Many people consider Bitcoin (BTC) and Ethereum (ETH) the Coke and Pepsi of cryptos. Yes, they are No. 1 and No. 2 in terms of total market capitalisation and public notoriety, but when you dive into the details, you’ll find that these 2 concepts actually serve completely different purposes. It might actually be more accurate to make a Coke versus apple juice comparison when talking about these 2 crypto’s.
Learning the differences between Bitcoin and Ethereum will lead you down a much deeper path of technological advancement and where humans are going as a culture. You don’t have to fully understand blockchain (the fundamental tech behind crypto) to know that we are on the verge of something special. Let’s take a look at what makes these projects similar, different and ultimately great.
Main Takeaways: Bitcoin vs. Ethereum
- Bitcoin is a cryptocurrency; Ethereum is a platform
- Bitcoin transactions are primarily monetary; Ethereum transactions may be executable code
- Transactions are much faster on the Ethereum network than on Bitcoin’s
- Bitcoin is primarily a store of value and medium of exchange; Ethereum is not
- Ethereum was created as a complement to Bitcoin but ended up as competition.
What is Bitcoin?
In January 2009, an enigmatic figure named Satoshi Nakamoto executed an idea that he had laid out in a white paper — a peer-to-peer electronic cash system that could operate securely without a central authority. With Bitcoin, the idea of the cryptocurrency, or money without any physical form, was born.
Bitcoin was not the first time that someone thought of a decentralised, nonphysical form of money, but it was the first time that the idea actually caught on. The value of all other cryptos (including Ether) generally moves in tandem with Bitcoin, and Bitcoin is still traded much more than any other coin.
The primary purpose of Bitcoin was to establish itself as a viable alternative to traditional fiat currencies backed by countries. It is primarily a store of value and a medium of exchange.
What is Ethereum?
Ethereum is more than a cryptocurrency. Actually, Ethereum is not a cryptocurrency at all. Ethereum is the platform that Ether is based on, and many people get the 2 confused. But you don’t call Ether Ethereum just like you don’t call Bitcoin blockchain.
Ethereum is a programming language and a decentralised software platform. Developers build decentralised apps (dApps) and smart contracts on top of the platform using the language. As the native currency on the Ethereum platform, ether is the gas that is used to power the platform.
Ethereum was launched in 2015 as an upgrade to the perceived weaknesses in Bitcoin. Its use cases provided more opportunities for developers to create new applications, so it eventually became a separate and competitive entity.
Similarities Between Bitcoin and Ethereum
Both Bitcoin and Ethereum are decentralised and do not issue stores of value through a central authority. They are both built on distributed ledger blockchain, which is ideally tamper-proof (tech experts with outrageously expensive gear can work around platform protections).
If you are working within an established, reputable crypto trading platform, you can likely trade both Bitcoin and Ether. Both currencies are so popular that they are often singled out for use in fiat-crypto exchanges to the exclusion of smaller coins.
Differences Between Bitcoin and Ethereum
Bitcoin was built to do one thing well — provide a way for people to anonymously transfer value from one to another without a central banker. Ethereum built on the idea of the blockchain more than it copied Bitcoin as a currency. As a result, Ethereum is able to do many things well instead of just serve as a platform to give us a store of value token.
Ether can be used as a digital currency, but that is not its primary purpose. The Ethereum platform was built primarily to monetise operations of Ethereum smart contracts and dApps. Both Ethereum and Ether are so well received, however, that people have created use cases for the cryptocurrency outside of its core function.
The market cap of Bitcoin around the beginning of 2020 was around $150 billion. The Ether market cap is about 1/10 of that size, coming in at around $16 billion. However, just as many people hold Ether in a portfolio or digital wallet as Bitcoin — around 3 million. There are at least 7 million people in the U.S. using Bitcoin, with 42 million bitcoin wallets, but Ether is catching up and may pass Bitcoin in volume in the very near future.
Users in emerging markets, who are often overlooked in these statistics, likely inflate the numbers even more. Most of those users are likely centered around Bitcoin.
Ethereum is such a flexible platform that some people are actually starting to hold their Bitcoin on it instead of on the Bitcoin blockchain. This is known as a “tokenised bitcoin.” Ether cannot be held on the Bitcoin blockchain. However, Bitcoin is much more widely accepted as a cash replacement.
There’s Really No Comparison
Researching Bitcoin vs Ethereum leads to a deeper discussion of what blockchain technology can do to improve every aspect of our lives. If you want to know the future of everything from finance to the judiciary to construction, Bitcoin and Ethereum will likely be a big part of it.
It is essential to understand that Bitcoin and Ethereum are fundamentally different ideas. Bitcoin is a store of value. Ethereum is a decentralised platform to program other decentralised ideas. Ether is the currency that runs Ethereum. All of these ideas are important. The blockchain that makes Bitcoin and Ethereum possible is the most important idea to understand. No longer do we have to rely on giving others our precious data to make transactions — blockchain gives us the power to create a trust-less, immutable way to do business.
There may be little to really compare between Bitcoin and Ethereum, but there will be huge comparisons to life before and after their mainstream acceptance.
Nazrul Hoque – 01 April 2021