Ethereum vs Bitcoin: What are the differences?
Omni -Bitcoin vs. Ethereum: An Overview
Ethereum and Bitcoin are famously pitted against one another mainly because these are the two most popular cryptocurrencies. From the way the technology behind Ethereum and Bitcoin work, to the purposes of their respective assets, BTC and ETH, these two differ in many ways. The main difference between them is that bitcoin is designed as a currency and a store of value, the Ethereum network is intended for complex smart contract and decentralized applications.
Bitcoin
Bitcoin was launched in January 2009 as a digital currency — a novel idea that had been discussed theoretically in academia and weakly attempted but never adopted successfully till Bitcoin. All bitcoin transactions are stored on multiple servers all around the world. Since anyone can set up such a server with their computer, Bitcoin is not governed by any central authority unlike government-issued currencies like the USD or AUD.
Ethereum
Ethereum is the second largest open-source blockchain that facilitates payments and supports smart contracts to help build secure decentralized Applications (dApps). With the invention of Bitcoin, many technoidealists picked up the baton to further the mission of creating the ultimate decentralized crypto-utopia, one of them being young Vitalik Buterin from Canada. Through Vitalik's advent and popularization of Ethereum, blockchain technology was adopted not just as a means for facilitating payments with Ether (ETH), but creating applications that go beyond just enabling a digital currency.
Ethereum enables developers to build and deploy decentralized applications (dApp) without the need of a centralized authority. The Ethereum Network team created Solidity, a programming language invented specifically for constructing and designing smart contracts that run on the blockchain.
Key Differences
While both the Bitcoin and Ethereum networks are powered by the principle of distributed ledgers and cryptography, the two differ technically in many ways.
Technicalities
Block time
The block time of Bitcoin is 10 minutes while the block time of Ethereum is less than 20 seconds.
Consensus mechanism
Bitcoin uses the Proof of Work mechanism to reach consensus while Ethereum uses Proof of Stake to validate transactions.
Programmability
Transactions on the Ethereum network may contain executable code, while the Bitcoin network transactions data is only used to record transaction information.
Purpose
Bitcoin is primarily designed to be an alternative to traditional currencies - a way for people to send money over the internet. It is meant to take the role of a digital currency that stores value, and pose as a direct competitor to fiat currencies like USD.
Ethereum is a programmable blockchain that enables functionalities way beyond just payments. Thanks to its programmability, Ethereum can be used to build applications in NFTs, DeFi, and even gaming.
Assets
Although BTC and ETH are both digital assets, they have several differences between them as well. Bitcoin is often compared to gold due to its finite supply, thus helping to preserve its value. One of Bitcoin’s defining features is its limited supply of 21 million, which was set by Satoshi (the creator of Bitcoin).
On the other hand, there is no set finite supply of ETH. However, the asset has become growingly deflationary over the years due to a few changes in its issuance structure — the latest being Ethereum's migration to Proof of Stake, which allowed the network to cut down on the total amount of ETH issued to validators.
Bitcoin vs Ethereum: Which is better?
At the moment, the answer to this question is highly subjective. Bitcoin has a higher market capitalization than Ethereum but Ethereum provides more functionalities than Bitcoin. On top of payments, Ethereum hosts the largest ecosystem in Web3, making up the biggest names in DeFi, Gaming, NFTs and the metaverse.
The two assets of the platforms are also widely diverged in the type of value they provide to users. ETH is ahead in terms of innovation and provision of decentralized applications for users while BTC is a darling among those that are looking for a currency to hedge against inflation and to have a "bank account" that they have easy access to.
FAQ
Ethreum vs Bitcoin: Which is more eco-friendly?
With Ethereum's move to Proof of Stake from Proof of Work, Ethereum consumes much less energy than Bitcoin, making it more eco-friendly. The mining conducted for Bitcoin's proof of work system requires a large amount of computing power. On top of that the mining requires specialized hardware and computer servers, which also generates electronic waste. In fact, the accumulation of such enormous carbon footprint partly led the Ethereum foundation to switch to Proof of Stake.
