If you ask anyone about the top cryptocurrencies at the moment, the answer will definitely be Bitcoin and Ethereum, followed by Ripple, Litecoin, Dash and so on. Most of them will also say that Ethereum will kick Bitcoin’s butt in the near future, thanks to its rapid growth. They are convinced that Ethereum is the currency of the future. But what are they missing?
Bitcoin was the first cryptocurrency to come into existence, no dispute there. But, it was created as a decentralized open source digital currency for peer to peer transaction of monetary value. To make it even more simple, the creation of bitcoin can be equated to the creation of money. Now if you have read about the qualities of ideal money, then you will know that Bitcoin satisfies all of them.
Now, what about Ethereum? The Ethereum protocol is a late comer to the cryptocurrency game and rightly so, because the whole concept of Ethereum is not built with just the blockchain, but blockchain 2.0 and blockchain 3.0 in mind. Ethereum is not a monetary platform but a smart contracts or blockchain-based applications platform. Then the next obvious question, why does ether have a value associated with it, if it doesn’t have any monetary purpose? Ether is a necessary evil, which one has to put up with for multiple reasons.
Ethereum is a blockchain based decentralized application platform. For a blockchain to exist, there has to be a network of users and crypto tokens have to be transacted along with the data in order to store any information on the blockchain. The same holds good for Bitcoin blockchain as well. Also, how do you create a truly decentralized network without the participation of the community? No, you can’t and in order to get the community to contribute their processing power to the network, they have to be incentivized. That’s what ether does.
Also, being an open source decentralized application platform, anyone can create Dapps or smart contracts and host them over the Ethereum protocol. Keep in mind that each application consumes processing power to run and the processing power is being contributed by the community. If there is no cost associated with hosting applications on the Ethereum blockchain, the chances of it being spammed by useless applications created by anyone and everyone is much higher. However, if there is a cost involved, then only useful Dapps with a purpose are hosted on the network, thus making meaningful use of processing power. Ether makes all these things possible.
There are inbuilt features included into the Ethereum platform to prevent it from going the Bitcoin way. Ethereum protocol does not support ASIC mining, only CPUs and GPUs can be used to mine ether. This will ensure a constant stream of processing power over the network, ensuring a broad community participation. Anyone with a decent computer or a gaming rig can mine Ethereum. The supply of ether is not limited; the protocol is designed to annually increase the total amount of ether that can be mined. This will limit the rise in ether value. Miners receive ether as rewards for their contribution to the network and developers have to deposit/send ether to host, maintain and operate the Dapps and smart contracts on the platform.
Having said this, the use case of both Bitcoin and Ethereum is completely different from each other. So those who still think that there is some sort of rivalry between both the platforms, can rest easy for now.
Disclaimer: The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of NewsBTC. Header Image: NewsBTC