Bitcoin was the first cryptocurrency, and years later, it still leads the pack in terms of popular opinion and market value. That said, Bitcoin can’t rest on its laurels forever, and other promising cryptocurrencies like Ethereum are now starting to generate a lot more hype.
To find out why Ethereum’s star is finally rising, check out the five things Ethereum does better than Bitcoin described below.
1. Faster Transaction Verifications
Bitcoin’s network takes around ten minutes to verify transactions, while transactions using ether, Ethereum’s associated cryptocurrency, take just ten seconds. Ethereum is also working to reduce its block times even more in an attempt to make online and in-person transactions more secure. In anticipation of the change, many investors and crypto enthusiasts are now buying Ethereum in Canada instead of or in addition to bitcoin.
Wondering why fast transaction verifications are so important, especially for in-person purchases? Think of it this way: if someone purchases a product online using cryptocurrency, then pulls the order just a few minutes later, it’s easy for the merchant to cancel the order and stop the product from shipping.
If someone uses cryptocurrency to buy that same product in person, walks out of the store, and cancels the order five minutes later, the merchant is out both a valuable product and the cryptocurrency used to purchase it. Faster transaction times have been driving an increased acceptance of ether as a valid mode of currency for in-person transactions largely because it poses less of a risk to merchants.
2. Proof of Stake vs. Proof of Work
Both Bitcoin and Ethereum miners use computing power to solve cryptographic puzzles and create more blocks. However, while Bitcoin still uses a proof of work algorithm, Ethereum made the switch last year to a proof of stake system. The proof of stake system allows ether mining to remain decentralized and all but eliminates the risk of a 51% attack, which remains a serious security concern for Bitcoin.
A 51% attack could only occur if a group of miners controlled more than 50% of the computing power behind the bitcoin creation system. That said, if this circumstance were to arise, it could allow malicious actors to reverse recent transactions and prevent new ones from gaining confirmations, creating severe disruptions to the system. In 2014, one mining pool actually achieved over 50% of the computing power, but they voluntarily split.
Proof of stake changes the game. It creates a more decentralized system that gives more mining power to a larger group of people. In addition to reducing security risks, proof of stake also has faster block times, requires less energy consumption, and creates lower transaction fees.
3. Smart Contracts
Smart contracts were developed on the Ethereum network and they rely on the Ethereum Virtual Machine’s Turing-complete coding language. They involve two parties coming to a mutual agreement to perform a transaction conditionally on a future event. If the event happens, the smart contract automatically triggers the transfer of funds with no way for either of the signees to go back on their word.
The idea of smart contracts is still very new, but it has a lot of staying power. Think about the insurance industry as just one example. The ability to sign a conditional contract that triggers payments automatically should a future event occur eliminates the need for lengthy negotiations, lawyers’ fees, and heading to court to get what signees are owed.
While some people feel that smart contracts could never be adopted because they would eliminate too much of the bureaucracy that powers the government, that’s a bit irrational. The idea is new, but it’s already quite powerful, and there’s no going back now.
4. Distributed Apps
Distributed Apps (dApps) are created by developers and built on top of Ethereum’s blockchain. Since they perform all of their computations on the blockchain, they have no distributed server. The ability to create dApps removes issues of censorship from app creation and opens up a whole world of possibilities in decentralized development.
Some people complain that Ethereum has not lived up to its hype in terms of dApp creation possibilities. In most cases, centralized web servers still provide a better option for hyper scaling. There are, however, a lot of intriguing possibilities for decentralized dApps, and the geniuses at Ethereum are still working hard to bridge the technological gaps required to bring them into the mainstream.
5. The Dev Community
While both Bitcoin and Ethereum rely significantly on developer communities that consist of tech enthusiasts willing to volunteer their time to contribute to open source repositories, Ethereum has taken things one step further. It’s still maintained by open-source developers, but there are also numerous private developers who create blockchain apps that leverage the Ethereum dev platform.
Ethereum’s private developers contribute to its digital app store with the intention of making revenue, but they pose no risk to its decentralized nature. Instead, these industry professionals flock to Ethereum because it provides a more advanced dev platform that is largely extensible and features its own programming language. They choose Ethereum because the platform makes decentralized development easier, especially early on in blockchains.
Which Is the Best Choice?
Currently, Bitcoin is still worth more than Ethereum, but people in the know are starting to flock to the newer platform. Its proliferation of advanced decentralized development features, reduced risk of attacks by malicious miners, faster transaction times, and lower energy consumption and fees mean that Ethereum very well could be the cryptocurrency of the future.
For developers, the choice is obvious. Ethereum is the better option. It allows for decentralized app creation, more effective smart contracts, and greater flexibility.
For investors, there’s no need to choose between the two. Investors can purchase and hold both bitcoin and ether, hedging their bets while the world decides how it feels about each of these blockchain giants. As with traditional assets, it’s often wise to diversify cryptocurrency portfolios because markets change, and so does the technology that underlies these thoroughly modern decentralized currencies.