Bitcoin and Ethereum are the largest cryptocurrencies on the market, so an implicit rivalry has always existed between them. Although they are both fairly similar as a result of operating on the same kind of system and having pretty much the same functionality, the two are also different in some key ways, the most noteworthy being the fact that Bitcoin more or less follows the standard definition of a crypto coin, being a tradeable asset and earning the nickname “digital gold” for its ability to retain its value over an extended period of time, while Ethereum is much more focused on technology and innovation, being a pioneer in the fields of decentralized finance and applications, as well as being the one to come up with the concept of non-fungible tokens.
The variations in value recorded by the ETH/BTC pair have fluctuated over the years, and although some believed that Bitcoin could eventually be surpassed by ETH, this hasn’t become a reality, especially after the former reached new record-breaking levels.
The similarities
According to Binance.com co-founder Yi He, “Crypto isn’t just the future of finance – it’s already reshaping the system, one day at a time.” Both Bitcoin and Ethereum are crypto assets based on publicly distributed ledgers known as blockchains and can be used and stored with the help of digital wallets. Alphanumeric strings are used as addresses and are traded on exchanges. Both are decentralized as well, something that has attracted most investors to them in the first place, as they offer a respite from traditional assets and their potential pitfalls.
This also means that they are neither issued nor regulated by central banks or other financial authorities. Instead of the classic system, cryptocurrencies rely on computers that can run copies of their networks to ensure that every single participant is on the same page. These copies are known as nodes. However, there are also several differences between the two.
Bitcoin and Ethereum
Bitcoin is the first cryptocurrency to be released on the market, the one that ultimately served as the blueprint for all the altcoins that followed in its footsteps. One of the most significant features of BTC is its fixed supply of 21 million coins. After the last one is mined, no more new coins will enter the marketplace, and investors will be left with the ones they already have. This characteristic plays a big role in the enduring appeal BTC has for investors as it drives scarcity and makes Bitcoin all the more valuable to own.
Every few years, the network goes through a halving event during which the rewards miners receive are sliced in half. The blockchain uses a proof-of-work protocol, and each node aims to validate the transactions. The blockchain is publicly available, and if a different version were detected, it would be rejected instantaneously by the other network participants since a version of the official blockchain is distributed among several different nodes. Tampering can be identified and its effects mitigated right away as a result.
This occurs through the detection of hashes, which are long strings of numbers that must be identical for every single node. Once a valid one is identified, it is broadcast to the entire network and included in the block. The PoW requires large quantities of electricity, with the resource-intensive process being necessary to ensure security, yet making Bitcoin unpopular as a result of its negative effect on the environment. Ethereum, on the other hand, is also a decentralized, distributed, and open-source network, but it takes things a step further to create a larger system.
The Ethereum white paper, released in 2013 by co-founder Vitalik Buterin, detailed the use of smart contracts —self-executing agreements written in code. It is the smart contracts that support the creation of decentralized applications that are operational without the guidance of a central entity. The Ethereum Foundation was established in Switzerland as a non-profit aimed at and dedicated to maintaining and supporting the network. ETH switched to a proof-of-stake protocol that is more energy-efficient and has lower entry barriers for validators.
Ethereum’s goal is distinctively ambitious, as it was launched with the aim of fostering the decentralization of the internet. It has its own programming language known as Solidity, which uses smart contracts. The potential uses of the ETH-based apps are considerable, and innovation rates continue to surge. BTC is used as a store of value and medium of exchange, but Ether can also be used to interact with apps on the native network.
The main differences
Bitcoin essentially serves as the digital counterpart of gold, while Ether was primarily created to power Ethereum’s system and the many applications it hosts. Bitcoin utilizes its Omni layer to issue tokens, a platform whose adoption has been closely tied to stablecoins. In contrast, Ethereum coins are launched according to different standards, with the best-known one being ERC-20. It includes many functions that developers must implement prior to releasing the assets.
The ERC-20 also provides information about the total supply of a token, the account balances associated with user addresses, and lets funds be moved between different traders. All Bitcoin transactions are primarily monetary but can still contain messages and notes. The Ethereum ones, on the other hand, include executable code that creates smart contracts or can even interact with self-executing contracts and the apps created using them.
Some of the other differences include the time required for new blocks of data to be added, which determines the time needed to confirm transactions. BTC blocks are added approximately every ten minutes, whereas Ethereum requires only fifteen seconds. The public wallets operate differently as well. The ones associated with Bitcoin can start with 1, 3, or bc1, while the Ethereum ones begin with 0x.
To summarize, Ethereum and Bitcoin share several similarities but also differ in a few key ways. If you’re an investor and want to ensure your portfolio is as strong as it could possibly be, you should invest in both. A diverse list of holdings will safeguard your capital in the case of depreciation events.
