However, it would not be a direct payment. Instead, the script will automate the process so that payment is made only after the goods are received.
A third party must also be convinced that the buyer wants to buy the item and sign the transaction with them (who have already signed). A seller will only get Bitcoin if the third party is satisfied, says Sandeep Shukla, an IIT-Kanpur professor of Computer Science and Engineering and co-director at software company c3ihub.
The scripts were programmed in Bitcoin with a scripting program that can only automate a small number of transactions. In Ethereum, however, the scripting language is capable of automating many types of transactions and creating programmable wallets. These are known as “smart contracts.”
This requires a virtual machine at every node to execute smart contracts, which are basically programs. This is a significant leap from Bitcoin’s limited programmed transactions or direct transactions. Shukla says this is why Ethereum is Blockchain 2.0.
Smart contracts, however, can be affected by bugs due to their general-purpose language and the added capability of smart contracts. There are also bugs due to concurrent transactions and the executed order transactions.
In 2016, for example, a smart contract of a decentralised autonomous organization was hacked. This exploited a bug that allowed a hacker to steal millions of dollars worth of Ether. Many attacks have been carried out using bugs in smart contract software since then.
Although tools exist to verify and test the validity of smart contracts, they are not comprehensive. Even though there are tools to verify the correctness of smart contracts, they are not complete. Smart contracts, however, allow for a multitude of new uses for blockchain technology that cannot be achieved with the Bitcoin blockchain’s limited programming capabilities.
Shukla also notes that Bitcoin depends on the “Proof of Work,” which means that a lot of energy goes into maintaining the Bitcoin blockchain (1% of the total energy consumption in the world, according to Coinidol.com). He adds that Bitcoin’s limited programming capabilities and the lack of significant changes to its programming model make it impossible to have Proof of Stake.
Ethereum is moving from Proof of Work to Proof of Stake. Proof of Stake in Ethereum is a way to kill decentralisation. Only 0.1% of Ethereum users have 95 percent of Ether. Shukla says that Proof of Stake can only be used to verify the validity and integrity of transactions in Ethereum.
Experts say this is a good thing. Experts believe that “Proof of Work” because only a small number of people can mine Bitcoin and Ethereum blockchains due to the large amount of computational hardware required and the energy required to do so is more beneficial.