How Is Ethereum Different From Bitcoin? | The Only Guide You Need

Unless you’ve been living under a rock, you probably already know what bitcoin is. In fact, chances are aware of ethereum. Even if you did even the lightest research on the topic of cryptocurrencies. Bitcoin (BTC) and ethereum (ETH) are the most popular crypto projects and most traded digital currencies on any crypto trading platform. So How is Ethereum Different From Bitcoin? Let’s talk about each project in detail and see how they are different.

See also: Will Ethereum 2.0 Replace Bitcoin And Change The World?

Ethereum Overview

Ethereum is much more than a cryptocurrency. It’s a platform built on blockchain. It gives an opportunity to develop, publish, and monetize decentralized applications, harvesting the power of the decentralized ledger underlying the Ethereum network. In addition, Ethereum was the first to offer the concept of smart contracts, which eliminated the need for a third party. The cryptocurrency of the platform is essential to its ecosystem. Ether is the name of the currency.

Ethereum
Ethereum

Ethereum was the first and the most successful attempt to utilize blockchain outside the fintech sphere. Its creator, Vitalik Buterin, saw an opportunity to revolutionize the crypto industry, and now the network includes over 3,000 dapps and millions of users around the globe.

See also: How to Build The Perfect Ethereum Mining Rig? [Explained]

Bitcoin Overview

Bitcoin is the first cryptocurrency in the world. Unlike Ethereum, which offers an entire platform, bitcoin is just a currency. However, it’s so popular that its market cap is larger than the capitalization of the 10 other most popular cryptocurrencies combined (including ethereum).

bitcoin
bitcoin

BTC was developed by Satoshi Nakamoto, whose identity remains unknown to date. 21 million units is its max supply. This means no more BTC than that can be minted. BTC is also one of the most regulated cryptocurrencies, as many businesses accept it as a payment method. El Salvador even became the first country to list it as an official currency.  

See also: How To Create A Cryptocurrency | [Complete Guide 2021]

Key Differences Between BTC and ETH

Before you decide to buy bitcoin or ethereum cryptocurrency, consider their differences.

Initial Purpose

The initial purpose of bitcoin was to be a means of payment and store value in an innovative way. Like we use fiat money to buy and sell things, bitcoin aims to provide a more secure, faster, affordable, and anonymous alternative that doesn’t depend on banks or any centralized entity.

Ethereum vs Bitcoin
Ethereum vs Bitcoin

Ethereum, on the other hand, is a distributed and open-source blockchain-powered network for building and publishing decentralized applications and using smart contracts. The network’s cryptocurrency — ether — supports Ethereum’s ecosystem, but it turned out to be the second most popular crypto after bitcoin.

Network

Bitcoin and Ethereum networks are similar as both are based on the concept of encryption combined with a distributed ledger. However, both are pretty unique in some ways. 

Both networks are based on the proof-of-work consensus algorithm. However, Ethereum has pledged to change to a more environmentally-friendly proof-of-stake, as the network is being upgraded to Ethereum 2.0.

ethereum version 2
ethereum version 2

Also, the Bitcoin network has a limited supply of BTC, which is 21 million BTC, whereas the supply of ETH is virtually unlimited.

Transaction Characteristics

Bitcoin transactions are technically monetary. You can add notes and messages to every transaction. Ethereum transactions go a bit deeper than that, as it’s possible to add executable code for creating a smart contract to a transaction.

ethereum transaction structure
ethereum transaction structure

The distributed ledger stores all transactions. However, the block creation time is much longer on the Bitcoin network: approximately 10 minutes instead of 15 seconds on Ethereum. 

This also affects the transaction throughput. The Bitcoin network can process approximately seven transactions per second (TPS), whereas Ethereum can process 30.

See also: Types Of Crypto Wallets And How To Choose The Best One For You

Usage Opportunities

Bitcoin is mainly a substitute for money, as it’s a currency, just like the dollar and euro. However, it does bring a lot of novelties to the table, such as the elimination of centralized financial authorities, end-to-end payments, improved transparency, anonymity, and security.

bitcoin used as currency
bitcoin used as currency

See also: Top 12 Privacy-Focused Cryptocurrencies Popular Right Now

A wide array of industries besides finance use Ethereum through smart contracts and dapps. Some industries are already profiting from Ethereum’s decentralized network, and smart contracts are software development, retail, and gaming.

What Crypto Is Better to Buy?

This choice is never easy. If your goal is to make a profit, bitcoin might be a better choice as its frequent price movements could offer an opportunity for a huge income in a short period. The overall bitcoin value is higher than ether’s value. However, investing in BTC also poses a huge risk.

How Is Ethereum Different From Bitcoin
How Is Ethereum Different From Bitcoin

Ethereum is no less volatile than BTC. But many ETH investors show interest in the properties of the Ethereum network besides the financial aspect. It means you could actually support the further development of the network when investing in ETH, which would ultimately drive the price of ether.

FAQs

What is a blockchain, and how does it work?

A blockchain is a sort of distributed database that is unique. The most important characteristic of blockchains is that no one has control over them! Users submit tasks in transactions, which are then organized into blocks, which are then linked to form chains.

What exactly is a dapp?

Dapp is simply a decentralized application. On the Ethereum Classic system, they are also known as smart contracts. The word is used to differentiate blockchain-based applications from centralized applications.

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See also: Blockchain Phone | Things to HAVE to Know About This

Conclusion

There’s no way to predict the future and tell which crypto will be more successful. It’s your job to do your research and decide how to invest in cryptocurrency. Also, please bear in mind that bitcoin and ether aren’t the only cryptocurrencies out there, as there are hundreds of other options you should explore before entering the crypto trading world.

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You can always find me playing the piano or playing FIFA when I'm not binge-watching TV Series with pizzas. Fountainhead of TechWhoop. Life motto: The only time success comes before work is in the dictionary.

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