Bitcoin vs. Ethereum: What’s the Difference?

Bitcoin vs. Ethereum: What’s the Difference?

The rise of cryptocurrency as the new payment system continues on. Despite the Covid-19 pandemic and additional world events bringing the crypto market to a first-time low since its beginning - $943 billion in July 2022 - many are still holding tight to its rise.

The numbers encouraged many countries to start working toward developing legislation and legal framework that would set the crypto world in place.

Bitcoin, the world's most famous crypto coin, still holds the top place on the market. Right behind it is Ethereum. As the two largest cryptos by market cap, comparing the two is natural, and setting them apart can be tricky.

Bitcoin and Etherium boast many similarities, but the fact remains that these digital coins have distinguishable features. Keep reading to learn what distinguishes these digital coins.

What is Bitcoin?

In 2009, a mysterious person who went under the pseudonym of Satoshi Nakamoto introduced the world to Bitcoin - the “first” digital coin. Now, Bitcoin was not the first attempt to create such a currency, but it was the first to succeed and open new territories for the digital era to thrive.

As a digital coin, the purpose of Bitcoin was to decentralize payments, i.e., give people more anonymity and free them from government-issued currencies. This is why Bitcoin works on a P2P system, meaning there is no third party (government, banks, or other financial institutions) to regulate the transactions between them - thus achieving full decentralization!

It is based on decentralized ledger technology (DLT), rather known as blockchain technology. Bitcoin also uses the Proof of Work (PoW) method, which essentially is a process called mining.

Find trusted crypto information on Fastbull to learn more about Bitcoin’s origin.

What is Ethereum?

The second-largest crypto, with a current price of $1,150, is Ethereum. This crypto uses the same basis as Bitcoin but goes further. It actually uses the blockchain network to create a fully decentralized computer.

Ethereum itself is not a cryptocoin but a decentralized platform that uses smart contracts and decentralized applications (dApps) that clear any third-party involvement, i.e., allow complete decentralization. As an open-ended software, it enables users to build and run various apps.

This feature of the Ethereum network has encouraged the rise of many other digital assets we know of today, like non-fungible tokens, or NFTs. However, to create dApps or use smart contracts, people need to pay fees with Ether - the native token on which the platform runs.

Ether is the digital coin that fuels the Ethereum network and can be traded as any other cryptocurrency. What makes it appealing to many is the sole fact that Ether doesn’t only use the P2P direction of contact. Instead, Ether can be used as collateral or it can be lent out - a process also known as lending - different from staking your coins.

Bitcoin vs Ethereum: Key Differences

Both Bitcoin and Ether may look the same at first glance, but the fact is that they have several features in which they differ.

First and foremost, Bitcoin and Ethereum use the PoW method. However, Ethereum is now working on a newer and better version called Ethereum 2.0 which would work based on the Proof-of-Stake (PoS) method.

The grounds on which this change was based was the criticism revolving around the PoW method. Namely, it is deemed too energy-wasting and not eco-friendly of a method. Mainly considering that the mining process takes up a lot of power. Instead, the PoS uses staking. This locks up your coins for a certain period and you receive rewards for that “lend”. It works on validating new blocks instead of mining.

Also, both cryptos use different ways to issue new tokens. Bitcoin uses the Omni layer. This centers around stablecoins - coins that lock to other assets like gold or fiat currency.  On the other hand, Ethereum uses the ERC-20. This imposes several rules that all developers need to pass to launch new tokens.

Next, the time difference for issuing their coins is yet another difference. While Bitcoin takes 10 minutes to do this, Ethereum can create a new coin every 15 seconds.

And finally, the main aim of both coins is different. Bitcoin aims to fully create a digital currency that can replace real money. Whereas, Ether’s primary usage was to enable the use of dApps and smart contracts on the Ethereum network.

Theoretically speaking, Ethereum and Bitcoin can’t compare. This is because of the sole fact that Ethereum is a platform that facilitates the use of applications via native currency. This allows the Ethereum blockchain to grow beyond the current usage of Bitcoin. Especially as a store of value and an exchange channel. Thus, it can develop the purchase of NFTs and other DeFi activities.

Bottom Line

The differences above are just a few between these two digital coins. Currently, the world is shifting slowly toward the idea behind Ethereum because of the prediction that Bitcoin's mining power will soon end.

Nonetheless, Bitcoin is still the top crypto on the market. How these two will develop in the future is left for us to see.

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