Bitcoin and other cryptocurrencies come about through a different means. These networks run around the clock completing complex equations and tasks that keep Bitcoin running. New Bitcoin is issued to these computer owners as a reward for their participation. Bitcoin is not backed by a major government or asset, so the value is based on others' willingness to use and trade the currency. For this reason, it is important for Bitcoin investors to only put in what they are willing to lose. Since its height in December , Bitcoin has fallen to about half the price, proving how risky of an investment it can be.
Like with the stock market, you would need a crystal ball to answer this question for sure, but many skeptics say Bitcoin may be past its peak. However, big fans of digital currencies say Bitcoin could increase tremendously over time. If you look around and see people bragging about their huge profits in Bitcoin, are you too late to the game? The answer is maybe. However, if you drank the Kool-Aid and think cryptocurrencies are the wave of the future, you have several cryptocurrency options to review. Ethereum and Litecoin are the most stable Bitcoin alternatives, but there are more than 4, cryptocurrencies traded today.
Bitcoin vs. Ethereum: What's the Difference?
Some investors believe that even if they missed the Bitcoin bandwagon that these other currencies will follow suit and offer massive returns. This is possible but unlikely. Other currencies will likely follow the trend of the biggest leaders, as is common in the stock market. If Google, Amazon, or Apple go up or down, other technology stocks tend to follow. The same can be expected in the cryptocurrency markets. It is possible that Bitcoin will double in price, but it is also possible it will fall to zero. Because they are not backed by a government or asset, Bitcoin and its cousins do not really represent anything.
They are only worth what someone is willing to pay for them. Whatever you do, do not invest more than you can afford to lose. Cryptocurrencies are a risky place to invest, and you never know what tomorrow will bring. It's also an open-source blockchain for conducting transactions, referred to as decentralised digital applications dapps or smart contracts. All of this requires power and energy. So to cover the cost, the Ethereum network creates tokens called Ether; this is the fuel that powers smart contracts.
Ether is also the cryptocurrency that you can buy, sell, or trade. A smart contract could be as simple as selling a second-hand bicycle or setting up a fundraising initiative without going through a crowdfunding site. Alternatively, smart contacts could facilitate complex financial agreements, including credit approvals, property purchases, insurance premiums, and much more. In other words, "smart contracts" could automate extremely complex transactions in a way that is fast, secure, and completely transparent.
Agreements that now take days and week to finalise could happen in a matter of minutes, or maybe even instantaneously. And this is only the tip of the iceberg. Ethereum's secure blockchain technology could make online voting a real possibility, ushering in a new age of democratic engagement and representation. It could also revolutionise the healthcare and legal industries, logistics, telecommunications, streaming services, education, social media, and e-commerce. Ethereum's biggest fans think this blockchain technology will form the basis of an entirely new internet, or what experts are calling Web 3.
In theory, the new web would be completely decentralised, giving users a chance to take back control of their information and create an organic online identity. This user-centric approach would incentivise the creation of networks where people and companies develop products and services that benefit everyone.
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It would also put an end to some of the more problematic big-tech practices we see today, including data mining, censoring particular political views, and manipulating user experience to create more addictive platforms. To look at this another way, web 2. As you can see, much of Ethereum's value comes from its future applications.
But will all this potential turn into a reality? Well, many people certainly think so. Ethereum has received public backing from some major players in the financial and tech spheres. The Enterprise Ethereum Alliance EEA is a global community of more than blockchain leaders, adopters, innovators, developers, and businesses from around the globe. The EEA helps promote the benefits of blockchain technology. While Ethereum and Bitcoin share many similarities, they were designed for entirely different purposes. And understanding how and why they differ is something you'll need to know before you can make a sound investment choice.
So here's a breakdown of the main difference between Bitcoin and Ethereum and what they mean for you as an investor.
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Ethereum is unlimited. The supply is continuous, although it will slow down as more coins are produced. Bitcoins are limited to 21million. Over time, this finite supply will increase demand, pushing up the value of each coin.
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Bitcoin is digital money that can be exchanged at any time. It's also a digital asset with a store of value. That means it can be saved, retrieved, and traded at a later date. This is why many investors see Bitcoin as digital gold. Ethereum is different. It's currency, Ether, is linked to smart contracts, and can only be traded after a set of predetermined conditions have been met. Broadly speaking, Bitcoin is money, whereas Ether is a fuel that powers the Ethereum network. In fact, it's often referred to as gas. Ethereum can verify transactions or blocks within 20 seconds. It takes Bitcoin around 10 minutes to process each block.
Bitcoin is over years old. It's the one cryptocurrency that most people have heard about.
Bitcoin has an established reputation and is now accepted by major retailers, including Microsoft, Starbucks, and BMW. So if or more likely when crypto goes mainstream, Bitcoin has a strong chance of becoming the currency of choice. So for first-time investors with a more limited bankroll, Ethereum is probably more attractive option. The Bitcoin and Ethereum blockchains are always being updated. But experts tend to agree that the Ethereum technology is more advanced and robust. It's faster and the transaction fees are cheaper than Bitcoin's.
Moreover, programmers are currently working on a major upgrade, known as Ethereum 2. The new platform will simplify Ethereum's blockchain, increase user security and transaction speed, and reduce barriers to entry, making the network accessible to anyone with a standard laptop. There's no official release as of yet.