Bitcoin is the most popular cryptocurrency where Ethereum is the second most popular cryptocurrency. So it is very natural for people to compare these two currencies. Today we are going to talk about the similarity, benefits, and differences between Bitcoin vs. Ethereum.
Basics of Bitcoin: What It Is, How It Works?
Bitcoin was launched in January of 2009 by a mysterious man named Satoshi Nakamoto. On that day Bitcoin offers an online currency that is secure without the need of any central authority. Which means it is completely different from government-issued currencies. Bitcoin was the first cryptocurrency which made it the best brand recognition and most liquidity. And it is the most widely accepted crypto. Bitcoin has no physical body and only value that is associated with a cryptographically a secured public ledger. However, Bitcoin is not the first attempt at an online currency of this type but it was the most successful till now.
As Bitcoin became popular, the idea of decentralized currency has gained acceptance among normal people. At some point government started recognizing cryptocurrency as a valid currency. Although there is still some country where bitcoin is completely banned.
Bitcoin is still far from being perfect and it still has huge potential for growth. Even though bitcoin is growing very fast the price of bitcoin is very volatile, to say the least. High energy consumption is another big problem. Also, Bitcoin doesn’t have 100% anonymity. But even with all these problems, Bitcoin is still the most popular crypto to this very day.
Basics of Ethereum: What It Is, How It Works?
After the rise of Bitcoin, a Russian-Canadian programmer named Vitalik Buterin found some problems in Bitcoin. To solve those problems and bring a better cryptocurrency he and few other crypto entrepreneurs founded Ethereum. Now, what’s the difference? Well, you can develop an app on top of Ethereum. Vitalik Buterin explained it like this, Bitcoin is a calculator which is good at only one thing where Ethereum is a smartphone where you can do multiple tasks. To put it simply Ethereum is an open-source operating system and computing platform.
Ethereum networks work with smart contracts. Now, what are those? Simply put, smart contracts are collections of code that carry out a set of instructions and run on the blockchain. These contracts are the ones that power decentralized applications. It’s similar to a smartphone app that runs on Android or Apple IOS however unlike those app smart contracts don’t answer to one company or authority.
Similarities in Bitcoin & Ethereum
Bitcoin and ether both are similar in many ways. Both are a digital cryptocurrency which can be exchanged or stored in various types of cryptocurrency wallets. Bitcoin and Ethereum are working towards the same goal. What is the goal? Decentralizing currency or money. Meaning the currency will not be depended on or controlled by one bank, organization, or even government. This is the sole reason many governments still don’t allow the use of cryptocurrency.
Ethereum and Bitcoin both use the distributed ledger technology which we know as blockchain. Both however uses the proof-of-work protocol which consumes a lot of energy. You might not be concerned about this but it’s really harmful to the climate. As of 2021, Bitcoin’s market cap is over $700 billion, while Ethereum’s market cap is around $287 billion.
Bitcoin vs. Ethereum
Bitcoin and Ethereum have a lot of similarities. Both Bitcoin and Ethereum use blockchain and share the same goal of decentralization. Not to mention Bitcoin and Ethereum is the most valued cryptocurrency right now. Even though all of this similarity Bitcoin and Ethereum has some major differences which makes our todays topic Bitcoin vs. Ethereum.
Bitcoin and Ethereum network has an overall different goal. Bitcoin was created as an alternative option against the national currency. That is why bitcoin mostly used as a medium of exchange and a store of value. On the other hand, Ethereum was developed as a platform to facilitate immutable, programmatic contracts, and applications via its own currency. Bitcoin network transactions are generally only for keeping notes of transactions. In Ethereum however, the network may contain executable code.
Bitcoin uses SHA-256 while Ethereum uses that. Bitcoin has a fast transaction speed than Ethereum. Also, Ethereum has potentially higher transaction fees while transaction fees on bitcoin fairly low. Not to mention bitcoin has a limited block (21 million) while Ethereum no such limitation.
But if you have to say what is the major difference between these two cryptocurrencies? Well, the main difference between Ethereum and Bitcoin is the fact that Ethereum is programmable and bitcoin is not. This feature alone widens the scope of Ethereum and making it more than just a digital currency. It makes a marketplace for financial services, games and apps and so much more.
While bitcoin was created only for decentralized currency, Ethereum was developed for multi-tusking. In Bitcoin, you can only transfer currency but in Ethereum you can create apps make games, and much more. Also, Ethereum 2.0 is under development which can solve most of the issues Ethereum has. If I am being honest I truly think Ethereum suppress bitcoin one day.