When people think about cryptocurrencies, Bitcoin and Ethereum are the first to come to mind.
Both of them have greatly contributed to the cryptocurrency world’s success, so in many cases, it is hard to say which one is better, although many differences draw a line between them.
Bitcoin is the first digital currency introduced, while Ethereum is a decentralized network that enables the development of dApps.
But for investors, when navigating the crypto market, it is hard to decide which one of the two to consider. They have all sorts of questions like Which one is better? How to buy Ethereum and Bitcoin? and the list can continue.
Regarding market capitalization, Bitcoin and Ethereum have done well over the years, so determining which is the best alternative may be difficult. Although they share some similarities, the two cryptos also have significant differences.
So, how is Ethereum different from Bitcoin?
What is Ethereum?
Ethereum is the second-largest cryptocurrency network that has been present over the years, a decentralized one made on blockchain technology and also a platform that allows app building, peer-to-peer transactions and global payment.
Although many people believe that Ethereum is a digital currency, it is nothing more than a blockchain ecosystem that has a native token, Ether, or ETH, that enables all the operations of the platform.
From the moment it was launched in 2015, Ethereum wanted to overcome the shortcomings of Bitcoin, and this is why it managed to bring many innovations in the crypto world.
For example, with the help of Ethereum, people can create NFTs, develop decentralized applications (dApps), communicate and transact directly without needing a third party.
Also, Ethereum has a unique programming language, Solidity, that enables the development of smart contracts, which represent programs stored on the platform’s network that can run automatically when the needed conditions are met.
What is Bitcoin?
Bitcoin was introduced in January 2009 by Satoshi Nakamoto and became the world’s first digital currency. Because it represented an innovation, it became very popular in just a few years.
Also, since its first introduction in the market, it has kept its first position and remained the largest digital currency until today.
Bitcoin has a limited supply, as Nakamoto made an algorithm that only allows the creation of 21 million coins. This is why other coins will no longer be created once Bitcoin reaches its limit.
Although before Bitcoin, there were some attempts that tried to create a digital asset, none succeeded, which is why Bitcoin became so popular.
Not only that, but Bitcoin was also the first digital currency fueled by blockchain, a technology made to solve a multitude of issues.
And while Bitcoin was originally a medium of exchange that enabled purchasing services and goods, it soon also became a store of value.
What are the similarities between Ethereum and Bitcoin?
Ethereum and Bitcoin are the most known cryptocurrencies around the world, and this fact is proven by the high trading volume, market cap and wallet users.
They also share some significant similarities, as both are decentralized networks, meaning no central authority or third party controls their transactions and operations.
This is why the government doesn’t regulate Ethereum, Bitcoin or any other cryptocurrency. Another similarity is that both digital assets have their own blockchains and native digital tokens, represented by Bitcoin and Ether.
Users can create crypto wallets to store their coins, making things much more accessible so that they can complete transactions.
As Bitcoin and Ethereum are developed on blockchain technology, they rely on nodes, a global network of computers that verify transactions in the network. The system can’t be falsified or replicated, as each node can access a copy of the ecosystem.
What are the differences between Ethereum and Bitcoin?
Ethereum was built to solve users’ shortcomings of Bitcoin, so there are many differences between them. Both of the most popular cryptocurrencies are based on encryption, but there are some discrepancies in their technical specifications.
For example, a Bitcoin transaction is validated in minutes, while an ETH one in seconds. Also, the consensus algorithms of the two digital assets differ, as Ethereum is based on LMD-Ghost, while Bitcoin has a SHA-256.
While Bitcoin and Ethereum enable developers to store data, Ethereum also allows users to create their own tokes, making them govern the app. This facility is made through ERC-721, corresponding to the non-fungible tokens (NFT), and ERC-20, corresponding to UNI and DAI.
Another difference is that Ethereum’s supply is unlimited, while the one of Bitcoin is fixed and has already mined two of its third parts available.
Another discrepancy that separates the two cryptos is that Bitcoin still uses a proof-of-work system, while Ethereum switched to a proof-of-stake model.
In a proof-of-work system, validators are required to solve challenging math problems, so the amount of processing power needed to resolve them has greatly increased.
This is why Bitcoin has received a lot of criticism for the energy it consumes, especially now that people are more interested in sustainability than ever before.
This is why, when Ethereum switched to the other alternative, it stepped ahead and showed that the crypto world could become greener.
Also, there are differences in the public wallets available on Ethereum and Bitcoin. For instance, on Ethereum, they begin with 0x, while on Bitcoin, with a 1, bc1, or a 3.
Final words
There are similarities and differences between the two famous cryptocurrencies that are the most popular alternatives investors consider today.
As Ethereum was created to overcome the shortcomings of Bitcoin, it brought more innovations that had yet to be met until then.
Although Bitcoin is the first digital currency created and has a huge market capitalization, the innovations of Ethereum made it a prominent player in the crypto world.
But can someone name exactly who will stand the test of time? Probably not, as the future of crypto is unclear.
