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Part Of. Bitcoin Basics. Bitcoin Mining. How to Store Bitcoin. Bitcoin Exchanges. Bitcoin Advantages and Disadvantages. Bitcoin vs. Other Cryptocurrencies. Bitcoin Value and Price. Table of Contents Expand. Ethereum: An Overview.

Ethereum Basics. Key Differences. What is the main difference in application between Bitcoin and Ethereum? Why is Bitcoin compared to digital gold and Ethereum to digital silver? Key Takeaways Bitcoin signaled the emergence of a radically new form of digital money that operates outside the control of any government or corporation.

With time, people began to realize that one of the underlying innovations of bitcoin, the blockchain, could be utilized for other purposes. Ethereum proposed to utilize blockchain technology not only for maintaining a decentralized payment network but also for storing computer code that can be used to power tamper-proof decentralized financial contracts and applications. Ether was intended to complement rather than compete with bitcoin, but it has nonetheless emerged as a competitor on cryptocurrency exchanges.

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Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Bitcoin How Bitcoin Works. Partner Links. Based on Proof of History, it processes transactions quickly at low cost. All of the programs linked with the Ethereum network require computing power; Ether is the token that is used to pay for this power.

What Is Ethereum? Ethereum is a blockchain-based software platform for creating and using smart contracts and distributed apps; the cryptocurrency Ether was created for it. What Is Qtum? What Is a Crypto Token? Crypto tokens are a representation of a particular asset or a utility on a blockchain. Bitcoin is a digital or virtual currency created in that uses peer-to-peer technology to facilitate instant payments.

Investopedia is part of the Dotdash publishing family. Smart contracts are similar to if-then statements, meaning if the actions required within the contract have been fulfilled, then the responding contract parameters would be completed.

If the contract parameters have not been fulfilled, then there might be a penalty, a fee, or the contract might be voided, depending on the terms established at the onset of the contract. For example, in a real estate transaction, if the contract stated that an upfront deposit was to be paid on a certain date, and the funds were not received, then the contract could be voided.

The smart contracts are contained within a distributed ledger or blockchain network. A distributed ledger is a ledger of transactions and contracts, which are kept and maintained in a decentralized manner across various locations. The agreement between a buyer and seller is written in lines of code within the smart contract, which is self-executing, depending on the terms within the contract.

As a result, there is no need for external monitoring or censoring by a central authority since the code controls the execution of the contract. Initially, the Ethereum blockchain was established as one network in which transactions were facilitated by using the cryptocurrency ether of ETH. This resulted in a fork leading to the two versions existing simultaneously. Although both Ethereum and Ethereum Classic offer smart contracts and are after the same market, Ethereum has gained in popularity as the more legitimate of the two networks.

One of the chief concerns of Ethereum Classic is the potential limitations when it comes to scalability. Typically, the network can handle 15 transactions per second, but that number is far less than payment networks such as Visa, which handles more than one thousand transactions per second. Although Ethereum Classic has gone through many software upgrades, the scalability of its payment systems remains to be one of its biggest challenges going forward. Also, security is likely to remain an issue with smart contracts, particularly since Ethereum Classic has already experienced a hack and theft of millions of dollars.

These concerns could potentially prevent smart contracts via Ethereum Classic from being used in major financial and real estate transactions. Regulations of the cryptocurrency market continue to develop, which may or may not change how Ethereum Classic—and other networks—operate. Without being considered a security, some cryptos may have challenges getting approved for inclusion in various financial products that contain a basket of securities, stocks, and bonds such as exchange traded funds and mutual funds.

Going forward, uncertainty remains surrounding the regulatory landscape for Ethereum Classic as well as other, less popular blockchain networks. The future of Ethereum Classic looks less bright than Ethereum since Ethereum is considered the more legitimate of the two networks, especially with the security concerns of Ethereum Classic. Investors have lost confidence in ETC over the years due to hacks into the system, and until ETC can redevelop its code and software to prevent future hacks, Ethereum Classic may have challenges ahead.

However, it remains to be seen how the smart contracts will be developed within the Ethereum Classic project and whether they can be adopted for widespread use. Only Bitcoin and Ether have been approved for such transactions. The futures are derivative contracts on an underlying security with a fixed price and maturity date. Ether futures allow investors to trade ether for speculation but also to hedge an outstanding position in ETH or perhaps other cryptos. We can determine how the investment community views ETC versus ETH by analyzing how much capital or investment dollars are being committed to the two currencies.

When comparing the two market capitalizations of the two cryptos, ETH is the clear winner. ETC has Since the split, there have been many upgrades and improvements to the Ethereum Classic project. The goal of the project continues to be working towards becoming a global payment network using smart contracts that can function without centralized governance. As with other cryptocurrencies, Ethereum Classic will likely continue to strive to be a digital store of value , meaning it can be saved and exchanged while retaining its value.

The digital store of value for crypto includes its purchasing power that can be quickly turned into cash or used to buy another asset, similar to money. The New York Times. Ethereum Classic. Accessed April 27, Securities and Exchange Commission.