The world of digital currencies has started as it vastly revolutionized the financial transaction process. The digital currencies, also known as cryptocurrencies or crypto coins, began to emerge following the trail of Bitcoin. Bitcoin (BTC) is the first-ever cryptocurrency to surface in the financial sector. Holding Satoshi Nakamoto’s hands, it was first introduced in the industry and eventually influenced the other economic creators to introduce more of such cryptocurrency. Since Bitcoin and Ethereum are two prominent names, we will stress these two in this article.
Basics of Bitcoin
Bitcoin (BTC) had been launched back in January 2009 and introduced a novel idea proposed in a white paper by Satoshi Nakamoto. Unlike the government-issued fiat currency, it offers secured transactions devoid of any central authority. Bitcoins are not physical coins, and the balances are solely associated with a public ledger that is cryptographically secured.
However, Bitcoin was not the sole attempt as an online or digital currency, and it has been the most successful in its early efforts. It has resulted in being a predecessor in some way to all the virtual currencies introduced in the past decade.
Over the years of trial and error, the decentralized virtual currency acquired acceptance amongst government bodies and regulators. A disheartening fact is that Bitcoin is not a formally accepted payment medium or store of value. But, cryptocurrency has been successful in carving out a separate niche for itself. It continues to co-exist with the traditional financial system irrespective of being debated and scrutinized regularly.
In the initial phase of cryptocurrency booming back in 2017, the market value of Bitcoin had accounted for nearly 87% of the entire cryptocurrency market.
Basics Of Ethereum
Applications based on blockchain technology go beyond enabling a digital currency. Ethereum was launched back in July 2015. It is the largest, well-established, and open-ended decentralized software platform.
Ethereum promotes the deployment of smart contracts along with decentralized applications (DApps) being built and run without any fraud, downtime, interference, or control of a third party. Ethereum is also entirely furnished with its own programming language that runs on a blockchain. It permits the developers for building and running the distributed applications.
The promising applications of Ethereum range broadly. They are powered by their native crypto token called Ether and abbreviated as ETH. Ethereum had launched a presale of Ether back in 2014 that received an astounding response. Ether serves as the fuel for running the commands on the platform of Ethereum. The developers use it for running the applications on the platform.
Ether serves two primary purpose -
- It gets traded as one of the digital currencies on various exchanges the same way the other crypto coins perform.
- It is utilized on the Ethereum network for running the applications.
Ethereum states, “people all over the world use ETH to make payments, as a store of value, or as collateral.”
Key Differences And Similarities Between Bitcoin And Ethereum
Let us talk about the similarities first, and then we will move on to the differences.
Similarities:
- Bitcoin and Ethereum networks are powered by the principle of cryptography and distributed ledgers.
- Both ETH and BTC are global digital currencies.
- ETH and BTC operate utilizing the proof-of-work consensus. Thus, the transactions need a network-wide agreement of nodes.
Differences:
- Transactions on the Bitcoin network bears data that is solely for keeping notes. Ethereum network transactions might contain executable data.
- Ethereum is much older than Bitcoin and more advanced than Bitcoin.
- The block time for Ethereum transactions is much less than the Bitcoin transactions. The former takes a couple of seconds to get confirmed, while the latter takes a couple of minutes to get approved.
- Ethereum processes 10-15 processes per second while Bitcoin processes 3-5 per second.
- Bitcoin leads over Ethereum on price stability.
- Bitcoin is limited to just 21 million coins, while this factor does not currently work on Ethereum. However, the blockchain experts have claimed the total number of Ethereum coins would never be over 100,000,000 ETH in the immediate future.
- Ethereum runs on algorithms that use e-hash. Bitcoin uses the SHA-256 algorithm.
- The networks for both Ethereum and Bitcoin are different based on their overall aims. Bitcoin cryptocurrency had been created as an alternative to the national currencies aspiring to be a store of value and medium of exchange. Ethereum had always intended to be a DLT platform for facilitating programmatic, immutable contracts and applications through its own currency.
- ETH does not aim to establish itself as an alternative to the monetary system. It also monetizes and facilitates the DApps operation and the smart contracts.
- GitHub contains only four repositories of Bitcoin in contrast to 247 Ethereum’s repository. A repository can be termed as the place where the developers collaborate for accessing project information.
Theoretically, Ethereum must not compete with Bitcoin as it is just another use-case for a blockchain supporting the latter. From the trader's perspective, Ethereum’s popularity has pushed it to the competition zone with other cryptocurrencies as well. Also, Decentralized Finance (Defi) tokens are based on Ethereum and thus have smart contracts which make it easier to trade on different platforms.
