When you hear the word cryptocurrency, Bitcoin (BTC) is probably the first crypto you think about and this isn’t surprising, since BTC is the first and most popular digital currency in the world. Bitcoin’s position as the crypto market leader is indisputable if we take into account the huge market capitalization and daily trading volume of BTC, which can be followed on platforms such as Coinmarketcap, that monitor thousands of cryptocurrencies and their market positions.
However, the second-largest cryptocurrency, Ethereum (ETH), is also a true power player on the cryptocurrency market, and it shouldn’t be viewed as a rival to BTC, but rather as a complementary currency that offers users a very different functionality range, focused on the developer community. While BTC is focused on decentralized, digital cash services, ETH is a much broader ecosystem that allows programmers, developers, and startups to build various applications and platforms based on the ETH open-source programming resources and blockchain technology.
These two cryptocurrencies are very different from each other and so is the logic behind the different quantities of coins available on the market, as well as the total cap of these currencies. While Bitcoin has a hard cap of 21 million coins, Ethereum doesn’t have a limit for its total supply.
Let’s take a look at how each of these cryptos works in order to fully understand the Ethereum network, the possibilities of its blockchain, and find out how much ETH is in circulation.
Blockchain: The Backbone of Cryptocurrencies
Cryptocurrencies have introduced totally new means of transferring funds, paying for products and services, as well as storing value, but they have also provided users with a whole new method for exchanging data through blockchain technology.
Blockchains have enabled the creation of digital currencies as a viable alternative to fiat money and also as a type of network that can power millions of utilities and businesses through decentralized system nodes and cryptographic algorithms that make sure there is no fraudulent behavior or scams.
A blockchain is basically a decentralized, public ledger of transactions for a cryptocurrency ecosystem. It is the network that houses a cryptocurrency and enables transactions through the internet. A cryptocurrency like ETH or BTC can’t leave the blockchain. Instead, certain amounts of a cryptocurrency change digital locations on the blockchain, so-called crypto addresses, known as public addresses where users store their cryptos in wallets or exchange platform accounts. Private keys act as passwords that prove the ownership over a certain amount of coins on a specific blockchain network, so basically, cryptos just change addresses on their blockchains.
These networks aren’t tied to specific geographical locations, which makes them perfect for all kinds of transactions, regardless of the location of senders and receivers, and allows for a whole new type of decentralized financial services, smart contracts, and decentralized applications.
Blockchains store data in the form of data blocks that are set in a chronological string from first to last and once a block is added to the chain, it can’t be altered, making it a very secure method for transferring funds.
The Bitcoin and Ethereum blockchain are the most popular such networks in the world and hundreds of other cryptocurrencies are built on the basis of these two blockchains.
The Proof-of-Work Algorithm
One of the main reasons for the constantly increasing popularity of blockchain technology is its reliability and high security. This wouldn’t be possible without complex cryptographic algorithms that make sure the network runs smoothly, automatically stopping any attempted fraud.
The proof-of-work (PoW) algorithm is the key mechanism behind blockchain security in the case of both Bitcoin and Ethereum. This algorithm works with the help of network nodes or miners, who use their mining rigs, powerful computers with several GPUs, to solve complex mathematical tasks in order to make sure every transaction is really legit.
For a transaction to get processed through the blockchain, independent miners need to verify that the transaction is real and not a double-spending fraud where someone is attempting to spend the same coins twice. Without the proof-of-work algorithm, people wouldn’t have any guarantee of protection against scammers and cyber attacks.
In the case of Ethereum, the proof-of-work algorithm is named Ethash and miners need to find the appropriate mixHash for each and every transaction through trying out numerous combinations that might be right. This is where the hash rate of a miner’s rig has the biggest role, because the higher the hash rate, the quicker will the miner find the appropriate hash.
When a miner does find the right hash for a transaction, the data can get included in the next block of the Ethereum blockchain and the miner will get their reward of freshly mined Ether. Before the transaction gets approved and added to the next block, the miner that found the appropriate hash sends it out to the rest of the network as proof of work, which gets checked by additional, independent miners. Given the fact that ETH has a high market value, crypto enthusiasts often decide to participate in Ethereum mining to make a profit.
Bitcoin and Ethereum Blockchain Basics
In order to understand the huge difference between Bitcoin and Ethereum and ultimately understand the difference between the supply of these two coins, we need to take a look at the characteristics and functionalities of both cryptocurrencies.
Bitcoin is the first cryptocurrency in the world, Launched by Satoshi Nakamoto in 2009, it presented the concept of decentralized, digital cash that works through a peer-to-peer transaction network, the first functional blockchain. It wasn’t popular right away and it took a couple of years for the crypto community to expand and for people to gain trust in this new, cryptography-based digital asset.
With the appearance of the first cryptocurrency exchanges in 2010, people started trading the coin and the user base started including businessmen, companies, startups, developers, and crypto brokers.
The main use of Bitcoin is as a means of paying for products and services and for storing value. It is literally digital money that can be transferred in 5 to 10 minutes between sender and receiver addresses anywhere in the world. Bitcoin might not be as practical and fast as some altcoins like Bitcoin Cash (BCH) or Litecoin (LTC) which generate blocks faster, but it is far more valuable because of its massive adoption rate.
The adoption rate of a cryptocurrency is one of the main sources of its value and the market cap, along with the trading volume of Bitcoin are indicators that explain its leading position on the cryptocurrency market. More and more companies are also including Bitcoin in their financial portfolio. You can even pay for services and products using your PayPal or Venmo account and it is exactly this sort of adoption by multinational companies that brings a constant rise of popularity to BTC.
All of this wouldn’t be possible if Bitcoin didn’t gain initial trust within both the crypto community and with ordinary people interested in new financial assets. The reliability and tight security of the Bitcoin blockchain are the main selling points of BTC and they served as a blueprint for most subsequent altcoins on how to create a reliable blockchain network.
The Ethereum blockchain is the second most popular cryptocurrency network, right behind BTC. It also has a massive trading volume and market cap, along with a high value per coin. It isn’t worth several tens of thousands of dollars per coin like BTC, but it reached an all-time high in 2021 of over 4,000 USD per coin.
ETH was developed by a programming team headed by Ethereum founder Vitalik Buterin in 2015. The idea behind Ethereum was to take the best aspects of the Bitcoin blockchain and expand them, creating a far more versatile cryptocurrency that enables multiple open-source programming functionalities. Vitalik Buterin wanted to preserve Ethereum as a non-profit ecosystem that would give people the tools to develop their businesses and other initiatives, while Ethereum co-founder Charles Hoskinson wanted to create a profitable project and left the Ethereum team to develop Cardano (ADA), one of Ethereum’s main rival cryptos.
While Bitcoin mainly provides users with digital cash functionalities, Ethereum enables people to develop smart contracts, power their businesses with advanced decentralized applications, and create innovative ways for conducting financial operations.
Ethereum Smart Contracts
One of the reasons why Ethereum is immensely popular within the developer community is its smart contract functionalities which enable the creation of self-executing, automated agreements between two parties. When you conduct a business contract in physical reality, you usually need to do some paperwork and make sure everything is in compliance with local laws and regulations. Smart contracts erase the implication of any central authorities or intermediaries when conducting a contract.
An Ethereum smart contract enables two interested parties to directly negotiate the terms and conditions of their agreement without having to comply with any external rules and regulations imposed on them by authorities. In practice, these cryptographic agreements can be used to automate various aspects of businesses such as regular payouts, the scheduling of daily transactions, the operation of supply chains, and the powering of decentralized applications.
Similar to Ethereum transactions which are secured by the proof-of-work algorithm, smart contracts are also operated by special cryptographic algorithms that make sure neither implicated party is cheated on. This makes smart contracts a fully reliable, trustless mechanism for doing business since you don’t have to know the other side or have any degree of trust because the algorithm ensures that the other side fulfills their end of the deal.
Smart contracts are irreversible, making them a perfect method for automating business processes without the possibility of being interrupted by a third-party cyber attack. This type of agreement was developed in crypto theory by mathematician Nick Szabo way back in 1994, but it first found its true practical use within the Ethereum ecosystem, showing that a cryptocurrency can do much more than just be digital money.
The ability to create smart contracts has quickly made Ethereum the most popular developer ecosystem available on the market, with thousands of projects developed on the foundation of the ETH blockchain.
Smart contracts are very powerful development tools by themselves, but when they are combined with the ETH native programming language Solidity and the Ethereum Virtual Machine, they can create highly advanced decentralized applications (DApps).
These applications aren’t dependent on technological resources tied to big data companies and they are powered by the decentralized Ethereum blockchain. This means that the user data isn’t shared unwillingly with any third party and that the developers have full control over their apps. In the event of a cyberattack, there is no central server that can shut down a DApp if it falls and the data of the app is located on decentralized network nodes instead of one central location.
The open-source aspect of the Ethereum network means that anyone with some programming knowledge can utilize all the tools offered by ETH to design and power apps from various fields and industries from healthcare and finance, all the way to games, education, and art. Decentralized programming solutions are very secure, since they use the same blockchain and smart contract technology native to Ethereum, without compromising any part of the app’s programming code or private data.
Ethereum has provided developers with a decentralized, democratic means for creating apps and platforms freely. There are thousands of DApps today, developed by the Ethereum community and some of the most popular ones include the entertaining CryptoKitties app, the decentralized crypto exchange Uniswap with its own highly popular crypto token, and the Fork Delta app for monitoring Ethereum forks.
Decentralized finance (DeFi) is one of the main fields whereEthereum based DApps are making a real difference for individuals and businesses around the world. Traditional financial services provided by banks and businesses all take time and paperwork, while the high speed of the Ethereum blockchain enables users to carry out all sorts of financial operations in a matter of seconds, which is even faster than a Bitcoin transaction.
Hundreds of apps centered around providing decentralized financial services have already been developed by programming teams around the globe, in hope of making the financial industry more agile, versatile, and user-friendly. Paying taxes, investing cash, lending money and converting currencies are just some of the daily operations that are a lot faster using various DeFi applications.
Some of the most popular ETH-based DeFi apps are Argent, an advanced smart contract-based crypto wallet, Dharma, a great decentralized lending platform, and Dhedge, a user-friendly app for investments.
Tokens on the Ethereum Network
The Ethereum network enables anyone with sufficient knowledge to create their custom tokens based on the ETH blockchain. While coins have their native blockchains, such as Bitcoin or Ethereum, tokens are cryptos built on the foundation of an already existing blockchain. Ethereum is perfect for creating tokens thanks to its smart contract capabilities.
Non-fungible tokens and ERC-20 tokens are the two most popular types of ETH tokens.
ERC-20 is the most popular ETH token standard that sets the rules for the creation of cryptos on the Ethereum blockchain. These tokens have to follow strict rules regarding accessibility, transferability, and the way their transactions are approved. These rules exist to ensure that all ERC-20 tokens are legit assets and not some scam. Some of the most popular cryptos that exist are actually ERC-20 tokens that use the advantages of the Ethereum blockchain and they include Chainlink (LINK) and Binance Coin (BNB).
Non-fungible tokens (NFTs) are a special asset class within cryptocurrencies because every NFT is a unique token with characteristics that make it stand out from all other such tokens. There are no two identical copies. The data within these tokens is what differentiates them.
The ability to create NFTs on Ethereum means that any asset can be tokenized, creating a unique medium for storing all sorts of data such as business data, personal information, books, music, etc. The value of an NFT is solely defined by the amount of money someone is prepared to pay for the token. This is a very innovative way for keeping assets safe as tokens and it wasn’t available before the introduction of this functionality by Ethereum.
The Future of ETH: Ethereum 2.0
The developer team behind Ethereum and the Ethereum Foundation that manages the development of the network is constantly maintaining the network and implementing all sorts of upgrades and improvements to make ETH even better.
Ethereum 2.0 is the name of the biggest planned upgrade to the network and developers have been working on it for years. The most important change this upgrade will bring is the shift from proof-of-work to a proof-of-stake (PoS) algorithm which will make the network more sustainable than now. The huge amount of electricity that miners use to verify transactions will be abolished because users will be staking their own coins as proof of validity for transactions.
So How Much Ethereum Is There in Circulation?
Ethereum, unlike Bitcoin, doesn’t have a hard cap on the total number of coins that can be released into circulation. There is no set limit to the amount of ETH which can be mined and the supply is constantly increasing.
This means that the number of ETH can only be monitored in real-time and this is exactly why web platforms like Coindesk and Ycharts are very useful because they show the trading volume and total available supply of Ethereum based on trading statistics pulled from hundreds of relevant resources on the web.
A Few Ending Words…
Ethereum has brought numerous innovations to the world of cryptocurrencies and continues to amaze users with the various useful apps and platforms that are based on its blockchain. The possibilities of the ETH blockchain are basically only limited by the creativity of developer teams willing to use ETH to create new apps and the total supply of Ethereum isn’t limited, which is very important for the constantly growing ecosystem of tokens and DApps that are tied to its network.