Ether, the second most valuable cryptocurrency behind Bitcoin, has been getting closer to its all-time highs. Why? Because of a plan to upgrade the Ethereum platform. Currently, the total value of Ether is close to $500 billion, but it’s growing. Just keep in mind that this is still less than half of the value of Bitcoin.
The question is this: could the upgrade, which is supposed to put a faster and more environmentally friendly twist to the current system, push Ethereum to the top of the pile of cryptocurrency? Let’s take a look:
Bitcoin and Ethereum are Very Different
Some people lump Bitcoin and Ethereum as one in the same, or identical competitors, but that just isn’t the case. They are, in fact, very different.
Bitcoin is set up as a system that allows traders to send some type of value to one another without needing an intermediary traditional bank. It can do this thanks to blockchains, which are like virtual ledgers that are checked, and then recorded, by a network of computers that are decentralized. This is known as Bitcoin “mining.” To make things even more interesting, Bitcoin is capped. This means that there is a limit of 21 million Bitcoins available to mine, and around 18 million have already been mined.
Ether is similar to Bitcoin, as in it is a cryptocurrency, but the platform, Ethereum, is quite different. It is software that has no host, and developers are able to build applications off of it. These applications can run without being connected to a particular company, and examples of this are exchanges, games, and insurance systems.
At the middle of this platform is the thought that contracts, which are agreements that are automated, ensure that the assets exchange hands when certain conditions have been met. All of the transactions use Ether, and the success of this is why Ether has been rising over the past couple of years.
Ethereum 2.0 vs. Bitcoin
Though you can say that Ethereum might have the advantage, there are several issues here. The first is that the network has become popular and congested, and thus, fees are expensive. The validators are prioritizing people who are willing to pay more for the transactions. For instance, currently, a crypto exchange called Uniswap is costing approximately $44 in fees. Bitcoin, at the same time, has a lot of congestion, too, but transactions are faster.
The second issue with Ethereum is that it has risen in popularity, and as more people trade, the power that you need to trade is more difficult to get. This is the same issue that Bitcoin is known for — it’s bad for the environment. In fact, Bitcoin mining is using just as much power to harvest the crypto as the entire country of the Philippines. Proponents of Bitcoin remind the critics that the network is starting to change to a more renewable energy process.
The creation of a new Ethereum, noted as Ethereum 2.0, will solve the issues that Ethereum has now, and that could really push it higher in value than Bitcoin. Currently, the system uses a validation system called “proof of work,” but it will change to a “proof of stake.”
“Proof of work” is a protocol where all of the validators attempt to solve difficult equations in order to prove that every transaction is valid. With a “proof of stake,” you don’t need the validators to do this because, instead, the system randomly chooses a transaction to confirm.
Many Bitcoin proponents don’t like a “proof of stake” system, as it gives more power to the largest validators, because there is more potential to corrupt the validation system. On the flip side, supporters of Ethereum say that “proof of stake” has a system of checks and balances that would prevent this from occurring.
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