Before jumping deep into the knowledge of why Ethereum will take over bitcoin we should know the basic terms of cryptocurrency, blockchain and new upcoming technologies like Web 3.0 and metaverse. we will cover each of these in quick and easiest way, so lets gets started.
What is Bitcoin and blockchain and how do they work:
Bitcoin is a digital currency, also known as a cryptocurrency, that uses blockchain technology to facilitate transactions. It was created in 2009 by an individual or group of individuals using the pseudonym Satoshi Nakamoto.
Blockchain is the technology that underlies Bitcoin and other cryptocurrencies. It is a decentralized, distributed ledger that records transactions on multiple computers. This creates a permanent and unchangeable record of all transactions that have occurred on the network.
Here’s how Bitcoin and blockchain work together:
- Transactions: When a user wants to send Bitcoin to another user, they initiate a transaction on the network. This transaction includes the sender’s public address, the recipient’s public address, and the amount of Bitcoin being sent.
- Verification: The transaction is then broadcast to the entire network, where it is verified by multiple computers, also known as nodes. These nodes use complex mathematical algorithms to confirm the validity of the transaction.
- Block creation: Once the transaction has been verified, it is grouped with other verified transactions to create a block. Each block contains a record of multiple transactions, and once a block is created, it is added to the chain of blocks, creating a permanent and unchangeable record of all transactions that have occurred on the network.
- Mining: The process of adding new blocks to the blockchain is called mining. Miners are nodes that perform complex mathematical calculations in order to add new blocks to the blockchain. In return for their efforts, miners are rewarded with newly minted Bitcoin.
- Decentralization: The blockchain is a decentralized system, meaning that it is not controlled by any single entity. Instead, the network is maintained by a decentralized network of computers, and all transactions are recorded and verified by multiple computers, making it resistant to tampering, fraud, and censorship.
What is the impact of new upcoming technologies on ethereum
New upcoming technologies such as sharding, rollups, and layer 2 scaling solutions have the potential to greatly impact Ethereum and its ecosystem.
- Sharding: Sharding is a technique that allows for the horizontal scaling of a database by dividing it into smaller parts, called shards. The goal of sharding in Ethereum is to increase the number of transactions that can be processed on the network by allowing each shard to process transactions in parallel. This will greatly increase the scalability of the network and allow more dApps to be built on Ethereum.
- Rollups: Rollups are a form of layer 2 scaling solution that allows for off-chain transactions to be batched and recorded on-chain in a compact form. This can greatly increase the number of transactions that can be processed on the network, while still maintaining the security guarantees of on-chain transactions.
- Layer 2 Scaling: Layer 2 scaling solutions such as Plasma, state channels, and sidechains allow for off-chain transactions to be processed, which can greatly increase the scalability of the network. These solutions move a portion of the transactions off the main chain, allowing for faster and cheaper transactions.
- Other technologies: Ethereum 2.0, which is a planned upgrade to the Ethereum network, aims to improve the scalability, security, and sustainability of the network. It will introduce a new consensus mechanism called Proof of Stake (PoS) and will also introduce sharding to the network
Why Ethereum is going to take over Bitcoin
Ethereum and Bitcoin are both blockchain-based technologies, but they have different goals and use cases. Bitcoin is primarily used as a digital currency, while Ethereum is a platform for building decentralized applications (dApps) and smart contracts.
Here are a few reasons why some experts believe that Ethereum has the potential to overtake Bitcoin:
- Smart Contracts: Ethereum has the ability to execute smart contracts, which are self-executing contracts with the terms of the agreement written directly into code. This allows for the automation of certain processes, such as the transfer of assets or the execution of certain actions. Bitcoin does not have this capability.
- Decentralized Applications (dApps): Ethereum allows for the creation of decentralized applications (dApps), which are applications that run on a decentralized network and are not controlled by any single entity. This opens up a wide range of potential use cases for Ethereum, from decentralized exchanges to prediction markets.
- Faster transaction times: Ethereum’s block time is about 15 seconds, compared to Bitcoin’s 10 minutes. This means that transactions on the Ethereum network are processed much faster than on the Bitcoin network.
- More flexible: Ethereum has a more flexible consensus mechanism compared to Bitcoin. This allows for a more decentralized network, and it also allows for the possibility of upgrading the network to support new features and technologies in the future.
- Scalability: Ethereum has been working on its scalability solution called Ethereum 2.0, which aims to increase the number of transactions that can be processed on the network by using a different consensus mechanism called Proof of Stake (PoS).
It’s worth noting that, while Ethereum has many advantages over Bitcoin, it’s still a relatively new technology and its long-term success is not guaranteed. Furthermore, there are other blockchain platforms that are also competing in this space, such as EOS and TRON.
In summary, Ethereum offers a more versatile platform with smart contract capabilities, faster transaction times, more flexibility, and scalability solutions. It also has a strong developer community and a growing ecosystem of decentralized applications. However, it’s still a relatively new technology and its long-term success is not guaranteed.