Bitcoin is the entry point for those who are unaware of what cryptocurrency is but just heard of its growth and great earning potential for traders and investors. By the next stage, when a person is already familiar with the concept of cryptocurrency and is ready to open up the new representatives of it, they typically discover Ethereum.
Why does Ethereum go next to Bitcoin? Well, that's exactly what we are going to discuss right now. We will also cover aspects regarding its growth potential in 2018, and some long-term speculations about Ethereum.
What Is Ethereum?
Before addressing more profound issues, it is important to clear things up. Ethereum is not a cryptocurrency, thus you cannot buy it.
Ethereum is a decentralized network that runs smart contracts. We'll shed light on them a bit later. For now, just keep that concept in mind.
Ether is a cryptocurrency token spread in the network of Ethereum. So, when you Buy Ethereum -- what you are really doing is buying the built-in cryptocurrency called Ether.
Why Next to Bitcoin?
Ethereum is the second to Bitcoin according to:
Popularity. It has already become one of the most discussed trends today, even beyond the sphere of cryptocurrency. In addition, there are many people and businesses that directly deal with decentralized technologies and/or crypto assets.
Market Capitalization. A short time ago, Ripple had outdone Ethereum in terms of market cap, but not for long. It took a couple of days for Ethereum to step back into the ranks. Now, with a cap of $129 billion, it is far ahead of its rivals.
In fact, there is an area where Ethereum beats Bitcoin and does that in a sustained way -- that's in terms of flexibility.
Flexibility. Bitcoin was designed almost nine years ago. Despite its continuous updates called "forks," it is still behind most of its rivals in the technological aspects. Ethereum is five years newer than Bitcoin, so you could say that the technology implemented within the Ethereum network is 'five years more developed.'
Flexibility, as an aspect, includes a variety of specific attributes, in which Ethereum is more adaptable than Bitcoin:
1. Higher performance. The network is able to process three times more transactions than Bitcoin can.
2. Smaller fees. Due to Bitcoin's scalability issue, you have to pay an additional fee in order to get your transaction validated in an acceptable amount of time. Ethereum doesn't have such problems, so the fees are moderate. You may be surprised, but at the moment, Ethereum holds three times more transactions than Bitcoin does. It is not only because of lower costs but also because transactions within the Ethereum network are sent much faster.
3. Broader applicability. The ultimate goal of the Bitcoin network is to process transactions. Ethereum's functionality is wider because, apart from transaction approval, it enables smart contracts, which allow for businesses to literally function on Ethereum's blockchain. This gives it a wider scope of usage, and thus more triggers can potentially affect the price of Ethereum in a positive sense.
What Are Smart Contracts?
A Smart Contract is a set of instructions or, basically, a program that runs on a decentralized network of Ethereum. Smart contracts ensure automatic execution of bilateral agreements between two parties when preset terms and conditions are met.
This feature opens great opportunities for many kinds of businesses, such as booking, taxi, real estate, and other services. It also works well for startups, because they are able to attract financing by means of an ICO (initial coin offering). ICO is a fundraising mechanism that involves the creation of crypto assets, or tokens, representing the 'stocks' of a company/startup.
Ether Has Great Potential in 2018
This part of our discussion is entirely about cryptocurrency of Ether or, more specifically, the potential of its price growing.
At the beginning of 2017, the price of 1 Ether was less than $10 dollars; now, it's over a thousand. What is the reason for such skyrocketing performance? Well, there are dozens if not hundreds of factors underlying Ether's price increase in 2017.
Let's look at two with the strongest impact:
-- 2017 was groundbreaking for the whole sphere of cryptocurrency. You may think that it's kind of a weak argument when we consider the rate of a specific coin, but, in fact, it makes a lot of sense. Since Ethereum is the second most popular brand among cryptocurrencies, any massive event in the sphere, even one that is not related to Ethereum, can affect the price of Ether.
-- Exploding demand for ICOs. Ethereum was the first popular platform for providing initial coin offerings. It is profitable for both the startups that wish to raise funds and people who wish to earn profits through investing in a certain ICO, hoping that it will greatly increase in the future. Since it's all done on the blockchain of Ethereum, the rate of Ether rose correspondingly in 2017.
What To Expect in 2018?
First of all, it is important to mention that the cryptocurrency sphere exploding in 2017 was only the beginning. This wave will continue gaining momentum and triggering the rates of the most popular cryptocurrencies, including Ethereum.
The two ultimate reasons why Ethereum will continue growing this year are:
-- Strong interest in Ether as an investment asset. Those who invested their funds in Ethereum one year ago will understand this point. At the moment, a great number of investors are betting on Ether and presume that its rate will continue surpassing records. And the support from people is what directly drives the price.
-- High demand for decentralized apps that run on Ethereum. Now, it's not only about smart contracts or some ICOs, but a wider concept -- Dapps (Decentralized applications). It is believed that 2018 will be the year of Blockchain technology going mainstream. Since Ethereum is ahead of the game, the demand for it is expected to be colossal. So, the rate of Ether will rise accordingly.
We are on the verge of a great year when Blockchain will become more advanced and developed. Continuous investments in decentralized technologies confirm that.
The trend will stay while Ethereum provides the answer to the grand question for the average person: "How to invest in the Blockchain and raise funds on it?"
Author Mary Ann Callahan is an expert on Bitcoin-related topics, working as a journalist at the CEX.IO cryptocurrency exchange. Mary Ann writes bitcoin purchase guides and covers blockchain security, as well as bitcoin regulations in different countries.