The cryptocurrency market is growing at a faster rate and gaining more popularity than ever. The number of people interested in Bitcoin, Ethereum, and other types of altcoins is increasing every day.
However, most people don’t know about the main differences between these two popular cryptocurrencies. Bitcoin and Ethereum are often talked about in the same sentence. The two cryptocurrencies have been around for nearly the same length of time, and they both have their fair share of backers and detractors.
This distinction is reflected in the design of the two systems: while both use blockchain technology, they have different methods for reaching consensus on the state of their respective ledgers.
But, when you look at the two side by side, there are key differences that jump out. This article will help you understand the main differences between Bitcoin and Ethereum.
Define Ethereum
Ethereum was created by Vitalik Buterin in 2014 to be a platform for decentralized applications built on top of it. It has the capability to have its own tokens, which can represent a wide variety of things from currencies, to quotas, to even a vote in an election.
The reason this is possible is because Ethereum uses a programming language that allows developers to code what they want directly into the blockchain itself.
Ethereum has two separate types of accounts: externally owned accounts (controlled by private keys) and contract accounts (controlled by their own internal code). Contract accounts can be programmed to store, send and receive Ether, monitor its own storage space, and send transactions to other contracts. This makes it possible to create complex programs that can respond autonomously to events on the network.
Ethereum’s strength comes from its ability to support decentralized applications with smart contracts. Smart contracts have many applications in many areas: financial agreements, legal agreements, supply chain management, gaming, gambling and online auctions are just some of them.
Understanding Bitcoin
Bitcoin, on the other hand, is strictly for payments. Instead of being able to program what you want into the blockchain, you have to write rules about how you want your money handled in the real world using a programming language called Script.
Bitcoin is a form of digital currency that exists as records of transactions on a public ledger, known as the blockchain and can be used for crypto pairs such as BTC USDT.
It’s completely decentralized, which means that no single institution controls the Bitcoin network. Instead, people in the network—known as miners—use powerful computing hardware to solve extremely complex math problems and verify transactions in coin exchange for transaction fees and newly minted bitcoins. The first miner to successfully solve each problem receives a reward, the value of which is currently 25 bitcoins per block.
Main Differences
Ethereum and Bitcoin may seem similar at first glance, but they are very different. Ethereum and Bitcoin were both created to be decentralized forms of money, and they both use a blockchain to ensure that transactions are secure.
Purpose
Bitcoin was developed with the purpose of being a decentralized currency that anyone could use equally without any central authority. Their aim is to make a currency that would not be influenced by any centralized institution (bank or government).
That means there aren’t any banks to regulate them or governments to tax them—and there also isn’t a single person who can control how much currency is released into circulation, either. Instead, these currencies are created through a “mining” process that involves solving complex math problems with powerful computers.
Ethereum’s creators had a different vision from the beginning: instead of being just a cryptocurrency, Ethereum was meant to be a platform for decentralized applications that would run in their own little world and would not be able to affect the rest of the system in any way.
Proof of Work vs Proof of Stake
Bitcoin is built on the proof-of-work algorithm, while Ethereum is built on proof-of-stake. It’s important to understand what these terms mean because they have major implications for how each network operates.
Bitcoin uses Proof of Work (PoW), where miners use significant computer power to verify transactions. The process is costly, time-consuming, and requires large amounts of electricity. Ethereum uses Proof of Stake (PoS), which is much less expensive and time-consuming. If you’re wondering what the difference is between the two methods, here’s a quick guide to help you get up to speed on Ethereum.
What’s in Store for Bitcoin and Ethereum?
For one thing, its popularity has made it incredibly expensive to use at times (it takes an hour or two to process a single Bitcoin transaction), which limits the number of people who want to use it regularly.
There are valid arguments on both sides, but I think it’s safe to say that Ether will have a significant impact on Bitcoin’s trajectory. The value of Ether has been increasing significantly over the past few months, meaning more and more people are paying attention to it.
Because Ethereum price has skyrocketed in 2017, it’s natural for people to wonder how high it could go, or if it will crash as a result of an eventual correction.
In addition, since Ethereum has been created as an open-source platform, it’s possible that developers will be able to create apps using Ether that serve completely different purposes to those using Bitcoin.
The future of Bitcoin and Ethereum is hard to predict—there are so many factors in play. Most people believe that Bitcoin will retain its dominance as the market leader in digital currency, but there are some major challenges ahead for it.