When it comes to Cryptocurrency Market Cap, Bitcoin and Ethereum are the two undefeated bulls in the arena. Both these coins i.e BTC and ETH, are considered to be the safest and fastest-growing crypto investments by leading institutions. Although they are part of the same industry, only a handful of us knows the actual use case and the difference between Bitcoin and Ethereum.
The decision to choose and invest between the two (Bitcoin vs Ethereum) often paralyzes most of the retail investors who wish to enter into the crypto market by putting a part of their savings into cryptocurrency. One group believes Bitcoin to be the next big thing while others believe more in Ethereum.
As an educated cryptocurrency investor, you should understand why these two crypto projects were created, the problems addressed by the projects, and their future outlook. Keeping this in mind, let’s compare these two –
Bitcoin vs Ethereum:
Table of Contents
What is Bitcoin?
Bitcoin is debuted as a peer-to-peer network based digital currency that can be used as a mode of payments or transactions across borders without the need for any third-party integration or involvement like banks.
The first digital currency was eCash that was created back in 1983
Whitepaper on Bitcoin was published back in 2008 by the famous yet unknown “Satoshi Nakamoto“. The first bitcoin transaction took place in early 2009 and since then we have this currency in circulation. Bitcoin is based on a blockchain system and works on DLT i.e distributed ledger technology. Check out my recent post on blockchain and what is bitcoin, if you’re interested to learn more about Bitcoin and the technology behind it.
Bitcoin has the power to process 4.6 transactions per second
Whenever a user performs a transaction, a block is generated on the network and the transaction copies are shared with the parties. However, since the system is decentralized, the record is permanently imprinted on the blockchain and the next block will be created over the recent block of transaction. That puts the block validation in place, also termed as proof of work. Mining is one such example of the POW (proof of work) model.
You may have a thought here, since everything is taking place on the internet. What about privacy and security. To clear the air blockchain is one of the world’s safest and secure systems of this century. It’s virtually impossible to identify the parties involved in Bitcoin transactions unless they like to reveal themselves. Even the addresses are encrypted on the ledger which makes it impossible to hack or break-in. One has to bring the world’s internet down to stop the system.
Key takeaways --
a. Bitcoin is a peer-to-peer blockchain network.
b. The purpose of bitcoin is to replace the national currencies.
c. Bitcoin was created to take control from centralized system like Banks.
Watch the video to understand the functioning of Bitcoin and how blockchain works –
Now let’s address the other elephant in the room, Ethereum.
What is Ethereum?
Learning from the shortcomings and application limitations of Bitcoin, a boy named “Vitalik Buterin” took charge and developed what we call today an Ethereum Blockchain network. Ethereum is a decentralized, open-source blockchain network with smart contract and DAPPS functionality.
Ethereum supports smart contracts and DAPPS creation
Ethereum came to life in 2015 and it was created to exploit blockchain technology and help create real-world applications. One of the smartest moves by the network is its ability to create smart contracts that can execute themselves once the conditions are met.
Let me explain smart contract by giving a real-world example. Let’s say you’re a tenant living in a rented apartment. You have a contract agreement signed with the landlord to pay the rent on the first of every month. Failing to do so, you are obliged to leave the apartment with immediate effect without delay and if the rent is paid on time, you can continue to live in the apartment. This is what a smart contract looks like with an add-on feature of auto-execution.
Any complex form of agreement between the parties or individuals with a clear set of conditions can be created and deployed on the Ethereum blockchain. Apart from smart contracts, the other use case of Ethereum network is to create decentralized applications or DAPPS. Just like we have apps on our mobile phones that run mostly on Android or iOS. Ethereum lets you create decentralized apps on its platform using its coding language “Solidity”.
Solidity is the primary language of the Ethereum blockchain
But wait, What about ETH?
ETH or Ether is the native currency of the Ethereum network that facilitates blockchain projects created on the Ethereum network.
ETH 1.0 has the power to process 15 transactions per second.
Ether does support peer-to-peer transactions. However, that’s not its primary use case. Just like you need gas to run the car similarly Ether is used to run its blockchain. Gas fees or transaction fees go up whenever there’s network congestion or high transaction volume on the network. That’s the reason behind creating ETH2.0 with the EIP1559 upgrade, which will potentially solve the scalability and higher gas fees issues.
Moving from ETH1.0 to ETH2.0 will also change the working algorithm. Ethereum will make a shift from Proof of Work (POW) to Proof of Stake (POS) model. This will increase the stake of validators required to approve the transactions taking place on the blockchain. If you wish to get hold of crypto jargons, I suggest reading my post on cryptocurrency terminology.
If EIP1559 where EIP stands for Ethereum Improvement Proposal implementation is successful. The rise in the adoption rate of the Ethereum blockchain is imminent, which may also result in the price value rise of Ether.
Check out my recent post on what is Ethereum, if you’re interested to learn more about the complete Ethereum ecosystem and the technology behind it.
a. The primary use of Ethereum network is to supports smart contracts and DAPPS.
b. Ether is used as a currency of the network.
c. Anyone can create smart contracts or develop DAPPS & crypto projects on the platform.
d. Ethereum is upgrading from ETH 1.0 to ETH2.0. Shift from POW to POS model.
Difference between Bitcoin and Ethereum:
Bitcoin vs Ethereum is an interesting comparison to study and observe. By now you must be clear about the purpose of the creation of these two crypto projects and their future outlook. For better understanding, I have compiled the list of differences between Bitcoin and Ethereum, shared below-
|Primarily created to replace national currencies. Complete financial decentralization.||Primarily created to support smart contracts and DAPPS creation.|
|Comply to Proof of Work (POW) algorithm||Switching to Proof of Stake (POS) algorithm|
|Ledger is created for record-keeping only||Ledger is created for record-keeping and it can also contain executable codes.|
|Supports 4.6 transactions per second||ETH 1.0 supports 15 transactions per section.|
|Cannot build projects on the blockchain.||Can build projects on the blockchain like – BAT, UNI, etc.|
Here’s a video explaining the difference between Bitcoin and Ethereum –
Which one should you invest in?
Bitcoin vs Ethereum, which one should you choose. I hate to be diplomatic here but the truth is, it all depends on your future outlook. On one hand, you have Bitcoin which has started getting the world’s attention and slowly picking up ground to become the currency of the future. However, it has a long way to go because it’s not yet considered as a legal tender by the majority of nations, explained by me in the post on Bank vs Bitcoin in India.
On the other hand, you have Ethereum, a proven blockchain that can be the future of smart contracts and potential blockchain projects like BAT, UNI, etc. Although the new update i.e ETH2.0 is promising, the blockchain is somewhat threatened by its competitors like Polygon (MATIC), Polkadot Crypto (DOT), and Cardano (ADA), these all projects are betting high on surpassing Ethereum in scalability and interoperability.
Whatever you choose, Bitcoin and Ethereum are the hottest crypto investments at the moment and they are poised to grow stronger with the market growth. However, you should always be careful before planning your cryptocurrency investment. Keep the risk factor in mind and remember to invest the money that you’re willing to lose.
Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.