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    Chet Bitcoin is different from Ethereum

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    Crypto News






    The first cryptocurrency in recent years has become a vehicle for transferring and storing value, while altcoin is actively used by developers as a platform for creating decentralized applications.


    Bitcoin is often compared to Ethereum and various predictions are made about the future of these assets. For example, in August, the head of the analytical company CryptoQuant, Ki Yong Joo, said that altcoin will outstrip the main cryptocurrency in terms of capitalization. He substantiated his prediction with the transition of Ethereum to protocol 2.0, which will increase the scalability, security and decentralization of the blockchain.

    Over the past two months, important changes have taken place on the Ethereum network. In early August, the London update was released, which launched the token burn mechanism. Thanks to this, on September 4, for the first time in the history of Ethereum’s existence, the emission of the altcoin became negative. More digital coins were burned that day than new ones were issued.

    Burning is the destruction of a certain number of tokens to reduce their number in circulation. This method is used to combat inflation and increase the value of cryptocurrencies. All coin burning operations are recorded on the blockchain as a transaction, and anyone can verify that the coins have been destroyed.

    At the same time, in the blockchain of the first cryptocurrency, the deflationary model was initially laid down, since the number of bitcoins is limited to 21 million (at the moment, almost 19 million have been mined). It is also worth considering the fact that about 20% of the bitcoins already mined ($ 158 billion at the current exchange rate as of September 28) are on wallets, passwords to which were irretrievably lost. This reduces the amount of Bitcoin in circulation.

    In November of this year, the Taproot update will be released on the bitcoin network, which will add the ability to create smart contracts on the blockchain of the main cryptocurrency.

    How Bitcoin differs from Ethereum

    Bitcoin was created as a peer-to-peer payment system, the performance of which depends entirely on its users. The creator of bitcoin Satoshi Nakamoto argued in the “white paper” that the main advantage of the cryptocurrency is its decentralization and the absence of privileged users who could somehow influence the network.

    Ethereum also has the structure of a decentralized peer-to-peer payment system with the token of the same name, however, altcoin developers have gone further and developed a virtual machine that allows the creation of smart contracts and decentralized applications (dApps). The technology has proved to be so successful that it is already being used by major companies such as Microsoft, IBM, Sberbank, Lufthansa, the international charity UNISEF and others.

    At the moment, many different projects are working on the Ethereum blockchain: from games (CryptoKitties, Axie Infinity) to NFT marketplaces (OpenSea) and decentralized crypto exchanges (Uniswap).

    The first cryptocurrency is based on the Proof-of-Work (PoW) algorithm, which requires a lot of computing power from miners to keep the network operational and conduct transactions. The PoW algorithm was also used to create Ethereum, but at the moment the altcoin is in the active phase of switching to another algorithm – Proof-of-Stake (PoS), which completely excludes mining. In PoS, the network is ensured by the cryptocurrency holders and rewarded for this. This process is called staking.

    Not competitors

    Bitcoin and Ethereum were initially positioned as completely different projects, says Mikhail Karkhalev, financial analyst at Currency.com crypto exchange. According to him, Ethereum is more of a technology for creating decentralized applications, while Bitcoin has become a vehicle for transferring and storing value.

    “There is no point in treating them as competing products,” the analyst explained.

    Ethereum has already confidently taken its place in the market, but other similar projects will appear that can compete with it, said Karkhalev. He also added that there are more and more other blockchains for creating decentralized applications, since the creation of Vitalik Buterin is far from ideal.

    Last week, buyers of TIME magazine’s non-fungible tokens spent four times as much on commissions as buying the NFTs themselves. One of the users paid a commission of more than $ 70K when buying 10 NFT tokens from TIME, the cost of which was 1 ETH ($ 3.1K at the time of purchase).

    According to Karkhalev, at the moment there are no projects on the crypto market that could make real competition to bitcoin. A similar project is Litecoin, but if Bitcoin is “digital gold”, then LTC is “digital silver,” the analyst summed up.

    Litecoin is a digital coin that was created on the basis of the bitcoin blockchain. It differs from the first cryptocurrency in its low commission and fast transactions.

    Different statuses in the industry

    Ethereum is the backbone of blockchain products and, in principle, the foundation of the modern blockchain industry, while bitcoin is an exchange-traded investment asset with a limited supply and characterized by deflationary properties, said Viktor Pershikov, lead analyst at 8848 Invest. According to him, from the point of view of investment attractiveness, these assets can be compared if we consider them as digital tokens, but from the point of view of their fundamental characteristics, these assets differ dramatically.

    In the future, one should not expect any confrontations between Bitcoin and Ethereum, since the main cryptocurrency has taken its niche “whipping boy” from the standpoint of regulators and financial authorities, as it identifies the entire sphere of digital assets in its person.

    Author: Alexey Korneev

    Chet Bitcoin is different from Ethereum

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    #Chet #Bitcoin #Ethereum

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