Ethereum has been called the new improved Bitcoin by some but in fact it’s a totally different thing. Ethereum is able to run “smart contracts,” which are some sort of simple instructions that can move the “ether” cryptocurrency around. As such it’s meant to run distributed applications.
That actually makes it valuable as a lot of tokens that are issued lately for ICO’s are Ethereum based ERC20 (The Ethereum token standard (ERC20)).
But why am I not investing in Ethereum? (note: I do trade ETH, I don’t hold it long term). A few reasons.
1. No fixed cap of coins
There’s not fixed cap of coins as is the case with Bitcoin which makes it less likely to skyrocket the way Bitcoin did, that might be a good thing for stability of the price but not for my personal investment purposes. However difficulty will make it reach its limit sometime in the future and bring the network to a halt. Slower network = longer block times = less ETH rewards.
According to the quote below however it is in practise capped.
Quote from Vitalik Buterin, Ethereum Foundation:
So here is a thought. Currently, because of the PoW ice age, the block time is scheduled to start increasing in mid-2017, and past around 2019 the increase is going to grow exponentially. The mining reward does NOT increase proportionately. Hence, there is already an exponential slowdown in the growth of the ETH supply built into the protocol; ……Hence, in the foreseeable future, the supply will not go far above 100 million
2. Errors, bugs and hacks
[Ethereum Browser Bug Could Put User Funds At Risk - CoinDesk
Using ethereum browser Mist may put cryptocurrency private keys at risk, according to an Ethereum Foundation blog post…]
(https://www.coindesk.com/ethereum-browser-bug-could-put-user-funds-at-risk/)
[Parity's $280m Ethereum wallet freeze was no accident: It was a HACK, claims angry upstart
*A crypto-currency collector who was locked out of his $1m Ethereum multi-signature wallet this week by a catastrophic…]
(https://www.theregister.co.uk/2017/11/10/parity_280m_ethereum_wallet_lockdown_hack/)
3. Can it deliver?
One silly but successful application named CryptoKitties and the transactions already slow down.
[Ethereum Loses to CryptoKitties, Network Remains Slow - Cryptovest
ICOs and regular transactions are seeing annoying delays due to the effect of blockchain game CryptoKitties taking up…]
(https://cryptovest.com/news/ethereum-loses-to-cryptokitties-network-remains-slow/)
CryptoKitties is burning up to 20% of the ETH gas in two smart contracts, and while in the past ICOs have slowed down transactions, for the first time there is a long-term factor.
But the presence of CryptoKitties also puts a big question mark on the hundreds of ICOs claiming to use the Ethereum network one day for distributed apps. The specifics of cryptographic computation may mean dapps never quite work to the levels of current corporate software and centralised applications.
4. Competition from NEO
Ethereum is developing in response to new demands. NEO is developing their platform in anticipation of future demands. We will not be going into details about all their differences but here are a few:
Neo uses a pProof of Stake protocol vs a Proof of Work protocol for Ethereum which is a better concept imho. In all fairness Ethereum uses a Proof of Work protocol now but will evolve into Proof of Stake.
Speed of both (tps= transactions per second). Ethereum can transact at 15tps with a maximum of 30tps. NEO can transact at 1,000tps with a maximum of 10,000tps.
No forking if there’s difference of opinion about the future course of action. A 66% consensus needs to be reached before changes to the blockchain are implemented.
Unlike Ethereum which uses ether as its token and as gas for each transaction with NEO it’s decoupled into NEO and GAS whereby NEO acts similar to shares, it’s indivisible and holding NEO earns you GAS tokens. This also keeps transaction costs low
Both NEO and GAS are capped at 100 million tokens.
Quantum computer resistant
As you can see for me it makes a lot more sense to support NEO given that it addresses some of the issues that plague Ethereum. Also holding NEO coins gives you free GAS tokens, that’s free interest !
Note: be careful not all exchanges give you GAS for holding NEO on their exchanges. One exchange that does is Kucoin (see my other article)