Bitcoin and Ethereum are the two biggest cryptocurrencies in the world by market capitalisation. However, they have their similarities and differences in terms of protocols, monetary policy, and plans for the future.
For someone who wants to engage with any of these cryptocurrencies, knowledge of this comparison is essential. To start with, Bitcoin and Ethereum are so fundamentally different that it is like comparing oranges to lemons.
What is the Main Difference Between Bitcoin and Ethereum?
Bitcoin is a digital coin, a blockchain-based cryptocurrency designed sorely for the purpose of transferring value from one person to another online through a decentralised, trustless network.
On the other hand, Ethereum is a token used for payment on a decentralised network of computers on which blockchain-based projects are run. The Ethereum network is built to be a general-purpose platform on which decentralised applications can run. Learn more about Ethereum to understand how it works.
Similarities Between Bitcoin and Ethereum
While Bitcoin and Ethereum both have different goals, Ethereum is based on Bitcoin’s core protocols. We wouldn’t have blockchain technology without Satoshi Nakamoto, and Ethereum simply upgraded the Bitcoin language to support more complex functionality.
Ethereum also currently uses a Proof of Work consensus protocol, although that is changing with the introduction of Ethereum 2.0 and Proof of Stake. In short, PoW means that energy and hardware costs have to be invested to maintain the system through mining, thus making it secure and valuable.
Like Bitcoin, Ethereum can also be used for peer-to-peer transactions for the transfer of money, although it can do so much more. There are many wallets that can store both ETH and BTC together due to their similarity.
Both Ethereum and Bitcoin are open-source and have large development communities. They have massive decentralised networks of nodes and miners as part of the ecosystem, making them very strong and secure.
Differences Between Bitcoin and Ethereum
There are more differences than similarities between Bitcoin and Ethereum.
Bitcoin was founded by Satoshi Nakamoto and a team of developers in 2009, while Ethereum is the brainchild of Vitalik Buterin and was released in 2015.
The use case of Bitcoin is limited to the transfer of money in a digital, trustless, decentralised environment, while Ethereum is meant to be a platform where blockchain-based decentralised apps (called Dapps) can run.
These apps could power anything from money transfer to games to social media networks.
Bitcoin Vs. Ethereum Blockchain
As already mentioned, Bitcoin’s blockchain protocol is designed strictly for the transfer of money digitally, while Ethereum is a more complex platform where other apps can run.
That being said, BTC is the native coin on the Bitcoin network. The fees charged are transaction fees, nothing more. On the other hand, ether or ETH is the native token on the Ethereum network. ETH is a utility token, where Dapps pay a fee to run on the network as well as to process transactions.
Secondly, Bitcoin uses the simple and robust Script language. Ethereum uses the more complex but flexible language called Solidity.
Solidity is designed to support smart contracts on the network, but its complexity makes it more vulnerable to bugs and hacks attacks.
Bitcoin’s supply is capped at 21 million, and the current number of Bitcoins produced per block mined is 6.25 as of mid-2021. This rate has been getting halved every four years. For Ethereum, there is no maximum supply described, but its mining is limited to 18 million ETH per year.
Bitcoin uses a complex cryptographic algorithm called Secure Hash Algorithm (SHA-256). It requires significantly more hashing power, and a new block is mined every 10 minutes or so. Ethereum uses a lighter algorithm simply called Ethash, and a new block is mined every 15 seconds or so.
Mining Bitcoin Vs. Ethereum
Bitcoin is more easily mined with CPUs and special ASICS, while Ethereum is optimised for mining with consumer-grade GPUs. However, Ethereum mining will become obsolete once Ethereum 2.0 is in action.
Summary: Should You Invest in Bitcoin or Ethereum?
The choice to invest in either Bitcoin or Ethereum is a personal one. Both coins are currently very strong, though highly volatile. Being block-chain-based projects, they face many of the same challenges in terms of scalability, transaction speed, and network upgrades.
Bitcoin seeks to completely revolutionise digital money exchange, but Ethereum seeks to completely decentralise everything. Theoretically, this gives Ethereum more potential in future for growth, with some people suggesting that it could overtake Bitcoin.
At the end of the day, when you invest in Bitcoin for Ethereum or both, always keeping in mind that the unregulated and volatile crypto market could lose you everything if you are not careful. You can buy these assets on exchanges such as CoinSpot to enjoy competitive trading costs, multilayered security, and 24/7 customer support. You can read our CoinSpot Australia review to know more about its advantages and drawbacks and how to register an account on it.