When it comes to cryptocurrency, there are two big names that stand out: Bitcoin and Ethereum.
But what exactly makes these two cryptocurrencies different? This article covers that, and more. But, first, let’s start with the basics;
What is Bitcoin?
Bitcoin was the first-ever cryptocurrency, and it is still the most well-known. It was created in 2009 by a person (or group of people) using the alias Satoshi Nakamoto. Bitcoin is a peer-to-peer digital currency, meaning that transactions take place between users directly, without an intermediary. These transactions are verified by network nodes through cryptography and recorded in a public dispersed ledger called a blockchain.
What is Ethereum?
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference. These apps run on a custom-built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
Ethereum was created in 2015, and it is often described as “Bitcoin 2.0”. Ethereum’s currency, Ether, is used to pay for transactions on the network.
How is Ethereum Different from Bitcoin?
So, how exactly do Bitcoin and Ethereum differ? Here are a few key points:
Inception
Ethereum was created in 2015 as a second-generation cryptocurrency. It builds on the features of Bitcoin and allows developers to create smart contracts and decentralized applications (apps). These applications run on a custom-built blockchain, which is different from the one used for Bitcoin transactions.
Bitcoin, on the other hand, was created in 2009 by Satoshi Nakamoto as a way to create a decentralized, peer-to-peer digital currency system. The idea was to create a currency that could be used like any other, but without the need for a central authority or middleman. Bitcoin is essentially a public ledger system, where transactions are verified and recorded by a network of computers called miners. Miners are rewarded with bitcoins for their work in verifying and recording transactions.
Functionality:
Bitcoin is primarily used as a digital currency, while Ethereum can also be used to create smart contracts and decentralized applications. Smart contracts are self-executing contracts that are stored on the blockchain and rely on cryptographic protocols to verify their execution. Decentralized applications are applications that are run on a network of computers rather than a single computer. Ethereum’s functionality goes beyond that of Bitcoin because it allows for the creation of smart contracts and decentralized applications. This has made Ethereum popular with developers and investors.
Monetay Policy:
Bitcoin is deflationary, meaning that the number of bitcoins in circulation will decrease over time. In other words, there’s a finite number of bitcoins that will ever be created (21 million), and as time goes on, the available supply of bitcoins decreases. As a result, the value of each bitcoin increases over time. Ethereum is inflationary, meaning that the number of Ethereum in circulation will increase over time. This difference is due to the way that Bitcoin and Ethereum are mined. Bitcoin is mined using a proof-of-work algorithm, while Ethereum is mined using a proof-of-stake algorithm.
Inflationary currencies are less desirable because they tend to decrease in value over time. So in a sense, you can think of bitcoin as being more stable and valuable than traditional currencies.
Purpose:
Bitcoin was created to be a digital currency and payment system, while Ethereum was created to be a decentralized platform for developers to create smart contracts and decentralized applications. These differences account for the different purposes of Bitcoin and Ethereum. Bitcoin is used primarily as a digital currency, while Ethereum can also be used to create smart contracts and decentralized applications. This is basically what has made Ethereum popular with developers.
Scalability:
Bitcoin is limited in its scalability, meaning that it can only process a certain number of transactions per second. There are two main variables that affect Bitcoin’s scalability: the block size and the block interval. The block size is a limit on how much data can be included in each block of the blockchain. The block interval is how often new blocks are created. Ethereum, on the other hand, is not limited in its scalability and can process a much higher number of transactions per second than Bitcoin. This difference is due to the different algorithms that are used to mine Bitcoin and Ethereum. Bitcoin is mined using a proof-of-work algorithm, while Ethereum is mined using a proof-of-stake algorithm.
Decentralization:
Bitcoin is more decentralized than Ethereum because it has a larger network of miners and nodes. Ethereum is less decentralized than Bitcoin because it relies on trusted nodes to verify transactions. This difference is due to the different algorithms that are used to mine Bitcoin and Ethereum. Bitcoin is mined using a proof-of-work algorithm, while Ethereum is mined using a proof-of-stake algorithm.
Mining:
Bitcoin is mined using a proof-of-work algorithm, while Ethereum is mined using a proof-of-stake algorithm. This difference accounts for the different purposes of Bitcoin and Ethereum. Bitcoin is used primarily as a digital currency, while Ethereum can also be used to create smart contracts and decentralized applications.
Price:
Bitcoin and Ethereum have both seen a significant increase in price over the past year. This difference is due to the different purposes of Bitcoin and Ethereum.
The price of Bitcoin is a lot higher than the price of Ethereum. This is because the market believes that Bitcoin has more potential than Ethereum. At the time of writing, one BTC is worth $46,728.10.
Bitcoin is the first cryptocurrency, and it has a lot of believers who think that it will take over the world. Ethereum is newer, and some people don’t believe that it has as much potential as Bitcoin. This is why the price of Bitcoin is higher than the price of Ethereum.
Additionally, the size of each respective network affects the price difference between Bitcoin and Ethereum. Bitcoin’s network is significantly larger than Ethereum’s network. This means that there are more people using Bitcoin than Ethereum, which drives up the price of Bitcoin.
What Should You Invest In?
So, which one should you invest in? That depends on what you’re looking for. If you’re looking for a digital currency to use for transactions, then Bitcoin is the better option. If you’re looking for a platform to build decentralized applications, then you can go ahead and buy Ethereum.
Again, Bitcoin is more well-known and has been around longer, so it’s more stable and has a lower risk of sudden price changes. Ethereum is newer and has more features, such as the ability to create smart contracts.
It’s important to note that Bitcoin and Ethereum are not in competition with each other. In fact, they can be complementary currencies. Bitcoin is great for transactions, while Ethereum is great for contracts. Bitcoin is more popular than Ethereum. Ethereum is more versatile than Bitcoin.
Verdict – Is Ethereum Different from Bitcoin?
Bitcoin and Ethereum are both digital currencies that have revolutionized the way we think about money. However, they are built on different technology platforms, have different supply limits, and are used for different purposes.
So what’s the verdict? Ethereum is different to Bitcoin, but both have their own unique benefits and drawbacks. Bitcoin is better for fast and simple transactions, while Ethereum is better for more complex transactions and contracts. It really depends on what you’re looking for from your cryptocurrency.
Read more:
How is Ethereum Different from Bitcoin?