If you went out and asked ten random people to name a cryptocurrency they knew about then the most cited would undoubtedly be Bitcoin and Ethereum. This simply comes down to them being the two most valuable cryptocurrencies when you look at market cap - as of writing (and remember these numbers tend to change a lot), all the Bitcoin in existence has a total value over $109 billion and Ethereum over $44 billion. As a result, it is only normal that these two cryptocurrencies see more headlines in mainstream media and as a result see a wider adoption.
If you are happy sitting on the sidelines, then just knowing that Bitcoin and Ethereum are both examples of cryptocurrencies and therefore digital money transfer systems may be enough for you. If you are looking to invest, to trade or maybe even start a business on one of these platforms - then you need to understand their differences in how they work and what they can be used for. Your ability to understand differences between two different coins is crucial when it comes to navigating the world of crypto because those differences can be what decides if a coin proceeds to become a widely accepted standard or if it will drop into obscurity and become worthless.
Let's start by learning about Bitcoin and Ethereum
Bitcoin is what we refer to as the first ever virtual currency, and when any other crypto rises in popularity it will always be compared to Bitcoin. It was born in 2008 when a mysterious Satoshi Nakamoto published a white paper: outlining lower transaction fees than any traditional online payment provider and regulated by a decentralized authority, a direct opposite to government-issued currencies. If you are new to crypto, an important aspect to grasp immediately is that there are no physical Bitcoins, there are only balances associated with public and private keys.
The concept of Bitcoin being accepted and formally recognized as a way of making a payment, has over the years increased among regulators and government bodies all around the world. You could say that it currently does occupy its own niche, coexisting in the world’s financial system, even if it is regularly debated and heavily scrutinized.
When you look into how Bitcoin functions, then you will make the discovery of blockchain - which is the technology that powers it. Currently, blockchain is probably the biggest topic in the world of FinTech(financial technology), but you can also find it appearing in many other industries.
The main attractiveness of blockchain is its ability to provide you with a tamper-proof record of all transactions on a network, it is a public ledger that can never be manipulated. Many companies believe it will allow them the possibility of working at lower costs, with reduced risks and an enhanced efficiency - which is why it is such a sought-after technology.
Ethereum: Blockchain 2.0
Whenever you see blockchain technology being used to create & power applications that are outside the realm of being solely an accounting method for a digital currency then this is often noted as being Crypto 2.0, blockchain 2.0 or some even call it Bitcoin 2.0. A good example of this would be our decentralized exchange Saturn Network, which would be considered an application that runs completely on Ethereum.
Ethereum was launched in 2015, it is currently the largest decentralized software platform that supports smart contracts and also Distributed Applications(dApps) to be built and run. It does this by providing developers access to a programming language that runs on a blockchain. Running applications on Ethereum provides the benefit of having no downtime and no interference from a third party. (See also: How Do Ethereum Smart Contracts Work?)
The types of applications you can find running on Ethereum is practically limitless: you can find games, exchanges, and marketplaces. One thing unites them all and that is that they are all powered by its platform-specific cryptographic token, Ether. You can think of Ether as a fuel for moving things around the Ethereum platform and therefore it is sought out by developers looking to develop and publish applications on Ethereum.
Broadly speaking Ether is used with two goals in mind: it is traded like many other cryptocurrencies via a digital currency exchange or it is used inside Ethereum’s network itself to run and monetize any work. Ethereum likes to say that it can be used to:
“Codify, decentralize, secure and trade just about anything.”
What are the key differences between Bitcoin and Ethereum?
Although Bitcoin and Ethereum are both blockchain based, technically the two are different in many ways. For example, Bitcoin produces a new block on average every 10 minutes, whereas, for Ethereum this is only 15 seconds. This means that Ethereum is much quicker than Bitcoin, you can expect transactions to be confirmed in seconds rather than minutes. They also use different hashing algorithms(the maths that makes encryption happen), with Bitcoin using SHA-256 and Ethereum using KECCAK-256.
The Ethereum network also gives developers the possibility of creating other cryptocurrencies, or tokens, that run off Ethereum’s blockchain. This opens up an even wider amount of use cases & scenarios, such as being used by organizations to represent shares, voting rights or even to be used as a means of confirming your identity or authorization credentials. (See also: Tokens or blockchains: which is a better investment?)
So with that said, the main difference is that they are occupying different spaces. Sure due to them being the two biggest cryptocurrencies they will be compared, but are they really in a competition?
Bitcoin Vs Ethereum
While Bitcoin does have an inbuilt scripting language it remains very limited in functionality with only a few dozen possible operations. Whereas with Ethereum we find what is called a Turing-complete programming language: meaning any sort of operation is possible. This means that you could say their biggest difference is having a different purpose.
Bitcoin has been created as the alternative to regular money, therefore it is a method of storing value and making a payment transaction. Ethereum is developed as a platform to power peer to peer contracts and applications fueled by its own currency. Therefore, Ethereum’s goal is not to establish itself as a payment alternative but to promote and monetize the use of itself(attracting more developers to build and run dApps on their network).
Bitcoin & Ethereum who is the winner?
If you do really want to go down the route of comparing the two, then there is really no clear winner: because they both have a different purpose. Ethereum is without any doubt an advancement of blockchain technology but it is not trying to achieve the same goals as bitcoin. Therefore, they are both set very well to establish themselves for worldwide adoption as they are developed with different intentions in mind.