The Ethereum Series: Part 4 – Ethereum Vs Bitcoin


Everything you need to know about Ethereum, explained in a four-part series, by Colin Adams

Part 4: Ethereum vs Bitcoin – What are the differences?

The differences between Bitcoin and Ethereum may be obvious by now, but let’s review some of the key points anyway.

The biggest difference between these two giants of the crypto world is their goals. Bitcoin wants to become a store of wealth (digital gold) and a globally-adopted currency. Ethereum wants to become the platform on which decentralized apps and smart contracts run.

Here are the notable differences between Bitcoin and Ethereum:

Bitcoin vs Ethereum infographic
Once you look at their features, BTC and ETH are not really direct competitors. They come from different generations and are different applications of blockchain technology. However, the popularity and rising market cap of ether bring it in competition with all cryptocurrencies. Particularly from a trading perspective, this means there may be a bit of rivalry.

Ethereum competitors and challenges

Ethereum has a lot of resources, the first mover advantage, a growing development team, and a good deal of momentum. But that doesn’t mean it isn’t facing a number of challenges.

Although some people view the Ethereum Classic fork as a strong positive precedent for community decision-making, it was a definite hurdle. The painfully slow rollout of the PoW/PoS switch is another area where Ethereum is arguably struggling. Another challenge people often point to is the difficulty for developers to get involved with Ethereum.

According to blockchain advisor Brian Schuster:

Ethereum is one of the leading blockchain development platforms in the world, but getting involved on a technical level is excessively hard. It takes a real strength of will today to be able to do the research and get a working app.

But the biggest challenge is getting Ethereum to scale. Ethereum is still a long way off from being able to run an app with say 10 million users.

This was highlighted by the release of the Ethereum-based game Crypto Kitties in November 2017. The idea behind this game is that the people can breed and trade digital cats for real money via smart contract. The kitties had a limited supply and a variety of ‘cattributes’, some exceedingly rare.

People jumped at the novelty of this digital collectible game. Over $6.5 million flowed to the project and, at one point, it accounted for a significant chunk of traffic on the Ethereum blockchain.

A lineup of digital felines

Crypto Kitties slowed Ethereum considerably and revealed that it still has a long way to go before it’s ready for prime time. As the Ethereum blockchain keeps getting bigger, its inefficiencies have begun to show. This is a problem for anyone who relies on Ethereum smart contracts and it also impacts its future applicability and price.

Solutions are feverishly being worked on, but how quickly they come and how successful they will be remains to be seen.

Unsurprisingly, a number of other blockchains are also now nipping at Ethereum’s heels as they work to achieve similar goals.

Here are five of Ethereum’s main competitors (but there are others!):

  1. QTUM is meant to be is a bridge between Bitcoin and Ethereum functionalities in the form of a business-friendly blockchain. Just like Ethereum, QTUM has the capacity to approach smart contracts as well; but unlike Ethereum, QTUM has the advantage of reviewing what’s worked and what hasn’t and proceeding from there.
  2. Cardano was founded by original members of Ethereum. It is another smart contract-focused blockchain. They’re currently putting their energy on the scalability and democratized voting issues that have dogged Ethereum.
  3. NEO is often referred to as ‘China’s Ethereum’. They aim to digitize many types of assets which were formerly kept in more traditional means, and therefore make it possible to use them in smart contracts.
  4. Ethereum Classic is a hard fork of Ethereum, as we’ve discussed above. Although not as acrimonious as the Bitcoin vs Bitcoin Cash divide, Ethereum Classic is at odds with Ethereum and obviously now a competitor. They’re out to achieve all the same things, albeit with a bit less clout and a divergent codebase.
  5. Lisk is perhaps the Ethereum competitor flying the most under the radar. A smart contract and dapp platform, Lisk is pinning their success on the implementation of sidechains. In essence, they’re trying to address scalability and incentive structure issues from the start.

The future of Ethereum

By some measures, Ethereum is already wildly successful and there is simply no arguing that it’s already been a big innovator in the space. But where it goes from here is contingent upon quite a few different factors.

Ethereum is steadily growing. But in recent weeks, crypto markets have been hit by a big downturn, with almost $200 billion in value knocked out of the market. This type of volatility is normal and likely to continue. In such turbulent waters, it is the technologies that hold real value, increase efficiency and solve real problems that are the ones that will stand the test of time.

So far, Ethereum appears to be firmly in this category. If you need evidence to take a bullish perspective on the future of Ethereum, consider the following:

  • As a number of Ethereum-based tokens soar in value, the underlying asset grows as well.
  • A lot of entrepreneurs and developers are going to need gas to use the network, and this could organically drive demand for ETH and increase its value.
  • A handful of big companies like JPMorgan Chase & Co, BBVA, Accenture, Microsoft, and Intel have come together and have formed a group called the Enterprise Ethereum Alliance (EEA) which focuses on developing applications utilizing the Ethereum blockchain.
  • As use cases for dapps continue to expand and the technology grows to meet the demand, Ethereum has the most evolved network to take the advantage.
  • The Ethereum community is smart, vibrant, and relatively sane (i.e. seems not to be as prone to mania or hype as other factions of crypto).

This quote is also worth considering:

In 2018, the door is wide open for blockchains that use smart contracts, like Ethereum, and I believe their potential market dwarfs that of “store of value” chains.

– Jez San, CEO of FunFair Technologies

Running down this list, one might conclude that the future is glittering for Buterin and co. That, however, is yet to be seen and there are, of course, naysayers too.

People who see a less optimistic future (or the outright demise of Ethereum) tend to cite a few common arguments. Consider the following views:

  • Ethereum will not deal with network congestion quickly enough or their solutions will partially fail, causing them to be overtaken by a competitor.
  • Vitalik Buterin is a single point of failure. Being the public face and driving force behind Ethereum makes him almost indispensable. If something happened to Buterin (or if he were to quit), this could be potentially devastating for the project.
  • Many of Ethereum’s (and its dapps) use cases are theoretical or impractical. Some have argued that most of the ideas dreamed up on Ethereum are simply solutions in search of a problem.
  • Community politics could turn toxic. Ethereum has already gone through one hard fork (more info and further debate here) and there is definitely potential for another to occur. The effects of this are hard to predict, but a similar type of discord and stalemate seems to be causing real problems for Bitcoin.

Related: Why I’m Investing In Ethereum

Final thoughts

As we’ve traced the history of Ethereum, broken down some of the key technical elements, and discussed its potential, hopefully it’s now clear how Ethereum functions as a base layer for decentralized applications.

The dollar value of its built-in ETH token is subject to the supply-and-demand mechanics, just like in any other marketplace. If a lot of dapps get built and the value of the Ethereum network continues to appeal to investors, the price should continue to steadily rise. But the opposite could happen too.

Although Ethereum is old in crypto-relative terms, it’s still a technology in its infancy. This new way of approaching smart contracts is undeniably one of the most important innovations in recent years and everyone is waiting with bated breath to see how things turn out.

How Ethereum evolves is perhaps the key to how quickly we will see the decentralized future that few of us can now fully comprehend. If it can live up to its promise, civilization itself may be running atop Ethereum in the not too distant future.

Colin Adams

Colin is a writer, cryptocurrency enthusiast, and contributor to The Lead Investor Podcast. Originally from Seattle, Washington, he can most often be found doing yoga, wandering around in the woods or traveling.

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