While both Bitcoin and Ethereum are based on mutual principles of ledgers and cryptography, the two differ in many technical ways and serve different purposes. It is important to understand the similarities and differences between Bitcoin and Ethereum — both if you’re a trader or an enthusiast. The most obvious difference is the age — with Bitcoin having been introduced as the very first global crypto asset in 2009 and Ethereum showing up only in 2015 as one of its competitors. Ethereum though has some nifty features which are bound to impress you, with some of them being even better than Bitcoin.
Bitcoin was the first virtual currency to show up nine years back. It was introduced by a mysterious entity known as Satoshi Nakamoto. To be precise and simple, you can call Bitcoin a ‘virtual currency’. It’s not a technology or a company. It’s your money, held in a digital form. Bitcoin offers you lower transaction fees than regular online payment transactions and is administered by a decentralized entity, unlike government-issued currencies.
Over the years, acceptance of the concept of virtual currency has increased among government bodies. India has shown a lot of interest in these virtual currencies, particularly in Bitcoins. You can buy Bitcoin in India through websites like Unocoin. The price of Bitcoin tends to fluctuate often depending on supply and demand. You can also purchase other tokens with Bitcoin or Ether, which is Ethereum’s token.
What are tokens?
Tokens are a representation of a particular asset or utility, that usually resides on top of another blockchain. Tokens can represent basically any assets that are fungible and trade-able, from commodities to loyalty points to even other crypto assets!
Ethereum (well, Ether actually) is another virtual currency, which according to many experts, has the potential to overtake Bitcoin as the dominant coin in the market. The aspect that makes Ethereum different is its technology. Blockchain technology is now being used to create applications which are beyond just a virtual currency. Such applications are often referred to as Crypto 2.0, Blockchain 2.0 or even Bitcoin 2.0.
The difference between Ethereum and Bitcoin is the fact that Bitcoin is nothing more than a currency, whereas Ethereum is a ledger technology that companies are using to build new programs. Both Bitcoin and Ethereum operate on what is called the “blockchain”, however, Ethereum is far more robust. If Bitcoin was version 1.0, Ethereum is 2.0, allowing decentralized applications to be built on top of it. Ether is used broadly for two main purposes: it is traded as a virtual currency and is used inside Ethereum to run applications and even to monetize work. According to Ethereum, you can use it to code, decentralize, secure and trade almost anything.
Difference between Bitcoin and Ethereum
- Purpose: From a general point of view, Bitcoin and Ethereum differ mainly in purpose. While Bitcoin was created as a virtual currency and is thus a medium of transaction and store of value, Ethereum has been developed as a platform which facilitates peer-to-peer contracts and applications. The primary purpose of Ether has always been to facilitate and monetize the working of Ethereum to enable developers to build and run distributed applications.
- Block time: It takes around 10 minutes to complete a transaction for Bitcoin whereas for Ethereum it takes just about few seconds. The Bitcoin blockchain has a block limit of 1 MB. So the number of transactions that fit into a single block cannot exceed 1 MB. The time it takes to mine, or create a new block on the Bitcoin blockchain is about 10 minutes. This effectively means that the Bitcoin network can handle 3–4 transactions per second which makes it much slower than Ether as the Ethereum blockchain has no limits.
- Value: Bitcoin is far more recognised than any of its peers, making it easier to buy, store and sell. Bitcoin’s value has been growing steadily, making it the most valuable virtual currency. The number of Bitcoins available is limited and will not be exceeded no matter what. Thanks to supply and demand, this means that Bitcoin should, in theory, grow in value. On the other hand, Ethereum will continue to release the same amount of Ether on a regular basis for a long time, so its supply will remain constant and will keep expanding.
- Transactions: Bitcoin has always been better at storing value but Ether has become one of the most preferred media for transferring wealth to and from people and entities. In mid-2017, Ether overtook Bitcoin in the number of daily transactions.
Both Bitcoin and Ethereum have advantages over each other, which one is right for you much depends on your financial situation and your willingness to invest.
If you want to buy a virtual currency with more developer support and stay invested for a longer period of time, Bitcoin is better of the two currencies and if you are willing to make regular transactions to pay for goods or services, or send crypto assets to others, Ethereum is much more manageable.
If you plan to put money into bitcoin or Ethereum, start doing your own research first. This is still a young venture and you should be certain before putting your valuable money in any of them.