Bitcoin vs. Ethereum: An Overview
Ether (ETH), the cryptocurrency of the Ethereum network, is the second most popular digital currency after Bitcoin (BTC). It is also the second by market cap.
Ether and bitcoin are similar: each is a digital currency traded via online exchanges and stored in various types of cryptocurrency wallets. Both tokens are decentralized. They both make use of blockchain technology.
Similarities and differences between bitcoin and ether.
KEY TAKEAWAYS
- Bitcoin signaled the emergence of a radically new form of digital money that operates outside the control of any government or corporation.
- With time, people realized they could use the blockchain technology, which is one of the underlying innovations of bitcoin, for other purposes.
- Ethereum proposed to use blockchain technology not only for maintaining a decentralized payment network but also for storing computer code which can power tamper-proof decentralized financial contracts and applications.
- Ethereum applications and contracts are powered by ether, the Ethereum network’s currency.
- Ether should complement rather than compete with bitcoin, but it has emerged as a competitor on cryptocurrency exchanges.
Bitcoin Basics
Bitcoin was launched in January of 2009. It was founded by the mysterious man named Satoshi Nakamoto.
Bitcoin offers the promise of an online currency that is secured without any central authority, unlike the dollar. There are no physical bitcoins, only balances associated with a cryptographically secured public ledger.
Over the years, the concept of a virtual, decentralized currency has gained acceptance among regulators and government bodies. Although it isn’t formally recognized as payment or store of value.
At the start of the cryptocurrency boom in 2017, Bitcoin’s market value accounted for close to 87% of the total cryptocurrency market.
Ethereum Basics
Launched in July of 2015, Ethereum is the largest and most well-established, open-ended decentralized software platform.
Ethereum enables the deployment of smart contracts and decentralized applications (dapps) to be built and run with no downtime, fraud, control, or interference from a third party.
Ethereum comes complete with its own programming language which runs on a blockchain, enabling developers to build and run distributed applications.
The potential applications of Ethereum are wide ranging and are powered by its native cryptographic token, ether (ETH). Ether is like the fuel for running commands on the Ethereum platform and is used by developers to build and run applications on the platform.
Ether is used mainly for two purposes—it is traded as a digital currency on exchanges in the same way as Bitcoin, and it is used on the Ethereum network to run applications.
Key Differences
| Bitcoin | Ethereum | |
| Networks | cryptography | cryptography |
| Transactions data | notes | code |
| Transaction confirmation | minutes | seconds |
| Algorithms | SHA-256 | ethash |
| Market cap | $147 billion | $16 billion |
Though, the Bitcoin and Ethereum networks are different regarding their overall aims. While bitcoin was created as an alternative to national currencies and thus aspires to be a medium of exchange and a store of value, Ethereum was intended as a platform to facilitate immutable, programmatic contracts, and applications via its own currency.
BTC and ETH are both digital currencies, but the primary purpose of ether is not to establish itself as an alternative monetary system, but to facilitate and monetize the operation of the Ethereum smart contract and decentralized application (dapp) platform.
Ethereum is another use-case for a blockchain that supports the Bitcoin network, and theoretically should not really compete with Bitcoin. However, the popularity of ether has pushed it into competition with all cryptocurrencies, especially from the perspective of traders.