Bitcoin vs Ether: How Ethereum pushes crypto beyond currency

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Bitcoin is not just the best-known cryptocurrency but also the oldest. Six years ago, Bitcoin dominated the crypto market with 81% share, but that has fallen to 41%. At $803 billion, Bitcoin is still the most valued token followed by the fast-emerging Ether — the currency of Ethereum platform — at $389 billion. What has driven Ether’s popularity? And where is it headed? Aseem Gujar & Partha Sinha find out… Bitcoin may be synonymous with crypto as it was designed as an independent virtual currency that could also be a hedge against inflation. To facilitate Bitcoin transactions, blockchain — distributed ledger technology — was developed by its anonymous creators in 2008. A teen, who was introduced to crypto by his father in 2011, realized that restricting blockchain to financial transactions was Bitcoin’s shortcoming and went on to conceptualize a new platform called Ethereum in 2014. Computer programmer Vitalik Buterin conceived Ethereum that uses blockchain for building applications that could enable secure property transactions or timely royalty payments to artists. Using Blockchain Both Bitcoin and Ethereum are decentralized, meaning that they are not issued or regulated by a central bank or other authorities. However, Ethereum, unlike Bitcoin, is helping crypto move beyond currency. For example, using some code on Ethereum, one can potentially pay crop insurance to a farmer based on drought data or even offer artists royalties every time a copy of their work is sold. Ethereum has its own built-in currency Ether, which can also help execute commands for programmable actions and smart contracts on the Ethereum blockchain. A self-executing contract written into lines of code and existing across a blockchain is called a smart contract. “While Bitcoin was envisioned as the currency for a truly decentralized online financial market, Ethereum was launched as a way to extend its applications on the blockchain,” said Vijay Pravin Maharajan, founder & CEO of BitsCrunch, a Chennai- and Munich-based blockchain start-up analytics. Ethereum’s focus is on extending the singular use of blockchain technology as against Bitcoin, which developed as an alternative asset and virtual currency that has no backing or intrinsic value, and no centralized issuer or controller. Ethereum’s design also enabled non-fungible tokens (NFTs) and decentralized finance (DeFi). NFTs are typically used to provide an ownership title to digital art, while DeFi refers to peer-to-peer financial services as against products from banks or other regulated entities. It is also Ethereum that has enabled ‘trust-less’ blockchain transactions for government-backed (fiat) money. In a decentralized setup, people need to trust the system rather than the other person. Gavin Wood, one of the co-founders of Ethereum, had said: “Ethereum commodities trust; it is a platform for zero-trust computing.” It means the platform doesn’t trust anyone and everything is subject to verification. What Are The Downsides According to industry experts, a blockchain system should have three basic attributes: decentralization, security, and scalability. Ethereum is decentralized and secure. However, scalability is a key pitfall. This issue was noted by Buterin in the white paper itself. “Like Bitcoin, Ethereum suffers from the flaw that every transaction needs to be processed by every node in the network,” the white paper said. Maharajan said that this is a highly inefficient system and can challenge businesses or projects that rely on the blockchain. However, he added that blockchain is an evolving technology and developers are working on improvements. What Should Investors Do According to industry players, Ether was never meant to compete with Bitcoin. However, it grew in popularity because of its use in various decentralized applications. “Ether should overtake Bitcoin soon based on its flexibility and versatility alone,” Maharajan said.

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