The main difference is the type of category in which they are included. While Bitcoin is used to make payments, Ethereum is a platform to build other projects and their respective cryptocurrencies.
Ethereum is an inflationary cryptocurrency, so it does not have an issuance limit. But this does not mean that it is unlimited. Its token, Ether, is the gasoline or native means of payment that other projects use and that as it is used, it is liquidated as if it were a traditional fuel.
Another big difference is the consensus algorithm; in this case, it uses the proof of work, and the standard token is ERC-20.
Its primary function is the execution of smart contracts.
How does Ether work?
Do you know how to invest with inflation on the rise, or do you still think it is a thing of the past?
Like any other cryptocurrency, Ethereum has its Blockchain or digital ledger, where it houses all transactions through data mining.
The logic is similar to that of Bitcoin:
Miners are responsible for verifying transactions to form blocks and encode them by solving complex algorithms. Processing time is around 14 seconds. The new blocks are intertwined with the previous block, and the miner receives a reward. Currently, they are approximately five Ether.
The Ethereum blockchain works similarly to Bitcoin, but it allows developers to program software with which transactions with smart contracts are managed and automated.
It ensures that it is met as soon as all the conditions of the same are met. An example of this would be that you decide to send a certain amount of ethers on a predetermined date. In this way, once the date is reached, the ethers from your wallet will be sent to that of the other counterparty.
Their potential is unlimited since it will respond to the programmers’ indications in each smart contract.
The main characteristics of these are:
Cut out the middlemen. They are logged, encrypted and duplicated on the public Blockchain, where all users can see the market activity. Eliminate the time and effort required in manual processes
Although it is a novel and attractive process, there are still many aspects of being polished. Any mistake in the programming code can spoil the final result.
Blockchain technology itself can revolutionize web-based services, as well as industries with long-established contractual practices. For example, the insurance industry owns more than $ 7 billion in sloped life insurance money, which can be pretty and transparently redistributed using Blockchain. Furthermore, with the implementation of intelligent contracts, customers can submit their insurance claim online and receive instant automatic payment, assuming that their claim met all the required criteria.
Essentially, the Ethereum blockchain can bring its fundamental principles – trust, transparency, security, and efficiency – to any service, business, or industry.
Ethereum can also be used to create Decentralized Autonomous Organizations (“DAO”), which operate entirely transparently and independently of any intervention without a single leader. DAOs are managed by programming code and a collection of smart contracts written on the Blockchain. It has been designed to eliminate the need for one person or group to have complete and centralized control of an organization.
DAOs are owned by people who bought tokens. However, the number of tokens purchased does not equal shares and ownership. Instead, tokens are contributions that provide people with the right to vote.
Advantages of Ethereum
The Ethereum platform benefits from all the properties of the Blockchain technology with which it works. It is entirely immune to any third-party intervention, which means that no one can control all decentralized applications and DAOs deployed within the network.
Any Blockchain network is formed around a consensus principle, which means that all nodes within the system need to agree on every change made within it.
Disadvantages of Ethereum
Even though smart contracts are meant to make the network fail-safe, they can only be as good as the people who write the code for them. There is always room for human error, and any errors in the code can be exploited. If that happens, there is no direct way to stop a hacker attack or exploit the said bug. The only possible way to do this would be to reach a consensus and rewrite the code behind it. However, this goes entirely against the very essence of the Blockchain, as it is supposed to be an immutable and unalterable ledger.
The DAO, which is the name of a particular DAO launched on April 30, 2016, was attacked, and more than 3.6 million Ether tokens were stolen from it. The attacker exploited a “recursive call bug” in the code, essentially draining the funds from the DAO into a “child DAO”, which had the same structure as the DAO. The loss of a large chunk of DAO funding was not the only consequence of the attack, as it undermined user trust throughout the Ethereum network, with the value of Ether falling from more than $ 20 to less than $ 13.