Looking back at the evolution of the cryptocurrency market, we can see that Bitcoin has been the leader of the crypto sphere for years, although, contrary to common belief, it’s not the first decentralized digital currency created. The concept of cryptocurrency existed long before the birth of Bitcoin, and several other attempts at developing viable digital assets preceded it. However, Bitcoin was the first crypto to garner public attention and have real-world applicability.
After its emergence onto the public scene, other crypto projects followed, hoping to emulate Crypto’s success but always failed short to achieve this goal. So, having no serious contenders to challenge its supremacy, Bitcoin remained at the top of the crypto market, unbothered for a very long time. That’s until Ethereum came along in 2015, bringing a host of innovations and changing the crypto sphere forever. From that moment on, the competition between Bitcoin and Ethereum has given rise to some of the most interesting debates in the crypto community, with people often pitting the two digital currencies against one another. And while Bitcoin has managed to retain its position, we have plenty of reasons to believe Ethereum will finally dethrone it in the near future.
So, let’s take a look at some of the factors that have influenced Ethereum’s evolution and prompted its rise as the next crypto king.
What is Ethereum?
Before we begin analyzing the different aspects that have turned Ethereum into the powerhouse technology of today, let’s set the record straight on what Ethereum is in order to remove all possible confusion from the equation. Ethereum is an open-source decentralized platform based on blockchain technology, powered by its native cryptocurrency Ether (ETH), with an entire host of applications centered around it.
The Ethereum project is the brainchild of Russian programmer Vitalik Buterin who had the brilliant idea of building on the innovations that its predecessors provided and expanding its capabilities well beyond crypto trading. Several years and updates after the idea was discussed, Ethereum became one of the most popular and reliable distributed software platforms to date.
A lot of people get confused by the terminology, using Ether and Ethereum interchangeably. While most crypto enthusiasts have no problem understanding what these terms refer to, it’s important to make the distinction between the two for those who are less familiar with the concepts. Ethereum is the technology that underpins its native cryptocurrency, Ether, along with other digital assets and a series of applications.
At the moment, Ethereum is the second-largest cryptocurrency by market capitalization, right behind Bitcoin. Its dominance grew year after year as the Ethereum price continued to experience significant increases.
A unique vision
When Vitalik Buterin and the rest of the co-founders decided to develop Ethereum, they set to achieve something quite different from the cryptocurrencies that were already on the market, including Bitcoin. They did not intend to build a better version of Bitcoin, but to create a unique and innovative technology that could provide the solution to a series of longstanding problems.
Therefore, Ethereum was shaped into a platform that brings together developers from all corners of the world, allowing them to use its technology to build decentralized applications and run smart contracts. As stated on the network’s official site, Ethereum can be used to codify, decentralize, secure, and trade just about anything. Therefore, Ethereum is not just another player in the crypto field, but one of the most important drivers of change, bringing a significant contribution to the expansion of the decentralized finance ecosystem.
A wide range of applications and use cases
Unlike Bitcoin, and other digital currencies available on the market, Ethereum goes far beyond crypto payments. So, instead of being limited to virtual money and trading, Ethereum serves as a marketplace where all sorts of applications can be developed, providing unparalleled security, reliability and scalability.
The development of decentralized autonomous organizations (DAOs) was among the first use cases of Ethereum. The network facilitated the creation of blockchain-based organizations that are not governed by a central authority, relying on a community decision-making protocol.
Ethereum also offers the perfect environment for non-fungible tokens (NFTs) to be created. As digital assets representing real-world items that cannot be replicated, NFTs have rapidly transformed into a hype that holds the potential of transforming the art world for the better.
But probably the area where Ethereum has the largest influence and contribution is represented by decentralized finance (DeFi). Ethereum gives developers the possibility to build new and innovative financial services and applications that are not subject to censorship, by using smart contracts, thus creating a more equitable financial system.
Keeping an eye on the future
Although Ethereum comes with a plethora of perks for developers, entrepreneurs, and average individuals, the network has also attracted criticism over the years, just like all other crypto platforms. Most of the complaints relate to the high transaction fees and the vast amounts of energy used in the mining process that aggravates the climate change issue.
Ethereum has undergone several updates since it first went live, in an effort to improve security and efficiency and fix many of its flaws. While these changes have made the system stronger, the biggest and most important upgrade of the network, called the Merge, is yet to go live.
The much-anticipated Merge specifically targets the issues mentioned above and hopes to tackle these shortcomings by switching from a proof of work to a proof of stake consensus. What this basically means is that Ethereum will change the method it uses to check and validate transactions on the network. The new version of Ethereum which will most likely be completed in the following weeks, will not only cut energy usage drastically (developers aim at using 99.95% less energy post-merge) but will also reduce fees and increase the security, efficiency, and scalability of the platform.