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LONDON — Ether, the world's second-largest cryptocurrency, has been stealing the limelight from bitcoin lately. The digital coin hit a record high above $4,000 on Monday and is now up more than 450% since the start of 2021.
That doesn't come close to the returns on meme-inspired crypto dogecoin, which is up over 11,000% year-to-date. But many crypto investors dismiss dogecoin as little more than a joke and have compared its rise to the Reddit-fueled trading frenzy that pumped up the prices of GameStop and other stocks.
Here is a breakdown of what ether is and how it's different from bitcoin:
How it started
Ether is the native currency of Ethereum, an open-source blockchain platform. Ethereum was founded in 2013 by Russian-Canadian programmer Vitalik Buterin and several other crypto entrepreneurs. Many of the people who started Ethereum were previously involved in bitcoin.
For Buterin, bitcoin was too limited in functionality. In an interview with Business Insider, he compared it to a pocket calculator that "does one thing well," whereas he said Ethereum is more like a smartphone with multiple applications you can use.
That's the main premise of Ethereum. Like bitcoin, it's built on blockchain technology — essentially a distributed computer network that records all cryptocurrency transactions. But unlike bitcoin, people can build apps on top of Ethereum.
In Buterin's own words, Ethereum is "a blockchain with a built-in programming language" and the "most logical way to actually build a platform that can be used for many more kinds of applications."
Smart contracts
The Ethereum network hosts what's known as smart contracts — collections of code that carry out a set of instructions and run on theblockchain.
These contracts are what power decentralized applications, or dapps, which are similar to smartphone apps that run on Google's Android or Apple's iOS operating systems, except they don't answer to one company or authority.
Recently, activity on ether's network has surged thanks to the rise of NFTs, or non-fungible tokens, which are digital assets designed to represent ownership of unique virtual items. That's because many NFTs — from the colorful online cats of CryptoKitties to the cyberpunk-inspired avatars of CryptoPunks — run on Ethereum.
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Put simply, bitcoin is a payments network that can be used to transfer value between two people anywhere in the world. Today, it's mainly used for investing. Ethereum, on the other hand, is aiming to create the infrastructure for an internet that isn't maintained by any single authority.
A big trend in Ethereum right now is decentralized finance, a term that refers to traditional financial products like loans and mortgages that are built using blockchain. In this case, blockchain replaces the middlemen — from banks to governments — and keeps track of everything.
Criticisms
Ethereum is far from perfect, though. In 2017, the popularity of the game CryptoKitties caused ether's network to become heavily congested, slowing transactions significantly and leading the game's developers to raise their fees.
Scalability is one of the biggest issues with the Ethereum network today. It currently operates using a proof-of-work protocol, similar to bitcoin. This means that cryptocurrency miners with purpose-built computers have to compete to solve complex mathematical puzzles in order to validate transactions.
This has led to criticisms of both bitcoin and Ethereum from those who are worried about the massive amounts of energy consumed by their networks.
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But Ethereum is undergoing an ambitious upgrade called Ethereum 2.0. This would see it move to a "proof-of-stake" model which relies on "stakers" who already hold some ether to process new transactions.
Crypto investors say the upgrade should help the Ethereum network run at scale, processing lots more transactions at a faster pace and supporting apps with millions of users.
It could also lead to short-term price appreciation. More and more ether is gettingstashed awayfor a "lockup" period by token holders seeking to become stakers and validate transactions on the new network. This could, in theory, limit the available supply of ether.
Still, some skeptics remain unconvinced by digital currencies like bitcoin and ether. The latest rally has reminded some investors of the 2017 crypto bubble, in which bitcoin ran up toward $20,000 before plummeting as low as $3,122 a year later. Bears say cryptocurrencies are in another bubble that's waiting to burst. But bulls are convinced things are different this time — namely, increased interest from institutional investors.
FAQs
Bitcoin is primarily a store of value, while Ethereum is functional, enabling the execution of applications and smart contracts. Bitcoin is sometimes described as 'digital gold' and Ethereum as 'digital silver'.
What is the main difference between Bitcoin and Ethereum? ›
Bitcoin is primarily a store of value, while Ethereum is functional, enabling the execution of applications and smart contracts. Bitcoin is sometimes described as 'digital gold' and Ethereum as 'digital silver'.
Is it better to invest in Ethereum or Bitcoin? ›
Buying either crypto requires a high risk tolerance. Looking at past performance, it's difficult to choose a winner between Bitcoin and Ether because their relative returns fluctuate depending on the time frame. In the past year, Bitcoin prices are up 157% compared to a 100% gain for Ether.
What is the point of Ethereum? ›
Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network that securely executes and verifies application code, called smart contracts. Smart contracts allow participants to transact with each other without a trusted central authority.
What is the difference between BTC and ETH? ›
Table
| Bitcoin | Ethereum |
|---|
| Transactions | 7 transactions per second | 30 transactions per second |
| Supply | 21 million limit | Unlimited |
| Use cases | Digital money | DeFi, NFTs, DAOs |
| Price | Leads entire crypto market | Follows Bitcoin, leads DeFi, NFTs, DAOs |
2 more rowsEvery cryptocurrency has transaction fees built into their basic operating structure. Bitcoin (BTC 1.26%) calls it a network fee, Ethereum (ETH 0.61%) transactions result in gas fees, and the Solana (SOL 1.72%) platform simply refers to processing costs as transaction fees.
Who owns Ethereum? ›
Ethereum is an open-source blockchain platform built by hundreds of thousands of developers from around the world. Since Ethereum is a decentralized network, no single entity controls or owns it.
Who will win Bitcoin or Ethereum? ›
Ethereum, it depends entirely on your requirements. While Bitcoin works better as a peer-to-peer transaction system, Ethereum works well when you need to create and build distributed applications and smart contracts. The choice is entirely up to you to choose a winner between Bitcoin vs. Ethereum.
How much Ethereum to be a millionaire? ›
At a price of $166,000, six ETH would be worth roughly $1 million. Currently, six ETHs cost around $20,000. For reference, the entire market cap of the S&P 500 is roughly $40 trillion. Additionally, the entirety of the world's above-ground gold reserves are estimated to be worth around $16 trillion.
Can Ethereum beat Bitcoin? ›
Will Ethereum ever Outperform Bitcoin? Given the highly volatile nature of the crypto market, various possibilities exist in the realm of cryptocurrencies, including the potential for Ethereum to surpass Bitcoin. As witnessed in 2021, ETH outperformed BTC, gaining nearly 400% compared to Bitcoin's 66%.
It allows developers to build and deploy applications and smart contracts. Ethereum utilizes its native cryptocurrency, ether (ETH), for transactions and incentivizes network participants through proof-of-stake (PoS) validation.
How does Ethereum make you money? ›
Ether coins are created using what's known as a “proof-of-stake” process. In this process, the cryptocurrency relies on the owners of the coin, stakeholders, to validate transactions in the cryptocurrency. In return, validators earn rewards in the form of ether coins.
Should I keep my money in Ethereum? ›
Sassano is optimistic about the investment potential of Ethereum, based on potential price appreciation of ETH as well as the inherent earning potential within the Ethereum network. “I continue to believe that ETH is the best risk-adjusted investment across any asset class for the long-term,” Sassano says.
Why do people use Ethereum instead of Bitcoin? ›
Supply Limit: Bitcoin has a capped supply of 21 million coins, emphasizing scarcity to preserve value. Ethereum, on the other hand, does not have a fixed supply limit, which is intended to facilitate its broader use in executing smart contracts and running DApps.
Should you buy Bitcoin or Ethereum? ›
Bitcoin remains the most highly valued cryptocurrency. Bitcoin has seen greater acceptance by traditional finance, evidenced by the approval of spot Bitcoin ETFs in 2024. Ethereum can support smart contracts, software programs that execute automatically when certain conditions are met.
Does Ethereum have a future? ›
Story Highlights. The live price of the Ethereum token is $ 3,171.59674227. ETH price could end the trade for July 2024 with a potential high of $3,730. By the end of 2030, the predicted Ethereum price could soar to a peak of $26,575.21.
Is Ethereum more secure than Bitcoin? ›
Security Comparisons
While both Bitcoin and Ethereum are highly secure thanks to encryption and blockchain technology, both have different approaches towards achieving security. Bitcoin's PoW system deters attacks because it is highly demanding in terms of computing power and energy.
Why is Ethereum worth more than Bitcoin? ›
Ethereum has more uses than Bitcoin.
Ethereum is a payments network too, and it's the No. 1 smart contract blockchain. I wrote about how Ethereum smart contracts work over here, but the TL;DR is that they allow developers to build all kinds of decentralized applications (dapps) on Ethereum.
What gives Ethereum value? ›
Investment Demand: As a popular cryptocurrency, Ethereum is often in demand as an investment asset. This demand can drive up its price, making it a potentially profitable investment.
How much will Bitcoin be worth in 2030? ›
Bitcoin (BTC) Price Prediction 2030
| Year | Price |
|---|
| 2025 | $ 67,942.94 |
| 2026 | $ 71,340.08 |
| 2027 | $ 74,907.09 |
| 2030 | $ 86,714.32 |
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