Ethereum Vs. Bitcoin: 9 Key Differences
There’s a huge shift in the last decade, as 2009 was the last time the world relied on cash that was real and tangible. Since 2009 “Bitcoin” has been a word that at first was whispered but then shouted as a saviour for the monetary system of our world. Then 2015 came along and things changed just as dramatically. The eternal struggle of Ethereum vs Bitcoin officially started.
From the very beginning of Ethereum’s existence, people said it would topple Bitcoin. But the very fact of the matter is that neither is “better” than the other because they simply very different.
We are going to discuss the differences and some similarities between Ethereum and Bitcoin, and give you the chance to decide for yourself.
Are you ready to tackle it? We think so. Grab your miner’s lid, you are going to need it!
COMPETITORS OR CO-CONSPIRATORS?
Ethereum and Bitcoin both run on something called blockchain technology and proof-of-work (for now). This means that data transform by use of a hashing algorithm into a series of numbers and letters.
This hash along with the public key of the current “owner” of the hash combine and then hashed again. This creates a new and unique hash. The only way to get this hash’s private key (used as a signature), is to do the proof-of-work to find it.
The reason why it’s called a chain is that it looks like one. A Fibonacci sequence is a kind of chain you might be familiar with.
1+1=2, 2+1=3, 3+2=5 and so on.
By building on what came previous, you create the chain. The only way to know what came previously is to do the work. Thus, proof-of-work and blockchain.
Ethereum and Bitcoin also thought of as currencies, but we’ll see about how that isn’t exactly the truth for both.
This is the point where Ethereum and Bitcoin diverge.
ETHEREUM VS BITCOIN: WHAT’S THE DIFFERENCE?
Despite having two things in common, that they use blockchain and proof-of-work algorithms, there are so many other things that set them apart.
Those differences don’t mean that they are at odds, but rather perform very different and necessary functions in the digital world we live in.
- Focus is completely different
- Approach at proof-of-work is very different
- Approach transaction fees differently
- Time to add new blocks and transaction rates
- Algorithm for hashing
- Number and cap on tokens
- Value per token
- Block size
- The base of value to the global community
There we have it, all 9 ways that Bitcoin and Ethereum are different. Time to buy Bitcoin or buy Ethereum based on what your needs are, right?
Sorry—it isn’t that easy. Let’s take a closer look at what makes these two different and focus on some of the more important characteristics.
Bitcoin has some very interesting features to boast about. Here’s a short list:
- The first cryptocurrency created in 2009 by Satoshi Nakamoto, a pseudonym for a person or a group of people
- Focused on replacing fiat currencies, especially in a digital space. It wants to be a store of value like physical gold in the digital world
- Proof-of-work based mining
- Transaction fees are optional
- 10 minutes (on average) to add a block to the blockchain
- SHA-256 “Hashcash” algorithm
- Maximum of 21 million Bitcoins, there are already 18.5 million in circulation right now
- Trades at about US$16,500 per Bitcoin
- US$280 billion market value
- Block size of Bitcoin depends on the fork. 10Mb up to 2GB
- Value of the currency based on the trust-less nature of the system
Here’s a quick list of ethereum features compared to the points we brought out for bitcoin. As you can tell, they’re very different beasts.
- Released in 2015 by Vitalik Buterin
- A platform first, but it has its own currency built-in
- Ethereum focuses on utilising smart contracts and distributed applications
- Currently proof-of-work, but will move to proof-of-stake
- Transaction fees, or “gas,” is mandatory
- 10-15 seconds to add a block to the blockchain
- Ethash algorithm
- 112,117,804 Ethereum coins, or “ether,” and counting
- Trades at about US$460 per Ether
- US$52.5 billion market value
- The highest recorded block size is 58,953 bytes or 58.9KB
- The value of the smart contracts on the platform is higher than the value of the ETH currency
ETHEREUM VS BITCOIN: VALUE
Bitcoin has a focus on replacing fiat currencies of the world and becoming a store of wealth like physical gold. This is a very lofty goal, and it needs to get faster at transaction speed and rate to accomplish this.
No one wants to wait 10 minutes on average to see if their payment goes through in queue at the store. As a secure store of value, however, it excels. Even more so in its pseudo-anonymity.
Ethereum, on the other hand, focuses on serving a need for smart contracts. A smart contract is an application built into the transaction that serves the purpose of handing over the deed to a home, stocks and bonds, escrow services, or any number of other agreements in a trustless fashion.
The two of you are your own notaries. Things only get done if the agreement that is built into the contract is satisfied. Can you see the value in this?
Now, Ethereum certainly has a currency built-in. That’s how transactions are paid for, and how value is assigned to a contract. But the focus is the smart contract itself, and ethereum as a platform of facilitating that contract.
That is has a currency built into the platform is just a necessity. Most people value that currency over the smart contract, but the valuation within those ERC-20 contracts has recently overtaken the value of the currency itself.
That’s proof of concept.
Bitcoin will never have more than 21 million tokens unless there is an agreement to raise that amount. There are serious debates about how destabilizing that would be, however. This makes it a limited commodity, just like gold.
Ethereum on the other hand will always have new tokens created, as each token can represent a contract in the network. It isn’t a currency, but a blockchain-based platform, remember. It wouldn’t work very well if one day we suddenly couldn’t make agreements.
Because it is an unlimited commodity, it isn’t positioned well to fight against hyper-inflation as a currency. Since its features as a currency are to give value to the transactions and pay for the transaction, though, it isn’t a problem.
ETHEREUM VS BITCOIN: WHICH WILL YOU CHOOSE?
It’s an eternal debate of ethereum vs bitcoin and which is better. But now you know that neither is “better” than the other. They just have different uses, like apples and oranges.
Even the currency side of Ethereum might be appetizing for you. After all, it had 6 years to learn from bitcoin’s mistakes, right? Before you go and buy bitcoin or Ethereum, you need a wallet, an exchange, and some knowledge to back you up.
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