What Makes Ethereum Different from Other Cryptocurrencies?

June 19, 2023

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Even those unfamiliar with blockchain technology have heard about Ethereum, or the world’s computer, as it’s called. Before Ethereum’s launch, it was commonplace for developers to create their own blocks when designing new solutions based on blockchain technology. Ethereum circumvented this necessity making it easy for developers to create smart contracts, cryptographic tokens, and decentralized apps. The Ethereum network accommodates its own native cryptocurrency, which accounts for a significant percentage of the global market capitalization. Supply and demand determine the Ethereum price, so if the supply of Ethereum decreases or demand for Ethereum increases, its price will rise (and the other way around).

Ethereum isn’t just a cryptocurrency used as a medium of exchange, meaning that it’s intended for complex operations. The power of Ethereum lies in its unique features, so let’s see what makes Ethereum different from other cryptocurrencies.

Ethereum Powers Smart Contracts

Ethereum is a decentralized blockchain platform that establishes a peer-to-peer network with thousands of nodes, which communicate with one another via standardized protocols. Various projects can be completed with the help of smart contracts governed by “if/when…then” statements. There’s no need for parties to trust one another. For the sake of clarification, smart contracts aren’t negotiable, so the original terms are absolute; smart contracts are immutable once they’re deployed to the blockchain. This eliminates the possibility of disputes at later stages, so transparency is guaranteed during transactions. Smart contracts can be used for regular agreements or contracts for the government.

Storing smart contracts in the Ethereum ecosystem promotes trust in the reliability of the transactions involved. The ledger is distributed among multiple nodes, so several parties have a copy of it, meaning that transactions can’t be lost or removed. ERC-20 is the technical standard for writing smart contracts on the Ethereum blockchain. It identifies tokens as blockchain-based assets that can be sent and received, often distributed through Initial Coin Offerings (ICOs). Smart contracts don’t operate alone – they’re powered by tokens. Every token is the same as the next and is locked under the custody of the smart contract; it’s not possible to take the tokens out.

Transactions Are Faster on The Ethereum Network

As far as processing speed is concerned, Ethereum is capable of processing 30 transactions per second, dividing the data blocks into smaller blocks. On the 15th of September 2022, Ethereum finalized the Merge, merging with a separate proof-of-stake blockchain (i.e., the Beacon Chain), and it promises up to 100,000 transactions per second. Increased transaction throughput will be possible thanks to further upgrades and innovations, such as sharding and layer 2 scaling solutions. Through scalability, Vitalik Buterin hopes to make interacting with the Ethereum blockchain more attractive. Scalability has been an issue due to the network’s design: each node has to process every transaction; this severely limits transaction process capability.

Ethereum Comes Complete with Its Own Programming Language

Solidity is the programming language used for developing decentralized applications on the Ethereum blockchain. Simply put, it acts like a tool for creating machine-level code compiled on the Ethereum Virtual Machine, which works by executing a program bytecode. Since it’s a relatively young language, Solidity advances at a rapid pace, so keep up to date with the implementation status of new features in the Solidity Github project. Solidity is similar to C and C++, so it can be easy to pick up. Attention must be paid to the fact that EVM smart contracts have limitations, such as restricted access to library functions for parsing JSON structures.

Ethereum Doesn’t Have a Maximum Supply

As opposed to fiat currencies, cryptocurrencies have a predetermined supply that can’t be increased or decreased. Interestingly, Ethereum has an infinite supply, so there’s no limit to how many tokens can be staked over time (this doesn’t disqualify it as a store of value). Although Ethereum has an unlimited supply, it doesn’t issue more than 18 million tokens per year, so for every block produced on the network, two coins are released into circulation. The number of Ethereum tokens has been steadily declining, which translates into the fact that we won’t have billions of coins in circulation anytime soon.

Ethereum has different uses and purposes, and this aspect was taken into account when the code was designed. Indeed, it has monetary value, so it can be bought or traded like any other cryptocurrency, but Ethereum’s value doesn’t need to be finite. There are many ways to become involved in Ethereum staking, some more decentralized, battle-tested, or risky than others; it’s a good investment, but it’s not for the faint of heart. Contrary to popular opinion, not all tokens without a hard supply limit are inflationary currencies, so it’s highly unlikely Ethereum won’t decline in market value.

Both Permissioned and Permissionless Transactions Are Allowed

The Ethereum framework allows for the creation of a permissioned blockchain, where the transaction validation process is limited to white-listed participants. More than one channel can be hosted and run in a private network. Also, multiple nodes can run on an individual device and can be run on different devices connected across the Internet. Permissioned transactions have become popular amongst industry-level firms and enterprises for which identity, security, and role definition are of the utmost importance. Ethereum enables permissionless transactions through the proof-of-stake consensus mechanism, so anyone can send/receive transactions, copy and contribute to the code, operate a node, and so forth.

Wrapping It Up

The main difference between Ethereum and other cryptocurrencies is that it’s programmable, broadening its scope. It’s the go-to place for financial services, games, and apps. Developers can create different types of tokens using the Ethereum public blockchain network, but it’s necessary to adhere to specific standards for fungible tokens. The Bedrock upgrade should increase performance and functionality, so it’ll change the roll-up game. Last but not least, the Shanghai upgrade is drawing closer, so it won’t be long until validators can withdraw their staked tokens. Still, Ethereum is known for running behind schedule, so it’s hoped that upgrade will be completed by the end of April.

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