Have you wondered what is the difference between Ethereum to Bitcoin, for example?
Since the introduction of Bitcoin, the world of payments has changed significantly. More and more people and organizations are developing cryptocurrencies every day in order to make transactions safer, easier and cheaper. Many businesses have started using cryptocurrencies as a payment method. However, their potential is even greater than that.
Let me explain to you what Ethereum is, what Ether is, how businesses use it and what the differences between it and Bitcoin are. Also in this article, you will find useful information on how and where to buy it.
What is Ethereum?
Ethereum was introduced in 2015 as an alternative to Bitcoin. As most digital currencies, Ethereum's software is based on the blockchain technology. Although it differs significantly from the one used in Bitcoin, let's leave that to the experts. What matters to us are the purposes we use them for.
If Bitcoin is primarily a peer-to-peer electronic cash system, Ethereum offers a wider range of possibilities. Many startups and businesses prefer Ethereum as a payment method as well as other uses, such as creation and development of applications.
The market cap of Ethereum is currently approx. $109 billion, second only to the omnipresent and pioneer in the cryptoworld Bitcoin.
According to Ethereum website, “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.”
What Are Ethers?
The decentralized blockchain of Ethereum is based on a token called Ether. By using tokens, developers can create their own application on the blockchain tehcnology. Not only do people use it to trade the coin (the way other cryptocurrencies are) but also to run their applications. This, on the other hand, can bring them some profit.
Ether is the token on which the platform Ethereum is based, and it makes sure all applications run smoothly and safely. This is the “payment” developers receive for their contribution to the network as well as other people part of the platform.
What's The Number Of Ethers?
Do we know the exact number of Ethers? Let's look at the things we know:
- Approximately 60 million Ethers were purchased during the presale phase in 2014.
- 12 million Ethers were dedicated to the Ethereum Foundation– these are the people who work on the underlying technology.
- Every 15-17 seconds, 5 Ethers are created. They go to the person who has verified the transaction.
- Around 18 million Ethers are mined every year.
- Sometimes miners find blocks which are not included in the blockchain and for this, they receive 2-3 tokens.
Keep in mind that, the number of Ethereums is fixed but the relative inflation is not. It decreases every year. This year, Ethereum is expected to change its algorithm– the new one is called Casper and it's more efficient. The team has regularly posted simulations and the last one was in August.
“In attempting to solve the nothing-at-stake problem, the cartel problem and the issue of finality, Casper promises to be, by a distance, the most advanced consensus mechanism to emerge in the public blockchain sphere.”
Differences Between Ethereum and Bitcoin
As I previously mentioned, Bitcoin is strictly a cryptocurrency while Ethereum is a whole platform on which people can create applications. Also, the technology allows people to create digital contracts, which can be authorized and verified automatically.
Why should businesses care?
Well, because Ethereum is based on the blockchain technology, running programs and applications on it can make them much faster. What's more, the whole process will be safer– the technology locates any malicious attempts to attack and disrupt the process. They are faster than the ones happening in Bitcoin. Data protection is one of the most important things for a business in this data-driven world.
Having said that, Ethereum enables companies to create decentralized apps that no third parties have access to.
When it comes to market cap – Bitcoin is the first one and Ethereum is the second one, with 203 billion and 109 billion respectively. Currently, Bitcoin's price is $12,450 and Ethereum's $1132. Even though Bitcoin's value has soared recently exceeding the cap of $15,000, I think that Ethereum has greater growth potential. Why? First of all, currently it's cheaper and much more affordable. Secondly, given the fact companies can use Ethereum for a wider range of activities is also a plus.
Investing in Ethereum
Not only are cryptocurrencies a great way to send or receive money or use applications but also a way to invest. Maybe you have read or heard things about Bitcoin and how people invest in it. So, if you want o buy coins and use them, you need to purchase a wallet.
What Is A Wallet?
Look at it from this perspective: it's like a personal bank account where you can “store” your money. The only difference is that you put cryptocurrency there not money. From there you can send them or receive more in the future.
Keep in mind that wallets are not a place where you can mine coins. This is just the place where you keep them once you have acquired them.
When you consider which wallet to buy, keep the following in mind:
- Does it have a private key?
- Easy to use?
- Is there a strong development community?
- Your data safe and backed-up?
- Is the wallet compatible with a different system?
I suggest you try Exodus– a desktop, multi-currency wallet with some great features.
Buy Ethers on Exchanges
If you want apples, you have to go the market and buy some. The same principle here. If you want to buy Ethers, you have to go to an exchange and purchase some. Why exchanges? All people who want to indulge in investing in Ethereum should remember that it is a currency
. You don't buy shares or securities. Simply said– you give dollars (euros, pounds, etc.) and you get Ethers. There is no interest rate or dividends. The only way you can benefit (besides all the things you can do using the Ethereum platform) is to speculate with the price of the tokens.
Coinbase: The Best Exchange Platform
One of the best exchanges is Coinbase. As per their site, the US-based exchange claims that it operates in 32 countries and has 11.5 million users. When you sign up, you actually create a wallet and you can start buying and selling the most popular cryptocurrencies including Ethereum.
Users prefer Coinbase due to its simplicity and user-friendly interface. There are no codes or difficult to understand features. You have a different account and you can see all the information structured. For example, how many Bitcoins, Etheres, dollar/euro, etc. From there you can actually start sending theifm and making transactions.
Are There Any Cons?
Nothing in this world is perfect; neither is Coinbase. Here are some of the drawbacks:
- You do not own the cryptographic keys compared, for example, to when you mine Ethers yourself
- The platform charges hefty fees on transactions
- There aren't options of margin trading or stop-loss orders
Alternatives to Coinbase
Nowadays, there are many exchanges which attract users all over the world. Below you can find the five 5 alternatives to Coinbase.
- Kraken – According to their website, this exchange is very liquid, affordable and reliable. Compared to Coinbase, it supports a wider range of cryptcurrencies as well as provides more options. Users can use stop-loss orders as well as margin trading.
- Poloniex – Based and regulated in the US, this website offers clients a secure trading process. The exchange stores your assets offline in a “cold storage” and guarantees protection.
- Butfinex – This exchange offers a wide range of currencies: Bitcoin, Ethereum, Litecoin and much more. Some of the options users can choose from are margin trading, margin funding, customizable interface, order types and others.
- Bittrex – A US-based digital exchange that supports trading with more than 190 currencies, including Ethereum. It also uses algorithmic trading which makes the process really fast and secure.
- GDAX – It's a world-class trading platform and its interface, in my opinion, looks great. It has some awesome real-time charting tools and has 0% makers fees. As a security precaution, the exchange stores up to 99% of its customer's data offline.
Cryptocurrencies are definitely worth researching both as a payment method and an investment. Currently, the two major players are Bitcoin and Ethereum. Businesses and individuals alike have started using the Ethereum network as it gives them secure, smooth and fast transactions.
In addition, it enables users to develop and run privately their own applications. Last but not least, Ethereum allows people to invest and trade the underlying token.