Ethereum and Bitcoin have rapidly become household names. While they’re frequently mentioned together, they are not the same.
Bitcoin was designed as an alternative to conventional money. Ethereum is inspired by Bitcoin, but it has grander ambitions: to build a software platform that allows users to run decentralized applications without the need of a third party, giving them more control over their data.
What is Ethereum?
Ethereum is a decentralized computing platform network built on open-source, distributed technology. The Ethereum network, like the Bitcoin network, is based on blockchain technology, which essentially is a digital public ledger where financial transactions can be verified and stored by software without the need of a third party.
The Ethereum network is best thought of as a secure database that anybody can use. When new “blocks” of information are added, they’re cryptographically linked to a parent block, making an uneditable chronicle of the prior changes.
Ether is one of the most famous cryptocurrencies, owing to its market capitalization ranking second only to bitcoin.
But the network’s potential to do more than just handle financial transactions is what makes Ethereum so appealing to users and enthusiasts. Developers can use Ethereum to create “smart contracts” (programs that can host any sort of decentralized application) that go beyond Bitcoin’s capabilities.
Bitcoin was the first to utilize blockchain technology in a peer-to-peer payment system, according to Jacob Wade, a financial coach and president of iHeartBudgets. “Ethereum utilizes similar blockchain technology, but it also has the capacity to develop decentralized applications on its platform,” he adds.
People have already developed and launched a slew of Ethereum dApps, including games, digital art marketplaces, and decentralized finance (DeFi) applications.
Is Ethereum a viable investment option?
It is, however. There isn’t one right answer for anybody looking to invest in Ethereum. The most important thing to remember is that, like any other investment, it’s speculative and should be treated as such before putting it in any portfolio.
Ether is becoming increasingly widely available, and there’s a lot of buzz in the media about its increasing value – but it’s vital not to be too caught up in the hype.
“It may be useful in a portfolio, but it should be regarded as highly speculative,” he adds. “Also, while the technology is promising, it’s uncertain which technology will win in the long run.”