Ether, the world’s second-largest cryptocurrency, has just surpassed bitcoin in popularity. The digital currency surpassed $4,000 for the first time on Monday and is currently up more than 450 percent year to date.
That is a pittance in comparison to the gains on meme-inspired cryptocurrency dogecoin, which is up more than 11,000 percent year to date. However, many cryptocurrency investors see dogecoin as a joke, equating its growth to the Reddit-fueled trading frenzy that inflated the values of GameStop and other companies.
What Is Ether And How Is It Different From Bitcoin?
How Ether statrted
Ether is the native money of Ethereum, a decentralized blockchain platform that is open source. Ethereum was established in 2013 by Vitalik Buterin, a Russian-Canadian programmer, and many other cryptocurrency entrepreneurs. Many of the Ethereum founders were previously working with bitcoin.
Bitcoin, according to Buterin, lacked sufficient functionality. He likened it to a pocket calculator that “does one thing well,” but Ethereum is more akin to a smartphone with several apps.
That is the basic tenet of Ethereum. As with bitcoin, it is based on blockchain technology – a decentralized computer network that keeps track of all cryptocurrency transactions. However, unlike bitcoin, Ethereum allows for the development of applications.
According to Buterin, Ethereum is “a blockchain with an embedded programming language” and the “most natural method to actually develop a platform that can be used for a variety of other types of apps.”
On the Ethereum network, smart contracts are hosted — collections of code that execute a set of instructions and are executed on the blockchain.
These contracts enable decentralized applications, or dapps, which are comparable to smartphone apps that operate on Google’s Android or Apple’s iOS operating systems, except that they are not governed by a single corporation or government.
Recently, ether’s network has seen an increase in activity as a result of the growth of NFTs, or non-fungible tokens, which are digital assets meant to represent ownership of unique virtual things. That’s because Ethereum powers a large number of NFTs, from the vibrant online kittens of CryptoKitties to the cyberpunk-inspired avatars of CryptoPunks.
Simply said, bitcoin is a decentralized payment network that enables the transfer of value between two parties located anywhere in the globe. Today, it is mostly utilized for investment purposes. Ethereum, on the other hand, aims to build the infrastructure for a decentralized internet.
Decentralized finance is a hot topic in Ethereum right now, referring to conventional financial products such as loans and mortgages that are constructed on the Ethereum blockchain. In this situation, blockchain eliminates intermediaries — from banks to governments — and maintains complete transparency.
Criticisms of Ethereum
However, Ethereum is far from ideal. In 2017, due to the popularity of the game CryptoKitties, the ether network became very crowded, drastically delaying transactions and forcing the game’s creators to increase their fees.
Scalability is one of the most serious concerns facing the Ethereum network at the moment. It is presently based on a proof-of-work algorithm similar to bitcoin. This implies that bitcoin miners using specially designed computers must compete to solve complicated mathematical riddles in order to verify transactions.
This has resulted in critiques of both bitcoin and Ethereum from individuals concerned about their networks’ enormous energy consumption.
However, Ethereum is undergoing a massive update known as Ethereum 2.0. This would require it to switch to a “proof-of-stake” paradigm, in which new transactions are processed by “stakers” who already own some ether.
According to cryptocurrency investors, the update should enable the Ethereum network to operate at scale, processing a greater volume of transactions at a quicker rate and enabling applications with millions of users.
This might potentially result in a short-term price increase. As token holders want to become stakers and verify transactions on the new network, an increasing amount of ether is being stowed away for a “lockup” period. This might theoretically limit the supply of ether.
Nonetheless, some doubters remain skeptical of the legitimacy of digital currencies such as bitcoin and ether. The new increase has prompted comparisons to the 2017 crypto bubble, during which bitcoin surged to near $20,000 before dropping to as low as $3,122 a year later. Cryptocurrencies, according to bears, are in another bubble that is about to explode. However, bulls are sure that things are different this time around, especially, increasing institutional investor interest.