13 Jul, 2017 | BANKSY
How Ethereum is Set to Overtake Bitcoin in 2018? In order to understand how Ethereum is set to overtake bitcoin we will introduce key Ethereum concepts first. Once this is done we will address the core issue of concern in this guide: why we think Ethereum will be the most important cryptocurrency in 2018
‘Ethereum' a term that often works the tongue while pronouncing it. But yet, it is a word that we must become accustomed to in the new found world of blockchain technology. By definition, Ethereum is a decentralized platform that runs smart contracts. The platform was developed by Ethereum Foundation, a Swiss non-profit, with some expert advice from great minds across the globe. The platform dawns us to a new found world of blockchain technology where all applications run exactly as programmed without fraud, third party interferences, or even a downtime. This is a feature that is only unique to Ethereum. That said, Ethereum's applications potential are endless. As a matter of fact, Ethereum does not just offer a platform. It helps developers create markets, store registries of debts as well as move funds in accordance with past instructions. Ethereum is braised to change the global technological infrastructure as we know it. Most cars run on gasoline while others have to be plugged in before they go out. With Ethereum, Ether, a new form of gasoline is required, something that all these new and exciting applications need in order to run. It is a platform-specific cryptographic token. Think of it as a ticket that gets you through the gates into a concert or a football match. There is so much that is happening right now around the Blockchain Technology. New applications are being developed and by default, new terms, concepts, and languages. It is therefore imperative to keep pace with these changes.
Here is a list of key Ethereum terms: • Decentralized Application – It is a service that operates without a middle man. Ethereum application allows for direct interaction between end users and resources without a central trusted party. • DAO – denoting a Decentralized Autonomous Organization, is a set of smart contracts on the blockchain whose work is to codify and/or automate the workings of an organization. • Identity – This is a verifiable interaction and/or property that pinpoints to its creator. • Unique Identity – This is a set of cryptographically verifiable interactions which identify the user to have been created by the same person while added constraints prevent people from having multiple identities. • Digital Identity – Involves a set of cryptographically verifiable transactions using the same public key. This has been said to be similar to "voting" in a real-world scenario. • Reputation – Ethereum is endeared as one of the most promising cryptocurrency technologies following in the footsteps of Bitcoin in terms of success. It has slowly been building up its awareness over the last few years and is now already available in major forex brokerage platforms. • Escrow – Most online payments are made through Escrow. It is a kind of technology that keeps funds held up between the two transacting parties for a given time until all parties are happy with the service offered. Generally, a third party creates a medium where two mutually untrusting entities can transact without fear of losing funds through fraud. • Ethereum – This is a decentralized platform that runs smart contracts. In a nutshell, Ethereum is nothing more than a service that utilizes Blockchain technology to facilitate cryptocurrency trading. • Ethereum Client – when you run the Ethereum software on a computer, you create what we call a Blockchain. The blockchain is accessed by connecting through a client software. • Ethereum Wallet – is used to connect to the Ethereum blockchain network. Users can create accounts and also transact from one Ethereum account to another • Ethereum Account – Ethereum accounts are made up of blockchain public address with 40 hex characters and a private key. The two, respectively, from the user id and the pass key for the respective clients • Smart Contract – is a computer program that can execute the terms of a contract when set conditions are met. It's pretty much like a Forex EA, where trading conditions and rules are set by the trader to enable the system to trade autonomously. • Miners – These are nodes in the Ethereum network that receive, propagate, verify, and execute transactions. It is part of the overall infrastructure which other than enabling transactions, makes sure that the process is safe from manipulation. • Ether – Ethereum network's medium of exchange. Also known as, Ethereum's value-token. You can try to relate this with Bitcoin's bits for easier understanding.
Both Ethereum and Bitcoin are as similar as they are completely different. Ethereum has often been misconstrued as yet another cryptocurrency but as we have already seen. Such is not the case. These are some of the main differences and comparisons between the two entities. Bitcoin identifies as a cryptocurrency whereas Ethereum offers a lot more than just a medium of exchange. It features smart contracts, Ethereum Virtual Machine (EVM) and also uses its currency, Ether, for peer-to-peer contracts Bitcoin's average block time is 10 minutes whereas that of Ethereum is 12 seconds. The faster block time allows for more block confirmations which give Ethereum clients an opportunity to complete more blocks and thereby receive more Ether. Ethereum raised its capital in a pre sale by fans from around the world whereas majority of the Bitcoin in circulation is owned by the early miners The majority of the Bitcoins have already been mined whereas, it is estimated only about half of all Ethereum's coins will have been mined by the year 2021. Ethereum uses Ethash, an algorithm that allows decentralized mining by Ethereum clients whereas, Bitcoin uses a centralized ASICs. In terms of costing, Ethereum costs transactions depending on storage needs, application complexity and bandwidth usage. Bitcoin, on the other hand, limits transactions by block size with these blocks competing with each other equally to the blockchain. Ethereum features its own Turing complete internal code whereas Bitcoin does not have this capability. Ethereum allows both permission and permission-less transactions to take place, whereas Bitcoin only works in a permission-less way.
Advantages of Ethereum.... • Ethereum clients can design and issue their own cryptocurrencies which can be used to represent virtual shares, assets or anything the client wishes • Ethereum allows its clients to create contracts and source for funds without the involvement of a central party such as banks and/or other financial institutions. • Ethereum's potential applications are only limited to users' level of imagination. From creating a virtual organization where members can vote and deliberate on issues, to creating their own countries with a unchangeable constitution. • Ethereum's GHOST protocol allows for a faster block time, about 12 seconds, which leads to quicker confirmation of blocks. • Ethereum uses a proof of work algorithm called Ethash to rewards its miners. This ensures that every miner is rewarded for their work, often with 5 Ether for each block mined.Warnings Ethereum has faced heavy criticism for potential security problems and after $50M in Ether was claimed by an anonymous entity in June 2016. This attack raised more questions than answers resulting in a dispute that saw Ethereum split into two Ethereum (ETH) and Ethereum Classic (ETC). Subsequent attacks saw Ethereum improve its DDoS protection, de-bloat the blockchain, and thwart further spam attacks by hackers. Ether's constant price fluctuation is seen warning sign to investors but some traders see this as an opportunity to buy and sell more Ether. Recent price surges have been a revelation to a lot of Ethereum clients with reports of up to 5,000% increase being recorded
Technology Used in Ethereum....Ethereum uses the blockchain technology but it is a little different than what we see with Bitcoin. Instead of giving users a set of predetermined operations, Ethereum gives users the freedom to create their own operations. In this sense, Ethereum is a programmable blockchain. It can be thought of as a blank canvas to which every artist can draw anything using their own laws and protocols. Therefore, it is up to entrepreneurs and developers to decide what they can use Ethereum for. The applications are as many as the reach of your imagination. While Bitcoin allows for individuals to exchange cash without involving middlemen like banks and other financial institutions, Ethereum's impact is believed to be far more reaching. Financial interactions of any complexity could be carried out automatically and with much ease purely on Ethereum code. The applications are endless and are only limited by the strength of your imagination.
How Ethereum Works....Since Ethereum is a blockchain technology just like Bitcoin, the two share certain features and technologies. Unlike Bitcoin where a blockchain is purely a list of transactions, all state transitions on the Ethereum blockchain are transfers of value and information between Ethereum accounts. There are two main types of Ethereum accounts. They include: • Externally owned accounts (EOAs) and, • Contract Accounts Externally Owned Accounts These are controlled by private keys executed by human users. This gives users control over the EOAs. Contract Accounts, on the other hand, are not influenced by human users. However, they can be controlled by an EOA which has been programmed with a specific address. It follows sooth that whoever owns the private key for an EOA programmed to control Contract Accounts then has the power to Control that Contract account. Contract Accounts These are secure because they cannot independently perform random number generation or API calls. They can only do so when instructed by an EOA. Ethereum users are required to pay a small transaction fee to the Ethereum network for each step of the program they activate. This protects the Ethereum blockchain from hackers and other malicious computational tasks. Users usually pay for these fees using Ether, Ethereum's value-token. Inside the Ethereum network, all transaction fees are collected by the nodes that validate the network. These nodes make up what is now termed as "miners". Ethereum miners group all transactions and put them together into "blocks" and then competitively put them in line to feature in the next blockchain. For every successful block mined, miners are rewarded with Ether. This endeavor creates a market where people dedicate their resources in exchange for Ethereum's value-token.
Products of Ethereum Trading Ethereum is traded across major exchanges by buying and selling the value-token, commonly known as Ether against major cryptocurrencies like Bitcoin, Litecoin and other altcoins. Ether is also traded against the USD. Some of the tradable pairs include: ETH/BTC – Ether against Bitcoin ETH/XMR – Ether against Monero ETH/ZEC – Ether against Zcash ETH/DASH – Ether against Dash ETH/XRP – Ether against Ripple ETH/STEEM – Ether against Steem ETH/ETC – Ether against Ether Classic ETH/USD – Ether against US Dollar
As we have already seen, Ethereum's applications are far reaching, a phenomenon that has already seen the price of Ethereum surge an astonishing 5,000% in as little as six months. This rise has alerted major brokers and exchanges to introduce Ethereum (ETH) as a tradable asset to their clients. Some of these exchanges and brokers include Changelly, Boleh VPN, eToro, BitMEX, Poloniex, Gdax (formerly, Coinbase), Kraken, btc-e, Bitfinex and much more. Other exchanges such as the Irish-based AvaTrade expressed their interest in Ethereum last year and last month they announced that they had introducing Ethereum trading to their trading platforms. Because of its infancy, investors are still split between investing in Ether. Some are seeing it a passing cloud that will not last while others are taking advantage of its constant price fluctuations and speculating on future prices. Having said that, there is more to Ethereum than what some of these individuals perceive. The potential is far reaching and the applications are endless. While the volatility of Ethereum and other major cryptocurrencies remains a reality, Bitcoin’s success serves as a great example to how patience can eventually pay off in the direst of situations. During its early days, Bitcoin rallied to more than $1,000 before plunging down to trade at just over $200. It has since recouped those losses to trade well in the $2,500 region. There is no saying where the next stop will be. But the point is that with Ethereum now trading at just a few hundred USD, there is certainly so much room to run if Bitcoin was to be used as a benchmark. In our opinion, Ethereum is set to overtake bitcoin by 2018. Throughout the last years, it was able to develop an infrastructure that is better more secure and reliable when compared to Bitcoin. It is also less monopolistic and is open to more sophisticated reform. These advantages set Ethereum apart when compared to other cryptocurrencies – and especially Bitcoin. Because of them, and in our opinion, it will emerge as the main cryptocurrency in the near future.