Ethereum (ETH) and Bitcoin (BTC) are the world’s first two cryptocurrencies, as well as the two most valuable in terms of total market capitalization, with key characteristics that distinguish them from one another.
Bitcoin and Ethereum have a lot in common: They are digital assets that are stored in digital wallets, have alphanumeric addresses, are sold on cryptocurrency exchanges, and are based on a publicly visible distributed ledger called a blockchain.
These two initiatives have different goals and motivations for being created, as well as different techniques for authenticating transactions inside their respective ecosystems. As a result, this article will explain what Bitcoin and Ethereum are, as well as how they differ from one another in terms of goal, method, and other aspects of their ecosystems.
Ethereum vs. Bitcoin
Ethereum and bitcoin are two of the most widely used cryptocurrencies today. They are, without a doubt, the most valuable in terms of market capitalization. The market capitalization of Bitcoin exceeds $575 billion, while that of Ethereum is around $218 billion at the time of writing.
Bitcoin and Ethereum are both decentralized cryptocurrencies, which means they are neither issued nor regulated by central banks or other governmental and financial institutions. Instead, they rely on nodes or machines that run copies of their networks to verify that everyone on the network is on the same page.
What is Bitcoin?
Bitcoin was the first cryptocurrency founded in 2009 by Satoshi Nakamoto, a crypto engineer who goes by the pseudonym Satoshi. This digital currency’s concept was simple but revolutionary. It promised a decentralized and transparent financial system that would provide an alternative to traditional cash, known as fiat currency.
Bitcoin was not the first time that a decentralized, nonphysical form of money was proposed, but it was the first time that the concept was successfully realized. All other cryptos (including Ether and XRP) follow Bitcoin in terms of value, and Bitcoin is still traded more than any other cryptocurrency.
Bitcoin has set a limit of 21 million coins that can be created. The coins can still be traded after that amount has been achieved, but no new ones can be added.
What is Ethereum?
Ethereum is a decentralized, open-source, and distributed blockchain network powered by its native cryptocurrency, Ether (ETH), that is used to facilitate transactions and interact with Ethereum-based decentralized apps. Vitalik Buterin, Ethereum’s co-founder, presented a white paper in 2013 explaining the usage of smart contracts, which are self-executing agreements in the form of code.
While Bitcoin employs blockchain technology for monetary transactions and allows nodes and messages to be attached to each transaction, Ethereum takes it a step further by leveraging blockchain technology to create a decentralized computer.
The Ethereum network, founded in July 2015, is an ambitious project working toward decentralizing all aspects of the internet. Ethereum, like Bitcoin, is a decentralized platform with no centralized power and also uses PoW to prevent malevolent actors from tampering with its data.
Key Differences between BTC and ETH
From the explanations given above, it’s apparent that there are several factors that make the two initiatives btc to eth different, although with some kinds of basic similarities.
Currency and Platform
Bitcoin was designed to accomplish one function: allow people to send money to one another without the use of a central authority. Bitcoin is widely recognized as the most viable alternative to existing currencies, as well as a medium of exchange and a store of value.
Ethereum, on the other hand, works differently because it is a platform that uses its native currency, Ether, to run applications and programmable contracts known as smart contracts.
As a result, rather than functioning exclusively as a store of value, Ethereum can do a lot of things well. Although Ether can be used as a digital currency, it is not its primary function. The Ethereum platform was created to monetize smart contracts and dApps.
Consensus Mechanism
Proof-of-Work (PoW) is the consensus method used on the Bitcoin blockchain, and it necessitates the use of processing power to solve a challenging but random problem in order to keep all nodes in the network transparent. Bitcoin, as the first blockchain, aimed to eliminate third-party influence over financial systems, which was commonly exercised by large banks or governments.
Ethereum has employed PoW since its inception, but it is planning to switch to PoS. This was always the intention because PoS requires far less energy and allows for the implementation of novel scaling techniques.
To become a validator in Ethereum’s proof-of-stake system, you must first put up 32 ether (currently worth roughly $57,000). If you don’t have that amount, which many people don’t, you can join a staking service where everyone serves as a validator at the same time.
Transaction Capacity
Bitcoin’s network can only execute 7 to 10 transactions per second, which makes it slower than the bulk of other blockchain networks, including Ethereum. This is because Bitcoin blocks are only produced every 10 minutes on average, and each block can only contain a restricted number of transactions.
The Ethereum network, on the other hand, can handle up to 30 transactions per second, with Ethereum 2.0 promising up to 100,000 transactions per second when it launches. The implementation of shard chains will be used to achieve this increase.
Block Time
The time it takes to mine a transaction block is referred to as block time. There is an expected block time and an average block time in both the bitcoin and Ethereum blockchains. The expected block time for bitcoin is 10 minutes, while Ethereum’s is between 10 and 20 seconds.
Closing Thoughts
Both Bitcoin and Ethereum are approaching their capacity limits and need solutions to assist them in handling additional users because the number of people using both blockchains is increasing over time. When demand for block space exceeds what both networks can handle, transaction costs on both networks rise.
The fundamental distinction between Ethereum and Bitcoin, however, is that Ethereum is programmable. Ethereum’s reach is broadened by this functionality, making it more than just a digital currency. It transforms Ethereum into a platform for financial services, gaming, and applications.